<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES ACT OF 1934
Date of Report (Date of earliest event reported) July 30, 1997
- --------------------------------------------------------------------------------
RATIONAL SOFTWARE CORPORATION
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 0-12167 54-1217099
- --------------------------------------------------------------------------------
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification No.)
18880 Homestead Road
Cupertino, CA 95014
- --------------------------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (408) 863-9900
Not Applicable
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
================================================================================
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On April 7, 1997, Rational Software Corporation, a Delaware corporation
("Rational") and Pure Atria Corporation, a Delaware corporation ("Pure Atria")
entered into an Agreement and Plan of Reorganization (the "Merger Agreement")
by and among Rational, Wings Merger Corp., a Delaware corporation and a wholly-
owned subsidiary of Rational ("Merger Sub") and Pure Atria , providing for,
among other things, the merger of Merger Sub with and into Pure Atria, which
will be the surviving corporation and will become a wholly owned subsidiary of
Rational (the "Merger"). At a Special Meeting of Stockholders on July 30,
1997, the Rational shareholders approved an amendment of Rational's
Certificate of Incorporation to increase the authorized number of shares of
Rational Common Stock from 75,000,000 to 150,000,000 to, among other things,
provide Rational with a sufficient number of authorized but unissued shares of
Common Stock to consummate the Merger. The Merger was effected on July 30,
1997, pursuant to the Certificate of Merger filed with the Secretary of State
of Delaware on that date. Pursuant to the Merger Agreement, each outstanding
share of Common Stock, par value $0.0001 per share, of Pure Atria (the "Pure
Atria Common Stock") was converted into the right to receive 0.9 (the
''Exchange Ratio'') shares of Rational Common Stock, and each outstanding
option or right to purchase Pure Atria Common Stock under the Pure Atria stock
option plans, the Pure Atria stock purchase plan or outstanding warrants was
assumed by Rational and became an option or right to purchase Rational Common
Stock, with appropriate adjustments made to the number of shares issuable
thereunder and the exercise price thereof based on the Exchange Ratio.
Approximately 39 million shares of Rational Common Stock were issued in
connection with the acquisition, and approximately 8 million additional shares
of Rational Common Stock are subject to options and other rights assumed in
connection with the acquisition.
The Merger is intended to be a tax-free reorganization under Section 368(a)
of the Internal Revenue Code of 1986, as amended, and is intended to be treated
as a pooling of interests for financial reporting purposes in accordance with
generally accepted accounting principles. The assets of Pure Atria were used,
prior to the completion of the Merger, for the development, marketing and
support of a comprehensive, integrated suite of software products designed to
improve the software development process and enable the production of reliable,
high quality software, a use that Rational intends to continue immediately
following the Merger.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of the business acquired, prepared pursuant to
Rule 3.05 of Regulation S-X are incorporated herein by reference to
Rational's Registration Statement on Form S-4 (File No. 333-29799)
filed with the Securities and Exchange Commission on June 23, 1997.
(b) Pro forma financial information required pursuant to Article 11 of
Regulation S-X:
<PAGE>
The following unaudited pro forma condensed combined financial
statements assume a business combination between Rational and Pure Atria
accounted for on a "pooling of interest" basis. The unaudited pro forma
condensed combined financial statements are based upon the respective
historical financial statements of Rational and Pure Atria should be read in
conjunction with such historical financial statements and the notes thereto,
which are incorporated by reference into this Form 8-K. The unaudited pro
forma condensed combined balance sheet as of June 30, 1997 combine Rational's
June 30, 1997 unaudited condensed consolidated balance sheet with Pure Atria's
June 30, 1997 unaudited condensed consolidated balance sheet. The unaudited
pro forma condensed combined balance sheets as of March 31, 1997 combine
Rational's March 31, 1997 unaudited condensed consolidated balance sheet with
Pure Atria's December 31, 1996 unaudited condensed consolidated balance sheet.
