As filed with the Securities and Exchange Commission on January 22, 1999
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
(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)
1998 Employee Stock Purchase 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 Amount Offering Aggregate Amount of
Class of Securities to be Price Per Offering Registration
to be Registered Registered Share(1) Price(1) Fee(2)
- ------------------------------- ---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
1998 Employee Stock Purchase
Plan Common Stock, $0.01 par
value (shares reserved for
future grant)... 191,261 $26.35 $5,039,727 $1,401.05
---------- --------- ----------- -----------
TOTALS.................. 191,261 $26.35 $5,039,727 $1,401.05
============================================================================
</TABLE>
(1) The indicated number of shares to be registered represents additional shares
issuable under the listed plan that are not covered by prior registration
statements. Price per share and aggregate offering price estimated in
accordance with Rule 457 (h) under the Securities Act of 1933, as amended,
solely for the purpose of calculating the registration fee. The
computation is based upon eighty-five percent of the average of the high
and low price as reported on the Nasdaq National Market on January 15,
1999, the price at which options are granted pursuant to the plan.
============================================================================
STATEMENT UNDER GENERAL INSTRUCTION E - REGISTRATION OF ADDITIONAL SECURITIES
The Registrant previously filed a Registration Statement on Form S-8 with the
Secutities and Exchange Commission on or about August 4, 1998 (SEC File No.333-
60579) (the "Previous Form S-8"). The Previous Form S-8 was filed in connection
with, among other plans, the 1998 Employee Stock Purchase Plan (the "1998
ESPP"). This Registration Statement registers additional shares of the
Registrant's Common Stock to be issued pursuant to the 1998 ESPP. The contents
of the Previous Form S-8, including periodic reports filed or to be filed by
the Registrant after the Previous Form S-8 to maintain current information
about the Registrant are incorporated by reference into this Registration
Statement pursuant to General Instruction E of Form S-8.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 8. Exhibits
--------
Exhibit Description
Number
4.1 The 1998 Employee Stock Purchase Plan filed herewith
5.1 Opinion of counsel 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 (see page II-2)
II-1
<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 Cupertino, State of California, on
January 21, 1999.
RATIONAL SOFTWARE CORPORATION
By: /s/ Timothy A. Brennan
-----------------------
Timothy A. Brennan
Senior Vice President, 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
jointly and severally, his attorneys-in-fact, each with the power
of substitution, for him in any and all capacities, to sign any
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
date indicated.
<TABLE>
<S> <C>
Date: January 21, 1999 /s/ Paul D. Levy
--------------------------------------------
Paul D. Levy, Chairman of the Board
and Chief Executive Officer
Date: January 21, 1999 /s/ Michael T. Devlin
--------------------------------------------
Michael T. Devlin, President and Director
Date: January 21, 1999 /s/ Timothy A. Brennan
--------------------------------------------
Senior Vice President, Chief Financial Officer,
and Secretary
(Principal Financial Officer
& Principal Accounting Officer)
Date: January 21, 1999 /s/ James S. Campbell
--------------------------------------------
James S. Campbell, Director
Date: January 21, 1999 /s/ Daniel H. Case III
--------------------------------------------
Daniel H. Case III, Director
Date: January 21, 1999 /s/ Leslie G. Denend
--------------------------------------------
Leslie G. Denend, Director
Date: January 21, 1999 /s/ John E. Montague
--------------------------------------------
John E. Montague, Director
Date: January 21, 1999 /s/ Allison R. Schleicher
--------------------------------------------
Allison R. Schleicher, Director
</TABLE>
<PAGE>
INDEX TO EXHIBITS
Exhibit Number Exhibit Document
- ------------- -----------------------------------------------------
4.1 1998 Employee Stock Purchase Plan incorporated herin by
reference to the Registrant's Registration Statement on
Form S-8 as filed on August 4, 1998. File No. 333-60579.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation, as to the legality of securities being
registered (Counsel to the Registrant) filed herewith
23.1 Consent of Ernst & Young, L.L.P. filed herewith
23.2 Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (contained in Exhibit 5.1 hereto)
24.1 Power of Attorney (see page II-2)
<PAGE>
RATIONAL SOFTWARE CORPORATION
1998 EMPLOYEE STOCK PURCHASE PLAN
(As Amended Through October 31, 1998)
The following constitute the provisions of the 1998 Employee Stock
Purchase Plan (herein called the "Plan") of Rational Software
Corporation (herein called the "Company").
