<PAGE>
As filed with the Securities and Exchange Commission on May 6, 1998
Registration No. 333-
================================================================================
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 OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
___________________
18880 HOMESTEAD ROAD
CUPERTINO, CALIFORNIA 95014
(408) 863-9900
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
RATIONAL SOFTWARE CORPORATION 1998 INDIAN STOCK
OPTION PLAN
(FULL TITLE OF THE PLAN)
___________________
TIMOTHY A. BRENNAN
CHIEF FINANCIAL OFFICER AND SECRETARY
RATIONAL SOFTWARE
CORPORATION
18880 HOMESTEAD ROAD
CUPERTINO, CALIFORNIA 95014
(408) 863-9900
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
___________________
Copy to:
GAIL CLAYTON HUSICK, ESQ.
MARTIN A. WELLINGTON, ESQ.
WILSON SONSINI GOODRICH & ROSATI
PROFESSIONAL CORPORATION
650 PAGE MILL ROAD
PALO ALTO, CA 94304
(650) 493-9300
___________________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
========================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS AMOUNT OFFERING AGGREGATE AMOUNT OF
OF SECURITIES TO TO BE PRICE OFFERING REGISTRATION
BE REGISTERED REGISTERED PER SHARE (1) PRICE (1) FEE (2)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Rational Software Corporation
1998 Indian Stock Option Plan 100,000 $16.38 $1,638,000 $483.21
========================================================================================
</TABLE>
(1) Estimated in accordance with Rule 457(h) solely for the purpose of computing
the amount of the registration fee based on the price of the company's
common stock as reported on the Nasdaq National Market.
(2) Rounded up to the nearest dollar.
================================================================================
<PAGE>
RATIONAL SOFTWARE CORPORATION
REGISTRATION STATEMENT ON FORM S-8
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
---------------------------------------
There are hereby incorporated by reference in this Registration
Statement the following documents and information heretofore filed with the
Securities and Exchange Commission (the "Commission"):
(a) The Registrant's Annual Report on Form 10-K for the year ended
March 31, 1997 as filed with the Commission.
(b) The Registrant's Quarterly Reports on Form 10-Q for the periods
ended June 30, 1997, September 30, 1997 and December 31, 1997, the Registrant's
Current Reports on Form 8-K dated April 7, 1997, July 15, 1997, and July 30,
1997, and the Current Reports on Form 8-K/A filed with the Commission on May
12, 1997 and June 16, 1997.
(c) The description of the Registrant's Common Stock contained in
the Registration Statement on Form S-4 (File No. 333-29799) filed by the
Registrant with the Commission on June 25, 1997, and any amendment or report
filed hereafter for the purpose of updating such description.
Item 1 of Registrant's Form 8-A dated May 25, 1984 as amended on Form
8-A/A dated May 25, 1995, filed with the Commission.
All documents filed by the Registrant pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act subsequent to the filing of this
Registration Statement, and prior to the filing of a post-effective amendment
which indicates that all securities offered have been sold or which deregisters
all securities then remaining unsold, shall be deemed to be incorporated by
reference in the Registration Statement and to be part hereof from the date of
filing of such documents.
Item 4. Description of Securities.
-------------------------
Not applicable.
Item 5. Interests of Named Experts and Counsel.
--------------------------------------
Not applicable.
Item 6. 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 of 1933, as amended. The Registrant's
Certificate of Incorporation, as
II-1
<PAGE>
amended, and Bylaws provide for indemnification of its officers, directors,
employees and other agents to the maximum extent permitted by the Delaware Law.
In addition, the Registrant has entered into Indemnification Agreements with its
officers and directors, the form of which is attached hereto as Exhibit 10.1.
Item 7. Exemption from Registration Claims.
----------------------------------
Not applicable.
Item 8. Exhibits
--------
Exhibit Description
Number
4.1 Rational Software Corporation 1998 Indian Stock Option
Plan
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, P.C. with
respect to the securities being registered
10.1 Form of Indemnification Agreement is incorporated herein
by reference to Exhibit filed with the Company's
Registration Statement on Form S-4 (Registration
No. 333-19669), filed with the Commission on January
13, 1997, as amended on January 17, 1997.