The unaudited pro forma condensed combined statements of operations for the
three month periods ended June 30, 1997 and 1996 combine Rational's historical
condensed consolidated statements of operations for the three month periods
ended June 30, 1997 and 1996 with the three month period ended June 30, 1997
and March 31, 1996 of Pure Atria, respectively. The unaudited pro forma
condensed combined statements of operations for the years ended March 31,
1997, 1996 and 1995 combine Rational's historical condensed consolidated
statements of operations for the fiscal years ended March 31, 1997, 1996 and
1995 with the fiscal years ended December 31, 1996, 1995 and 1994 of Pure
Atria, respectively.
The pro forma information is presented for illustrative purposes only
and is not necessarily indicative of the operating results or financial position
that would have occurred if the Merger had been consummated as presented in the
accompanying unaudited pro forma condensed combined financial information, nor
is it necessarily indicative of future operating results or financial position.
These unaudited pro forma condensed combined financial statements should
be read in conjunction with the historical consolidated financial statements and
the related notes thereto of Rational and of Pure Atria incorporated by
reference herein.
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEETS
REFLECTING RATIONAL SOFTWARE CORPORATION
AFTER GIVING EFFECT TO THE MERGER
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, 1997
-------------------------------------------
COMBINED
RATIONAL PRO FORMA PRO FORMA
SOFTWARE PURE ATRIA ADJUSTMENTS BALANCE
--------- ---------- ----------- ---------
ASSETS
------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents....... $ 155,857 $ 19,943 $ 175,800
Short-term investments.......... 66,906 60,650 127,556
Accounts receivable, net........ 35,279 13,632 48,911
Prepaid expenses and other
assets......................... 4,565 5,061 9,626
Deferred tax assets............. -- 9,901 9,901
--------- -------- ---------
Total current assets.......... 262,607 109,187 371,794
Property and equipment, net....... 19,438 18,783 38,221
Other assets, net................. 20,897 619 21,516
--------- -------- ---------
Total assets...................... $ 302,942 $128,589 $ 431,531
========= ======== =========
<CAPTION>
LIABILITIES AND STOCKHOLDERS'
EQUITY
-----------------------------
<S> <C> <C> <C> <C>
Current liabilities:
Accounts payable................ $ 4,584 $ 2,830 $ 7,414
Accrued employee benefits....... 8,903 9,916 18,819
Other accrued expenses.......... 10,268 7,343 17,611
Current portion of accrued
merger and integration
expenses....................... 5,895 9,701 75,000 90,596
Deferred revenue................ 18,978 23,665 42,643
Current portion of long-term
debt and lease obligations..... 1,624 -- 1,624
--------- -------- ------- ---------
Total current liabilities..... 50,252 53,455 75,000 178,707
Accrued rent...................... 434 -- 434
Long-term accrued merger and
integration expenses............. 808 -- 808
Long-term debt.................... 1,738 -- 1,738
--------- -------- ------- ---------
Total liabilities............. 53,232 53,455 75,000 181,687
Stockholders' equity:
Common stock.................... 502 4 386 892
Additional paid-in capital...... 357,706 131,135 (386) 488,455
Treasury stock.................. (1,340) -- (1,340)
Accumulated deficit............. (107,192) (54,669) (75,000) (236,861)
Cumulative translation
adjustment..................... 34 (1,336) (1,302)
--------- -------- ------- ---------
Total stockholders' equity.... 249,710 75,134 (75,000) 249,844
--------- -------- ------- ---------
Total liabilities and
stockholders' equity............. $ 302,942 $128,589 $ -- $ 431,531
========= ======== ======= =========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEETS
REFLECTING RATIONAL SOFTWARE CORPORATION
AFTER GIVING EFFECT TO THE MERGER
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
--------- ------------
COMBINED
RATIONAL PRO FORMA PRO FORMA
SOFTWARE PURE ATRIA ADJUSTMENTS BALANCE
--------- ------------ ----------- ---------
ASSETS
------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents....... $ 227,493 $ 17,363 $ 244,856
Short-term investments.......... 2,525 80,014 82,539
Accounts receivable, net........ 33,565 29,478 63,043
Prepaid expenses and other
assets......................... 3,395 3,526 6,921
Deferred tax assets............. -- 9,054 9,054