1. Purpose. The purpose of the Plan is to provide employees of
the Company and its Designated Subsidiaries with an opportunity to
purchase Common Stock of the Company through accumulated payroll
deductions. It is the intention of the Company to have the Plan qualify
as an "Employee Stock Purchase Plan" under Section 423 of the Internal
Revenue Code of 1986. The provisions of the Plan shall, accordingly, be
construed so as to extend and limit participation in a manner consistent
with the requirements of that section of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the Common Stock of the Company.
(d) "Company" shall mean Rational Software Corporation, a
Delaware corporation and any Designated Subsidiary of the Company.
(e) "Compensation," unless otherwise determined by the
Board, shall mean all regular straight time earnings, including
commissions, but exclusive of payments for overtime, shift premium,
incentive compensation, incentive payments, bonuses, or other
compensation.
(f) "Continuous Status as an Employee" shall mean the
absence of any interruption or termination of service as an Employee.
Continuous Status as an Employee shall not be considered interrupted in
the case of a leave of absence agreed to in writing by the Company,
provided that such leave is for a period of not more than 90 days or
reemployment upon the expiration of such leave is guaranteed by contract
or statute.
(g) "Designated Subsidiaries" shall mean the Subsidiaries
which have been designated by the Board from time to time in its sole
discretion as eligible to participate in the Plan.
(h) "Employee" shall mean any person, including an
officer, who is customarily employed for at least twenty (20) hours per
week and more than five (5) months in a calendar year by the Company or
one of its Designated Subsidiaries.
(i) "Exercise Date," unless otherwise determined by the
Board, shall mean the last Trading Day of each Exercise Period.
(j) "Exercise Period," unless otherwise determined by the
Board, shall mean a period commencing on an Offering Date or on the day
after an Exercise Date and terminating on the last Trading Day before
the commencement of the next Offering Period under the Plan.
(k) "Offering Period," unless otherwise set forth herein
or determined by the Board, shall mean a period of twenty-four (24)
months consisting of four (4) six-month Exercise Periods during which
options granted pursuant to the Plan may be exercised.
(l) "Offering Date," unless otherwise determined by the
Board, shall mean the first day of each Offering Period of the Plan.
(m) "Plan" shall mean this 1998 Employee Stock Purchase
Plan.
(n) "Subsidiary" shall mean a corporation, domestic or
foreign, of which not less than 50% of the voting shares are held by the
Company or a Subsidiary, whether or not such corporation now exists or
is hereafter organized or acquired by the Company or a Subsidiary.
(o) "Trading Day" shall mean a day on which the principal
stock exchange or quotation system on which the Company's stock is
traded is open for trading.
3. Eligibility.
(a) Any Employee as defined in paragraph 2 who shall be
employed by the Company on the Offering Date shall be eligible to
participate in the Plan, subject to limitations imposed by
Section 423(b) of the Code.
(b) Any provisions of the Plan to the contrary
notwithstanding, no Employee shall be granted an option under the Plan
(i) if, immediately after the grant, such Employee (or any other person
whose stock would be attributed to such Employee pursuant to
Section 424(d) of the Code) would own stock and/or hold outstanding
options to purchase stock possessing five percent (5%) or more of the
total combined voting power or value of all classes of stock of the
Company or of any subsidiary of the Company, or (ii) which permits such
Employee's rights to purchase stock under all employee stock purchase
plans of the Company and its subsidiaries to accrue at a rate which
exceeds Twenty-Five Thousand Dollars ($25,000) of fair market value of
such stock (determined at the time such option is granted) for each
calendar year in which such option is outstanding at any time.
4. Offering Periods. Unless otherwise determined by the Board,
the Plan shall be implemented by consecutive, overlapping twenty-four
(24) month Offering Periods beginning every six (6) months on the first
Trading Day on or after May 1 and November 1 of each year, until
terminated in accordance with Section 20 hereof; provided that, the
first Offering Period (the "First Offering Period") shall begin on the
first Trading Day after the Company's Annual Meeting on July 16, 1998
and shall end on the last Trading Day before May 1, 2000. The Board of
Directors of the Company shall have the power to change the commencement
date, termination date and duration of offering periods with respect to
future offerings without stockholder approval at any time.