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Counsel (contained in Exhibit 5.1)
24.1 Power of Attorney (see page II-4)
Item 9. Undertakings
------------
(a) Rule 415 Offering. 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 of 1933;
(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 set forth in the
registration statement.
(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 paragraphs (a)(1)(i) and (a)(1)(ii) do not
-------- -------
apply if the registration statement is on Form S-3 ((S)239.13 of this chapter)
or Form S-8 ((S)239.16(b) of this chapter), and the information required to be
included in a post-effective amendment by those paragraphs is contained in
periodic reports filed 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 of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered
II-2
<PAGE>
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.
(b) The undersigned Registrant hereby undertakes 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 (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the 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 an initial bona
fide offering thereof.
(c) 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 Delaware General Corporations Law, the
Certificate of Incorporation of the Registrant, the Bylaws of the Registrant,
Indemnification Agreements entered into between the Registrant and its officers
and directors, 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 the
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.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements 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 May 6, 1998.
RATIONAL SOFTWARE CORPORATION
By: /s/ Timothy A. Brennan
-----------------------
Timothy A. Brennan
Chief Financial Officer and Secretary
(Principal Financial Officer & Principal
Accounting Officer)
POWER OF ATTORNEY
KNOW ALL THESE PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Paul D. Levy and Timothy A. Brennan 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 conforming 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: May 6, 1998 /s/ Michael T. Devlin
-----------------------------------------------------
Michael T. Devlin, President and Director
Date: May 6, 1998 /s/ Paul D. Levy
-----------------------------------------------------
Paul D. Levy, Chairman of the Board
and Chief Executive Officer
Date: May 6, 1998 /s/ Timothy A. Brennan
-----------------------------------------------------
Chief Financial Officer and Secretary
(Principal Financial Officer
& Principal Accounting Officer)
Date: May 6, 1998 /s/ James S. Campbell
-----------------------------------------------------
James S. Campbell, Director
Date: May 6, 1998 /s/ Daniel H. Case III
-----------------------------------------------------
Daniel H. Case III, Director
Date: May 6, 1998 /s/ Leslie G. Denend
-----------------------------------------------------
Leslie G. Denend, Director
Date: May 6, 1998 /s/ John E. Montague
-----------------------------------------------------
John E. Montague, Director
Date: May 6, 1998 /s/ Allison R. Schleicher
-----------------------------------------------------
Allison R. Schleicher, Director
</TABLE>
II-4
<PAGE>
EXHIBIT 4.1
RATIONAL SOFTWARE CORPORATION
1998 INDIAN STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this 1998 Indian Stock Option
--------------------
Plan are to attract and retain the best available personnel for positions of
substantial responsibility, to provide additional incentive to Service
Providers, to allow Service Providers to benefit from appreciation in the Common
Stock without having to actually purchase Common Stock and to promote the
success of the Company's and the Subsidiary's business.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or any of its Committees as shall
-------------
be administering the Plan, in accordance with Section 4 hereof.
(b) "Applicable Laws" means the requirements relating to the
---------------
administration of stock option plans under the applicable laws, rules and
regulations of India, U.S. state corporate laws, U.S. federal and state
securities laws, the Code and any stock exchange or quotation system on which
the Common Stock is listed or quoted.
(c) "Board" means the Board of Directors of the Company.
-----
(d) "Code" means the Internal Revenue Code of 1986, as amended.
----
(e) "Committee" means a committee of Directors appointed by the Board
---------
in accordance with Section 4 hereof.
(f) "Common Stock" means the Common Stock of the Company.
------------
(g) "Company" means Rational Software Corporation, a Delaware
-------
corporation.
(h) "Consultant" means any person who is engaged by the Subsidiary to
----------
render consulting or advisory services.
(i) "Director" means a member of the Board of Directors of the
--------
Subsidiary.
(j) "Employee" means any person, including Officers and Directors,
--------
employed by the Subsidiary. A Service Provider shall not cease to be an
Employee in the case of (i) any leave of absence approved by the Subsidiary or
(ii) transfers between locations of the Subsidiary or between the Company, any
parent or subsidiary corporation, or any successor thereto. Neither service as
a Director nor payment of a director's fee by the Company or any Parent or
Subsidiary shall be sufficient to constitute "employment" by the Subsidiary.