--------- -------- ---------
Total current assets.......... 266,978 139,435 406,413
Property and equipment, net....... 13,291 12,974 26,265
Other assets, net................. 22,521 1,541 24,062
--------- -------- ---------
Total assets...................... $ 302,790 $153,950 $ 456,740
========= ======== =========
<CAPTION>
LIABILITIES AND STOCKHOLDERS'
EQUITY
-----------------------------
<S> <C> <C> <C> <C>
Current liabilities:
Accounts payable................ $ 9,981 $ 3,802 $ 13,783
Accrued employee benefits....... 12,269 8,987 21,256
Other accrued expenses.......... 8,255 11,311 19,566
Current portion of accrued
merger and integration
expenses....................... 9,236 15,371 $75,000 99,607
Deferred revenue................ 17,936 24,281 42,217
Current portion of long-term
debt and lease obligations..... 2,010 -- 2,010
--------- -------- ------- ---------
Total current liabilities..... 59,687 63,752 75,000 198,439
Accrued rent...................... 535 -- 535
Long-term accrued merger and
integration expenses............. 916 -- 916
Long-term debt.................... 1,741 -- 1,741
--------- -------- ------- ---------
Total liabilities............. 62,879 63,752 75,000 201,631
Stockholders' equity:
Common stock.................... 477 4 364 845
Additional paid-in capital...... 356,270 99,847 (364) 455,753
Treasury stock.................. (1,340) -- (1,340)
Accumulated deficit............. (115,006) (8,822) (75,000) (198,828)
Cumulative translation
adjustment..................... (490) (831) (1,321)
--------- -------- ------- ---------
Total stockholders' equity.... 239,911 90,198 (75,000) 255,109
--------- -------- ------- ---------
Total liabilities and
stockholders' equity............. $ 302,790 $153,950 $ -- $ 456,740
========= ======== ======= =========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED JUNE 30, 1997
REFLECTING RATIONAL SOFTWARE CORPORATION
AFTER GIVING EFFECT TO THE MERGER
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED JUNE 30, 1997
-------------------------------------------------
COMBINED
RATIONAL PRO FORMA PRO FORMA
SOFTWARE PURE ATRIA ADJUSTMENTS BALANCE
---------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Net product revenue..................................... $ 27,705 $ 10,650 $ 38,355
Consulting and support revenue.......................... 15,223 12,570 27,793
--------- ---------- ------------
Total revenue........................................... 42,928 23,220 66,148
Cost of product revenue................................. 3,610 263 3,873
Cost of consulting and support revenue.................. 7,072 4,338 11,410
--------- ---------- ------------
Total cost of revenue................................... 10,682 4,601 15,283
--------- ---------- ------------
Gross margin............................................ 32,246 18,619 50,865
--------- ---------- ------------
Research and development expenses..................... 6,704 6,785 13,489
Sales and marketing expenses.......................... 14,481 14,057 28,538
General and administrative expenses................... 3,972 2,947 6,919
--------- ---------- ------------
Total operating expenses................................ 25,157 23,789 48,946
--------- ---------- ------------
Operating income (loss)................................. 7,089 (5,170) 1,919
Other income, net....................................... 3,330 1,255 4,585
--------- ---------- ------------
Income (loss) before income taxes....................... 10,419 (3,915) 6,504
Provision for income taxes.............................. 2,605 (1,229) 1,376
--------- ---------- ------------
Net income (loss)....................................... $ 7,814 $ (2,686) $ 5,128
========= ========== ============
Net income (loss) per share............................ $ 0.16 $ (0.06) $ (0.04) $ 0.06
========= ========== ============ ============
Shares used in net income (loss) per share
computations......................................... 50,218 43,166 (6,765) 86,619
========= ========== ============ ============
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED JUNE 30, 1996
REFLECTING RATIONAL SOFTWARE CORPORATION
AFTER GIVING EFFECT TO THE MERGER
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------
JUNE 30, MARCH 31,
1996 1996
---------- ----------
COMBINED
RATIONAL PRO FORMA PRO FORMA
SOFTWARE PURE ATRIA ADJUSTMENTS BALANCE
---------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Net product revenue..................................... $ 20,329 $ 20,164 $ 40,493