5. Participation.
(a) An eligible Employee may become a participant in the
Plan by completing a subscription agreement authorizing payroll
deductions on the form provided by the Company and filing it with the
Company's payroll office at least one week prior to the applicable
Offering Date, unless a later time for filing the subscription agreement
is set by the Board for all eligible Employees with respect to a given
offering.
(b) Payroll deductions for a participant shall continue at
the rate specified in the subscription agreement throughout an Offering
Period with automatic re-enrollment for the Offering Period which
commences the day after the last Exercise Date of any Offering Period at
the same rate specified in the original subscription agreement, subject
to any change in subscription rate made pursuant to Section 6(c) or (d),
unless sooner terminated by the participant as provided in Section 11.
6. Payroll Deductions.
(a) At the time a participant files his or her
subscription agreement, such participant shall elect to have payroll
deductions made on each payday during the Offering Period in an amount
not exceeding ten percent (10%) of his or her Compensation on each
payroll date. The aggregate of such payroll deductions during any
Offering Period shall not exceed ten percent (10%) of his or her
aggregate Compensation during said Offering Period. Any Employee
electing to participate in the First Offering Period who is
simultaneously participating in the Company's 1994 Employee Stock
Purchase Plan (the "1994 Plan") may elect to have such Employee's
contributions under this Plan for such period include the amount, if
any, contributed under the 1994 Plan that would otherwise be returned to
such Employee in the event of a pro rata distribution pursuant to
Section 12(a) of the 1994 Plan on October 30, 1998, provided, however,
that the total amount contributed under the Plan and the 1994 Plan may
not exceed 10% of such Employee's Compensation.
(b) All payroll deductions made by a participant shall be
credited to his or her account under the Plan and will be withheld in
whole percentages only. A participant may not make any additional
payments into such account.
(c) A participant may discontinue his or her participation
in the Plan as provided in Section 11, or may increase or decrease the
rate of his or her payroll deductions during the Offering Period by
completing or filing with the Company a form provided by the Company
notifying the payroll office of such withdrawal or reduction of
withholding rate. The change in rate shall be effective as of the next
pay date following five (5) business days after the Company's receipt of
the form or at such other time as the Company and the participant may
agree.
(d) Notwithstanding the foregoing, to the extent necessary
to comply with Section 423(b)(8) of the Code and Section 3(b) hereof, a
participant's payroll deductions may be decreased to 0% at such time
during any Exercise Period which is scheduled to end during the current
calendar year. Payroll deductions shall recommence at the rate provided
in such participant's subscription agreement at the beginning of the
first Exercise Period which is scheduled to end in the following
calendar year, unless terminated by the participant as provided in
Section 11 hereof.
(e) At the time the option is exercised, in whole or in
part, or at the time some or all of the Company's Common Stock issued
under the Plan is disposed of, the participant must make adequate
provision for the Company's federal, state, or other tax withholding
obligations, if any, which arise upon the exercise of the option or the
disposition of the Common Stock. At any time, the Company may, but
shall not be obligated to, withhold from the participant's compensation
the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the
Company any tax deductions or benefits attributable to sale or early
disposition of Common Stock by the Employee.
7. Grant of Option.
(a) Unless otherwise determined by the Board, on the
Offering Date of each Offering Period, each eligible Employee
participating in the Plan shall be granted an option to purchase on each
Exercise Date during such Offering Period (at the per share option
price) up to a number of shares of the Company's Common Stock determined
by dividing such Employee's payroll deductions to be accumulated prior
to such Exercise Date by the lower of (i) eighty-five percent (85%) of
the fair market value of a share of the Company's Common Stock on the
Offering Date or (ii) eighty-five percent (85%) of the fair market value
of a share of the Company's Common Stock on the Exercise Date; provided
that in no event shall an Employee be permitted to purchase during an
Exercise Period a number of shares in excess of a number determined by
dividing $12,500 by the fair market value of a share of the Company's
Common Stock on the Offering Date, and provided further that such pur-
chase shall be subject to the limitations set forth in Sections 3(b) and
13 hereof. The Board may, for future Offering Periods, increase or
decrease, in its absolute discretion, the maximum number of shares of
the Company's Common Stock an Employee may purchase during each Exercise
Period of such Offering Period. Exercise of the option shall occur as
provided in Section 8 hereof, unless the participant has withdrawn
pursuant to Section 11 hereof. The option shall expire on the last day
of the Offering Period. Fair market value of a share of the Company's
Common Stock shall be determined as provided in Section 7(b) herein.