<PAGE>
(k) "Fair Market Value" means, as of any date, the value of Common
-----------------
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
on the last market trading day prior to the day of determination, or;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(l) "Option" means a stock option covering Common Stock granted to a
------
Service Provider pursuant to the Plan.
(m) "Option Agreement" means a written or electronic agreement between
----------------
the Company and an Optionee evidencing the terms and conditions of an individual
Option grant. The Option Agreement is subject to the terms and conditions of
the Plan.
(n) "Option Exchange Program" means a program whereby outstanding
-----------------------
Options are exchanged for Options with a lower exercise price.
(o) "Optioned Stock" means the Common Stock subject to an Option.
--------------
(p) "Optionee" means the holder of an outstanding Option granted under
--------
the Plan.
(q) "Plan" means this 1998 Indian Stock Option Plan.
----
(r) "Service Provider" means an Employee, Director or Consultant.
----------------
(s) "Share" means a share of Common Stock, as adjusted in accordance
-----
with Section 11 below.
(t) "Subsidiary" means Rational Software India Pvt. Ltd., a
----------
subsidiary corporation of the Company, and any successor thereto.
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<PAGE>
3. Stock Subject to the Plan. Subject to the provisions of Section 11 of
-------------------------
the Plan, the maximum aggregate number of Shares which may be subject to option
and sold under the Plan is 100,000 Shares. The Shares may be authorized, but
unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable without having been
exercised in full, or is surrendered pursuant to an Option Exchange Program, the
unpurchased Shares which were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated); provided,
--------
however, that Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.
4. Administration of the Plan.
--------------------------
(a) Procedure. The Plan shall be administered by the Board or a
---------
Committee appointed by the Board, which Committee shall be constituted to comply
with Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan and, in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities, the
Administrator shall have the authority, in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options may from
time to time be granted hereunder;
(iii) to determine the number of Shares to be covered by each
such award granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions of any Option
granted hereunder;
(vi) to determine whether and under what circumstances an
Option may be settled in cash under subsection 9(e) instead of Common Stock;
(vii) to reduce the exercise price of any Option to the then
current Fair Market Value, if the Fair Market Value has declined since the date
the Option was granted;
(viii) to institute an Option Exchange Program;
(ix) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws; and
-3-
<PAGE>
(x) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan.
(c) Effect of Administrator's Decision. All decisions, determinations
----------------------------------
and interpretations of the Administrator shall be final and binding on all
Optionees.
5. Eligibility.
-----------
(a) Options may be granted to Service Providers.
(b) The Plan shall not confer upon any Optionee any right with respect
to continuing the Optionee's relationship as a Service Provider with the
Subsidiary, nor shall it interfere in any way with his or her right or the
Subsidiary's right to terminate such relationship at any time, with or without
cause.
6. Term of Plan. The Plan shall become effective upon the later to occur
------------
of (i) its adoption by the Board, or (ii) its approval by the Reserve Bank of
India. It shall continue in effect for a term of ten (10) years unless sooner
terminated under Section 13 of the Plan.
7. Term of Option. The term of each Option shall be stated in the Option
--------------
Agreement.
8. Option Exercise Price and Consideration.
---------------------------------------
(a) The per share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the
Administrator at the time the Option is granted.
(b) The consideration for the Shares to be issued upon exercise of an
Option shall be consideration received by the Company under a cashless exercise
program implemented by the Company in connection with the Plan. The cashless
exercise program may be implemented in the manner and example described in
Exhibit A hereto."
9. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Stockholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement. An Option may not be exercised for a fraction of
a Share.
An Option shall be deemed exercised when the Company receives written
or electronic notice of exercise (in accordance with the Option Agreement) from
the person entitled to exercise the Option. Shares issued upon exercise of an
Option shall be issued in the name of the Optionee or, if requested by the
Optionee, in the name of the Optionee and his or her spouse. Until the Shares
are issued (as evidenced by the appropriate entry on the books of the Company or
of a
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<PAGE>
duly authorized transfer agent of the Company), no right to vote or receive
dividends or any other rights as a stockholder shall exist with respect to the
Shares, notwithstanding the exercise of the Option. The Company shall issue (or
cause to be issued) such Shares promptly after the Option is exercised. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the Shares are issued, except as provided in Section 11 of
the Plan.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares thereafter available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to which the Option is
exercised.