Consulting and support revenue.......................... 11,673 8,466 20,138
--------- ---------- ----------
Total revenue........................................... 32,002 28,630 60,632
Cost of product revenue................................. 1,944 561 2,502
Cost of consulting and support revenue.................. 6,007 2,253 8,260
--------- ---------- ---------
Total cost of revenue................................... 7,948 2,814 10,762
--------- ---------- ---------
Gross margin............................................ 24,054 25,816 49,870
--------- ---------- ---------
Research and development expenses..................... 5,279 5,185 10,464
Sales and marketing expenses.......................... 10,927 13,227 24,154
General and administrative expenses................... 2,892 2,335 5,227
--------- ---------- ---------
Total operating expenses................................ 19,098 20,747 39,845
--------- ---------- ---------
Operating income (loss)................................. 4,956 5,069 10,025
Other income, net....................................... 947 761 1,708
--------- ---------- ---------
Income (loss) before income taxes....................... 5,903 5,830 11,733
Provision for income taxes.............................. 810 1,979 2,789
--------- ---------- ---------
Net income.............................................. $ 5,093 $ 3,851 $ 8,944
========= ========== =========
Net income per share.................................... $ 0.11 $ 0.09 $ (0.09) $ 0.11
========= ========= ========= =========
Shares used in net income per share computations........ 44,407 43,399 (4,340) 83,466
========= ========= ========= =========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS FOR THE YEAR
ENDED MARCH 31, 1997
REFLECTING RATIONAL SOFTWARE CORPORATION
AFTER GIVING EFFECT TO THE MERGER
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
RATIONAL/
PERFORMANCE
RATIONAL/ PURE AWARENESS/
PERFORMANCE ATRIA/ PURE ATRIA/
PERFORMANCE AWARENESS INTEGRITY INTEGRITY
AWARENESS PRO FORMA COMBINED PRO FORMA COMBINED COMBINED
RATIONAL CORPORATION ADJUSTMENTS PRO FORMA PURE ATRIA INTEGRITY ADJUSTMENTS PRO FORMA PRO FORMA
-------- ----------- ----------- ----------- ---------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net product
revenue.......... $ 91,696 $ 4,064 $ 95,760 $93,437 $ -- $93,437 $189,197
Consulting and
support revenue.. 53,677 1,614 55,291 39,058 -- 39,058 94,349
-------- ------- -------- ------- ------- ------- --------
Total revenue..... 145,373 5,678 151,051 132,495 -- 132,495 283,546
Cost of product
revenue.......... 9,134 69 2,500 11,703 2,643 -- 2,643 14,346
Cost of consulting
and support
revenue.......... 26,566 1,091 27,657 11,739 -- 11,739 39,396
-------- ------- ------ -------- ------- ------- ------- --------
Total cost of
revenue.......... 35,700 1,160 2,500 39,360 14,382 -- 14,382 53,742
-------- ------- ------ -------- ------- ------- ------- --------
Gross margin...... 109,673 4,518 (2,500) 111,691 118,113 -- 118,113 229,804
-------- ------- ------ -------- ------- ------- ------- --------
Research and
development
expenses........ 24,445 2,078 26,523 22,794 887 23,681 50,204
Sales and
marketing
expenses........ 50,646 4,005 54,651 57,757 -- 57,757 112,408
General and
administrative
expenses........ 16,995 885 600 18,480 10,272 729 11,001 29,481
Charges for
acquired in-
process research
and
development..... 56,798 -- 56,798 -- -- -- 56,798
Merger and
restructuring
costs........... 7,201 -- 7,201 35,255 -- 35,255 42,456
-------- ------- ------ -------- ------- ------- ------- --------
Total operating
expenses......... 156,085 6,968 600 163,653 126,078 1,616 127,694 291,347
-------- ------- ------ -------- ------- ------- ------- --------
Operating loss.... (46,412) (2,450) (3,100) (51,962) (7,965) (1,616) (9,581) (61,543)
Other income,
net.............. 7,917 (45) 7,872 3,669 18 3,687 11,559
-------- ------- ------ -------- ------- ------- ------- --------
Loss before income
taxes............ (38,495) (2,495) (3,100) (44,090) (4,296) (1,598) (5,894) (49,984)
Provision for
(benefit from)
income taxes..... 4,459 (276) 4,183 2,361 -- 2,361 6,544
-------- ------- ------ -------- ------- ------- ------- --------
Net loss.......... $(42,954) $(2,219) (3,100) $(48,273) $(6,657) $(1,598) (8,255) $(56,528)
======== ======= ====== ======== ======= ======= ======= ========
Net loss per
share............ $ (0.98) $ (1.10) $ (0.17) $ (0.20) $ (0.70)
======== ======== ======= ======= ========
Shares used in per
share
computation...... 43,702 43,702 39,921 1,125 41,046 80,643
======== ======== ======= ===== ======= ========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MARCH 31, 1995 AND 1996
REFLECTING RATIONAL SOFTWARE CORPORATION
AFTER GIVING EFFECT TO THE MERGER
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------
1995 1996
---------- ----------
<S> <C> <C>
Net product revenue..................................... $ 74,688 $ 126,876
Consulting and support revenue.......................... 45,419 61,261
--------- ----------
Total revenue........................................... 120,107 188,137
Cost of product revenue................................. 7,989 9,735
Cost of consulting and support revenue.................. 22,016 26,779
--------- ----------
Total cost of revenue................................... 30,005 36,514
--------- ----------
Gross margin............................................ 90,102 151,623
--------- ----------
Research and development expenses..................... 23,379 33,773
Sales and marketing expenses.......................... 47,388 80,063
General and administrative expenses................... 12,342 19,481
Charges for acquired in-process research and
development.......................................... -- 20,300
Merger and restructuring costs........................ (1,100) 2,961
--------- ----------
Total operating expenses................................ 82,009 156,578
--------- ----------
Operating income (loss)................................. 8,093 (4,955)
Other income, net....................................... 1,331 4,234
--------- ----------
Income (loss) before income taxes....................... 9,424 (721)
Provision for income taxes.............................. 1,741 6,391
--------- ----------
Net income (loss)....................................... $ 7,683 $ (7,112)
========= ==========
Pro forma net income (loss) per share:
Income (loss) before income taxes, as reported........ $ 9,424 $ (721)
Pro forma income taxes................................ 2,036 7,115
--------- ----------
Pro forma net income (loss)........................... $ 7,388 $ (7,836)
--------- ----------
Pro forma net income (loss) per share................... $ 0.12 $ (0.11)
========= ==========
Shares used in pro forma per share computations......... 62,500 69,778
========= ==========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
1. The adjustments to the pro forma condensed combined financial statements
reflect the issuance of up to shares of Rational Common Stock
for all of the outstanding shares of Pure Atria Common Stock in connection
with the Merger based on an exchange rate of 0.9 shares of Rational Common
Stock for each outstanding share of Pure Atria Common Stock.
Additionally, the unaudited pro forma condensed combined statement of
operations for the fiscal year ended March 31, 1997 gives effect to the
acquisition of Performance Awareness Corporation which was completed by
Rational on March 31, 1997 and accounted for using the purchase method. The
aggregate purchase price (including direct acquisition costs) was
approximately $32.9 million in cash and options assumed by Rational. The
fiscal year 1997 pro forma statements of operations give effect to the
acquisition as if it had occurred on April 1, 1996, accordingly the Company
would have recorded approximately $3.1 million of amortization on purchased
intangibles.
The unaudited pro forma condensed combined statement of operations for the
fiscal year ended March 31, 1997 also gives effect to the acquisition of
Integrity QA Software, Inc. ("Integrity") which was completed by Pure Atria
on January 31, 1997 and accounted for using the purchase method. The
1,125,000 shares issued by Pure Atria pursuant to the acquisition of
Integrity are included in the weighted average share calculation of Pure
Atria on a pro forma basis.
2. There were no material transactions between Rational and Pure Atria during
any period presented. In addition, it is currently expected that the impact
of any conforming accounting policies will not be material.
3. The Combined Company expects to incur charges to operations currently
estimated to be between $55 and $75 million, in Rational's third quarter
ended September 30, 1997, to reflect direct transaction fees and
costs incident to the Merger of $15 million and additional anticipated
costs of $40 to $60 million associated with integrating the two companies.