(b) Termination of Relationship as a Service Provider. If an Optionee
-------------------------------------------------
ceases to be a Service Provider, other than upon the Optionee's death or
Disability, the Optionee may exercise his or her Option within such period of
time (of at least thirty (30) days) as is specified in the Option Agreement to
the extent that the Option is vested on the date of termination (but in no event
later than the expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for three (3) months following the Optionee's
termination. If, on the date of termination, the Optionee is not vested as to
his or her entire Option, the Shares covered by the unvested portion of the
Option shall revert to the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified by the Administrator, the
Option shall terminate, and the Shares covered by such Option shall revert to
the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a Service
----------------------
Provider as a result of the Optionee's disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option Agreement
(of at least six (6) months) to the extent the Option is vested on the date of
termination, but in no event later than the expiration date of the term of such
Option as set forth in the Option Agreement. In the absence of a specified time
in the Option Agreement, the Option shall remain exercisable for twelve (12)
months following the Optionee's termination. If, on the date of termination,
the Optionee is not vested as to the entire Option, the Shares covered by the
unvested portion of the Option shall revert to the Plan. If, after termination,
the Option is not exercised within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service Provider,
-----------------
the Option may be exercised within such period of time as is specified in the
Option Agreement (of at least six (6) months) to the extent that the Option is
vested on the date of death (but in no event later than the expiration of the
term of such Option as set forth in the Option Agreement) by the Optionee's
estate or by a person who acquires the right to exercise the Option by bequest
or inheritance. In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months following the Optionee's
termination. If, at the time of death, the Optionee is not vested as to the
entire Option, the Shares covered by the unvested portion of the Option shall
revert to the Plan. If the Option is not so exercised within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
-5-
<PAGE>
(e) Buyout Provisions. The Administrator may at any time offer to buy
-----------------
out for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
10. Non-Transferability of Options. Options may not be sold, pledged,
------------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
11. Adjustments Upon Changes in Capitalization or Merger.
----------------------------------------------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the
Administrator, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until fifteen (15) days prior to
such transaction as to all of the Optioned Stock covered thereby, including
Shares as to which the Option would not otherwise be exercisable. To the extent
it has not been previously exercised, an Option will terminate immediately prior
to the consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company
--------------------
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option shall be assumed or an equivalent option
substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation. In the event that the successor corporation refuses to
assume or substitute for the Option, the Optionee shall fully vest in and have
the right to exercise the Option as to all of the Optioned Stock, including
Shares as to which it would not otherwise be vested or exercisable. If an
Option becomes fully vested and exercisable in lieu of assumption or
substitution in the event of a merger or sale of assets, the Administrator shall
notify the Optionee in
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<PAGE>
writing or electronically that the Option shall be fully exercisable for a
period of fifteen (15) days from the date of such notice, and the Option shall
terminate upon the expiration of such period. For the purposes of this
paragraph, the Option shall be considered assumed if, following the merger or
sale of assets, the option confers the right to purchase or receive, for each
Share of Optioned Stock subject to the Option immediately prior to the merger or
sale of assets, the consideration (whether stock, cash, or other securities or
property) received in the merger or sale of assets by holders of Common Stock
for each Share held on the effective date of the transaction (and if holders
were offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding Shares); provided, however, that if
such consideration received in the merger or sale of assets is not solely common
stock of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Option, for each Share of Optioned Stock
subject to the Option, to be solely common stock of the successor corporation or
its Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
12. Date of Grant. The date of grant of an Option shall, for all
-------------
purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board. Notice
of the determination shall be given to each Service Provider to whom an Option
is so granted within a reasonable time after the date of such grant.
13. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time amend,
-------------------------
alter, suspend or terminate the Plan.
(b) Stockholder Approval. The Board shall obtain stockholder approval
--------------------
of any Plan amendment to the extent necessary and desirable to comply with
Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration,
----------------------------------
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.
14. Conditions Upon Issuance of Shares.
----------------------------------
(a) Legal Compliance. Shares shall not be issued pursuant to the
----------------
exercise of an Option unless the exercise of such Option and the issuance and
delivery of such Shares shall comply with Applicable Laws and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
-7-
<PAGE>
(b) Investment Representations. As a condition to the exercise of an
--------------------------
Option, the Administrator may require the person exercising such Option to
represent and warrant at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required.