Integration costs of merging the companies are expected to include
severance costs associated with any employee terminations, costs associated
with conforming employee benefits plans, charges associated with the
closure of duplicate facilities and asset writedowns related to duplicate
business systems. The final amounts associated with each of these items has
not yet been determined. An estimated charge of $75 million is reflected in
the pro forma condensed combined balance sheet as a reduction to retained
earnings and an increase to accrued liabilities. The estimated charge is
not reflected in the pro forma condensed combined statement of operations
data. The amount of this charge is a preliminary estimate and therefore is
subject to change.
4. For the three months ended March 31, 1997, Pure Atria reported a net loss
of $43.2 million ($1.02 per share) on total revenues of $30.0 million
compared to net income $3.9 million ($0.09 per share) on total revenues
$28.6 million for the comparable 1996 quarter. Pure Atria's three-month
period ended March 31, 1997 includes one-time pre-tax charges to operations
related to the Integrity acquisition of $43.6 million for in-process
research and development and $1.1 million for certain merger and
integration costs. Pure Atria also recorded a charge of $0.5 million during
the first quarter of 1997 for in-process research and development in
connection with the acquisition of other technology.
<PAGE>
(c) Exhibits
2.1 Agreement and Plan of Reorganization dated April 7, 1997 by and among
Rational Software Corporation, a Delaware corporation, Wings Merger
Corp., a Delaware corporation and wholly-owned subsidiary of Rational
Software Corporation, and Pure Atria Corporation, a Delaware
corporation is incorporated herein by reference to Rational's
Registration Statement on Form S-4 (File No. 333-19669) filed with the
Securities and Exchange Commission on June 23, 1997.
2.2 Certificate of Merger merging Wings Merger Corp. with and into Target,
dated July 30, 1997.
3.1 Amendment to Certificate of Incorporation of Rational Software
Corporation dated July 30, 1997.
23.1 Consent of KPMG Peat Marwick LLP, Independent Auditors.
<PAGE>
99.1 Press Release dated July 30, 1997.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
RATIONAL SOFTWARE CORPORATION
August 11, 1997 /s/ Robert T. Bond
------------------------------------------------
Robert T. Bond
Senior Vice President, Chief Operating Officer,
Chief Financial Officer, and Secretary
<PAGE>
EXHIBIT 2.2
CERTIFICATE OF MERGER
MERGING
WINGS MERGER CORPORATION
WITH AND INTO
PURE ATRIA CORPORATION
--------------------------
Pursuant to Section 251 of the General Corporation Law of
the State of Delaware
--------------------------
Wings Merger Corporation, a Delaware corporation ("Merger Sub"), and
Pure Atria Corporation, a Delaware corporation ("Target"), DO HEREBY CERTIFY
AS FOLLOWS:
FIRST: That Merger Sub was incorporated on April 7, 1997, pursuant to
the Delaware General Corporation Law (the "Delaware Law"), and that Target was
incorporated in Delaware on May 9, 1995 under the name "Pure Software
Subsidiary, Inc.," and subsequently amended its corporate name to "Pure Atria
Corporation," pursuant to the Delaware Law.
SECOND: That an Agreement and Plan of Reorganization (the "Merger
Agreement"), dated as of April 7, 1997, among Rational Software Corporation, a
Delaware corporation, Merger Sub and Target, setting forth the terms and
conditions of the merger of Merger Sub with and into Target (the "Merger"),
has been approved, adopted, certified, executed and acknowledged by each of
the constituent corporations in accordance with Section 251(c) of the Delaware
Law.
THIRD: That the name of the surviving corporation (the "Surviving
Corporation") shall be Pure Atria Corporation, a Delaware corporation.
FOURTH: That pursuant to the Merger Agreement, the Restated
Certificate of Incorporation of Target immediately prior to the Merger will be
the Restated Certificate of Incorporation of the Surviving Corporation without
amendment.
FIFTH: That an executed copy of the Merger Agreement is on file at the
principal place of business of the Surviving Corporation at the following
address:
<PAGE>
Rational Software Corporation
2800 San Tomas Expressway
Santa Clara, CA 95051
SIXTH: That a copy of the Merger Agreement will be furnished by the
Surviving Corporation, on request and without cost, to any stockholder of any
constituent corporation.
SEVENTH: That the Merger shall become effective upon the filing of this
Certificate of Merger with the Secretary of State of the State of Delaware.
IN WITNESS WHEREOF, each of Merger Sub and Target has caused this
Certificate of Merger to be executed in its corporate name this 30th day of
July, 1997.
WINGS MERGER CORPORATION
By: /s/ Paul Levy
--------------------------------
Paul Levy, President
ATTEST:
/s/ Robert T. Bond
- ----------------------------------
Robert T. Bond, Secretary
<PAGE>
PURE ATRIA CORPORATION
By: /s/ Reed Hastings
----------------------------------
Reed Hastings, President and Chief
Executive Officer
ATTEST:
/s/ Chuck Bay
- ---------------------------
Chuck Bay, Secretary
<PAGE>
EXHIBIT 3.1
AMENDMENT TO CERTIFICATE OF INCORPORATION
OF
RATIONAL SOFTWARE CORPORATION
Rational Software Corporation, a corporation organized and existing
under the laws of the State of Delaware (the "Company"), hereby certifies as
follows:
FIRST: The Board of Directors of the Company at a meeting duly called
and held in accordance with the Bylaws of the Company and Section 141 of the
Delaware General Corporation Law, as amended, duly adopted resolutions
proposing and declaring advisable the amendment to the Certificate of
Incorporation of the Company as set forth below.
SECOND: Paragraph 4(a) of the Certificate of Incorporation, as
amended to date, hereby is amended to read as follows:
4(a) The total number of shares of Common Stock which the
corporation shall have authority to issue shall be one hundred fifty million
(150,000,000) and each of such shares shall have a par value of one cent
($0.01).
THIRD: The undersigned, Michael T. Devlin and Robert T. Bond,
further verify that:
A. This Amendment to Certificate of Incorporation has
been duly adopted in accordance with Section 242 of the Delaware General
Corporation Law, as amended.
B. Pursuant to a duly adopted resolution of the Board of
Directors of the Company, the special meeting of the stockholders of the
Company was duly called and held, upon notice in accordance with Section 222
of the Delaware General Corporation Law, as amended, at which meeting holders
of at least a majority of the outstanding shares of Common Stock of the
Company, constituting the only outstanding securities of the Company entitled
to vote in respect of the amendment to the Certificate of Incorporation of the
Company as set fort above, duly approved said amendment.
THE UNDERSIGNED, being the President and Secretary, respectively, of
Rational Software Corporation, do make this Amendment to Certificate of
Incorporation, hereby declaring and certifying that this is an act and deed of
the Company and that the facts herein stated are true, and accordingly have
hereunto set their hands this 30th day of July 1997.
/s/ Michael T. Devlin
Michael T. Devlin, President
/s/ Robert T. Bond
-----------------------------
Robert T. Bond, Secretary
<PAGE>
EXHIBIT 23.1
Consent of KPMG Peat Marwick LLP, Independent Auditors
------------------------------------------------------
The Board of Directors
Rational Software Corporation:
We consent to incorporation by reference in the registration statements (Nos.
33-77382, 33-85906, 33-97044, 333-15007, 333-15015, 333-21563, 333-22687,
333-25815, 333-31505, and 333-32991) on Form S-8 of Rational Software
Corporation of our report dated January 21, 1997, except as to Note 2, which
is as of January 31, 1997, with respect to the consolidated balance sheets of
Pure Atria Corporation and subsidiaries as of December 31, 1995 and 1996, and
the related consolidated statements of operations, redeemable convertible
preferred stock and stockholders' equity, and cash flows for each of the years
in the three-year period ended December 31, 1996, which report appears in the
registration statement (No. 333-29799) on Form S-4 of Rational Software
Corporation.
KPMG Peat Marwick LLP
San Jose, California
August 8, 1997
<PAGE>
EXHIBIT 99.1
RATIONAL SOFTWARE CORPORATION ANNOUNCES THE COMPLETION OF
ITS ACQUISITION OF PURE ATRIA CORPORATION; RATIONAL BECOMES
LEADING SOFTWARE BUSINESS FOCUSED ON DELIVERING INTEGRATED
SOLUTIONS FOR
SANTA CLARA, Calif.--(BUSINESS WIRE)--July 30, 1997--Rational Software
Corporation (NASDAQ:RATL) today announced the completion of its acquisition of
Pure Atria Corporation.