15. Inability to Obtain Authority. The inability of the Company to obtain
-----------------------------
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
16. Reservation of Shares. The Company, during the term of this Plan,
---------------------
shall at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
17. Tax Consequences. Each Optionee is advised that he or she may suffer
----------------
adverse tax consequences as a result of the purchase or disposition of Common
Stock hereunder. Accordingly, each Optionee shall be liable for his or her
taxes and other liabilities under the Plan in accordance with the laws
applicable thereto. Optionee is further advised to consult with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of Common Stock hereunder, as neither the Company nor the Subsidiary
can provide any Optionee with tax advice. Neither the Company nor the Subsidiary
shall be responsible or liable for any tax liabilities for and on behalf of any
Optionee under the Plan, except as required by Applicable Laws.
-8-
<PAGE>
EXHIBIT A - CASHLESS EXERCISE PROGRAM:
- ---------------------------------------
The Cashless Exercise Program (referenced in Clause 8 (b) of the Plan) provides
that the employee, upon exercise of an Option, will receive cash or Common
Stock, or a combination thereof, equal to the difference between the Option
exercise price and the Fair Market Value of the Common Stock on the exercise
day. The transaction will be consummated through a broker, who will sell all or
a portion of the Optioned Stock on the open market. A portion of the proceeds
from such sale will be transferred to the Company in satisfaction of the
Optionee's exercise price. Any remaining Common Stock or cash will be remitted
to the Optionee. No cash or other property will be transferred out of India.
Example:
- -------
Assume a 5,000 share option grant, a Fair Market Value and exercise price of $10
per share at the time of grant, and a Fair Market Value on the date of exercise
of $15 per share. The employee may receive the following:
-total market value = $75,000
-total exercise price = $50,000
-profit = $25,000
-cash = $25,000
or
==
-shares = $25,000/15 = 1,666
So the employee receives $25,000 (in Indian Rupees) or 1,666 shares without any
cash expenditures, but still needs to pay taxes on the entire profit amount of
$25,000. The employee is free to choose any combination of cash and Common
Stock.
-9-
<PAGE>
Exhibit 5.1
[LETTERHEAD OF WILSON SONSINI GOODRICH & ROSATI APPEARS HERE]
April 30, 1998
Rational Software Corporation
18880 Homestead Road
Cupertino, CA 95014
RE: REGISTRATION STATEMENT ON FORM S-8
----------------------------------
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 the date hereof (the
"Registration Statement") in connection with the registration under the
Securities Act of 1933, as amended, of 100,000 shares of your Common Stock (the
"Option Shares") reserved for issuance under the Rational 1998 Indian Stock
Option Plan (the "Plan"). As your legal counsel, we have examined the
proceedings taken and are familiar with the proceedings proposed to be taken by
you in connection with the sale and issuance of the Option Shares under the
Plan. In addition, for purposes of this opinion we have assumed that the
consideration received by the Company in connection with each issuance of the
Option Shares will include an amount in the form of cash, services rendered or
property that exceeds the greater of (i) the aggregate par value of such Option
Shares or (ii) the portion of such consideration determined by the Company's
Board of Directors to be "capital" for purposes of the Delaware General
Corporation Law.
Based upon the foregoing, it is our opinion that, when issued and sold in the
manner referred to in the Plan and pursuant to the agreements which accompany
the Plans, the Option Shares issued and sold thereby 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, including any Prospectus constituting a part thereof,
and any amendments thereto. This opinion may be incorporated by reference in
any abbreviated registration statement filed pursuant to General Instruction E
of Form S-8 under the Securities Act with respect to the Registration Statement.
Very truly yours,
/s/ Wilson Sonsini Goodrich & Rosati
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
<PAGE>
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 1998 Indian Stock Option Plan of Rational Software
Corporation of our reports dated April 22, 1997, with respect to the
consolidated financial statements of Rational Software Corporation included in
its Annual Report (Form 10-K) for the year ended March 31, 1997 and the related
financial statement schedule included therein, filed with the Securities and
Exchange Commission.
/s/ Ernst & Young LLP
San Jose, California
April 30, 1998