With combined revenues of $277.8 million for fiscal year 1997, Rational becomes
the leading software business focused on providing customers with a
comprehensive, integrated solution for automating component-based software
development. Under the terms of the acquisition agreement, each outstanding
share of Pure Atria common stock was exchanged for 0.90 shares of Rational
common stock. Approximately 39 million shares of Rational common stock were
issued in connection with the acquisition, and approximately 8 million
additional shares of Rational common stock are subject to options and other
rights assumed in connection with the acquisition.
Rational expects the merger to result in approximately $15 million in direct
transaction costs plus an additional charge to operations of approximately $40
million to $60 million, primarily in the quarter ending in September, to reflect
costs associated with integrating the two companies. The merger is intended to
be a tax-free transaction and will be accounted for using the pooling-of-
interests method. Stockholders of Pure Atria will receive a letter from
ChaseMellon Shareholder Services, the exchange agent for the merger, regarding
the procedures for tendering their stock certificates for shares of Rational.
Stockholders of Pure Atria should not tender stock certificates except in
accordance with such instructions.
Customers are relying on component-based development to provide them with a
competitive advantage by improving productivity, quality, and time-to-market of
key software assets. The acquisition of Pure Atria strategically positions
Rational to provide market-leading and integrated products that automate the
important aspects of application development and deployment. "With the
mainstream adoption of component-based development, we see enterprise customers
demanding complete product suites," said Paul Levy, Rational's chief executive
officer. "These same enterprise customers are interested in doing business with
vendors that offer unassailable financial strength and staying power. Rational's
strategy effectively exploits these powerful market dynamics."
"The combination of Rational and Pure Atria enables us to depend on a single
company to automate our key software-development processes," said Alan F.
Nugent, senior vice president and chief information officer at American
Re-Insurance Company. "We look forward to being able to purchase integrated
suites from Rational that will provide essential capabilities across the
lifecycle right out of the box." As a result of the acquisition, Rational's
product solution addresses the key aspects of automating software development
and deployment, including requirements management, visual modeling, software
quality and testing, process management, and software configuration management.
Rational has outlined a detailed product roadmap and integration strategy in a
concurrent announcement today. Rational Software Corporation (NASDAQ:RATL)
develops, markets, and supports a comprehensive solution that automates the
component-based development of software. Rational's solution includes an
integrated family of products that automate development and quality assurance
throughout the software lifecycle, a software process that can be configured to
the specific needs of customers, and a range of consulting and support services.
For more information on Rational's products and services, visit Rational's Web
site at http://www.rational.com.
This press release contains forward-looking statements, including statements
relating to anticipated costs of the acquisition and integration of Pure Atria,
the anticipated advantages of the acquisition to Rational, anticipated customer
demand and Rational's ability to meet market demands, and Rational's future
<PAGE>
financial and competitive position. These forward-looking statements involve
risks and uncertainties, which may cause actual results to differ materially.
Among these risks are general risks of integrating operations; execution by
combined sales and marketing forces; integration of products, technologies, and
engineering teams; the financial impact of any failure to achieve synergies;
risks of integrating geographically dispersed organizations; increased
integration difficulties associated with other recent acquisitions by both
companies; the effect of the merger on resellers and customers; costs of
integration and transaction expenses; and the availability of
pooling-of-interests accounting, as well as the nonmerger-related risks faced by
Rational and Pure Atria generally.
For a more detailed description of these risks, see the Registration Statement
on Form S-4 filed by Rational with the SEC relating to the acquisition of Pure
Atria. Note to Editors: The word "Rational" and Rational's products are
trademarks of Rational Software Corporation. References to other companies and
their products use trademarks owned by the respective companies and are for
reference purposes only. For more information contact: Rational Software
Corporation, 2800 San Tomas Expressway, Santa Clara, CA 95051-0951 Tel.
408/496-3600 or 800/728-1212 Fax 408/496-3636 Fax-on-demand 408/496-3966 E-mail
[email protected] Web www.rational.com