(b) Unless otherwise determined by the Board, the option
price per share of the shares offered in a given Exercise Period shall
be the lower of: (i) 85% of the fair market value of a share of the
Common Stock of the Company on the Offering Date; or (ii) 85% of the
fair market value of a share of the Common Stock of the Company on the
Exercise Date. The fair market value of the Company's Common Stock on a
given date shall be the closing price as quoted on the Nasdaq Stock
Market, Inc.'s National Market or, if traded on a securities exchange,
the closing price on such exchange.
8. Exercise of Option. Unless a participant withdraws from the
Plan as provided in Section 11, his or her option for the purchase of
shares will be exercised automatically on each Exercise Date of the
Offering Period, and the maximum number of full shares subject to option
will be purchased for him or her at the applicable option price with the
accumulated payroll deductions in his or her account. During his or her
lifetime, a participant's option to purchase shares hereunder is
exercisable only by him or her.
9. Delivery. As promptly as practicable after the Exercise
Date of each offering, the Company shall arrange the delivery to each
participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option. Any cash remaining which
is insufficient to purchase a full share of Common Stock at the
termination of each Exercise Period shall be applied to such
participant's account in the subsequent Exercise Period unless the
participant requests withdrawal of such cash.
10. Automatic Transfer to Low Price Offering Period. Unless
otherwise determined by the Board, in the event that the fair market
value of the Company's Common Stock is lower on an Exercise Date than it
was on the first Offering Date for that Offering Period, all Employees
participating in the Plan on the Exercise Date shall be deemed to have
withdrawn from the Offering Period immediately after the exercise of
their option on such Exercise Date and to have enrolled as participants
in a new Offering Period which begins on or about the day following such
Exercise Date. A participant may elect to remain in the previous
Offering Period by filing a written statement declaring such election
with the Company prior to the time of the automatic change to the new
Offering Period.
11. Withdrawal; Termination of Employment.
(a) A participant may withdraw all but not less than all
the payroll deductions credited to his or her account and not yet used
to exercise such participant's option under the Plan at any time prior
to the Exercise Date of the Offering Period by giving written notice to
the Company. All of the participant's payroll deductions credited to
his or her account will be paid to him or her at the next pay date after
receipt of his or her notice of withdrawal and his or her option for the
current period will be automatically terminated, and no further payroll
deductions for the purchase of shares will be made during the Offering
Period. If a participant withdraws from an Offering Period, payroll
deductions shall not resume at the beginning of the succeeding Offering
Period unless the participant delivers to the Company a new subscription
agreement.
(b) Upon termination of the participant's Continuous
Status as an Employee prior to the Exercise Date for any reason,
including retirement or death, the payroll deductions credited to his or
her account will be returned to the participant's or, in the case the of
participant's death, to the person or persons entitled thereto under
Section 15, and his or her option will be automatically terminated. The
preceding sentence notwithstanding, a participant who receives payment
in lieu of notice of termination of employment shall be treated as
continuing to be an Employee for the participant's customary number of
hours per week of employment during the period in which the participant
is subject to such payment in lieu of notice.
(c) A participant's withdrawal from an offering will not
have any effect upon his or her eligibility to participate in a
succeeding offering or in any similar plan which may hereafter be
adopted by the Company.
12. Interest. No interest shall accrue on the payroll
deductions of a participant in the Plan.
13. Stock.
(a) The maximum number of shares of the Company's Common
Stock which shall be made available for sale under the Plan shall be
2,000,000 shares, plus a semi-annual increase to be made on the first
Trading Day on or after May 1 and November 1 of each year (the
"Refreshment Date") equal to the lesser of (i) such number of shares as
is required to cause the number of shares reserved hereunder to equal
2,000,000 as of the Refreshment Date after having given effect to all
option exercises on the immediately preceding Exercise Date or (ii) a
lesser amount determined by the Board, subject to adjustment upon
changes in capitalization of the Company as provided in Section 19
hereof. Unless otherwise determined by the Board, if the total number
of shares which would otherwise be subject to options granted pursuant
to Section 7(a) hereof on any Exercise Date exceeds (i) the number of
shares then available under the Plan or (ii) 500,000 shares, as adjusted
for changes in capitalization of the Company as provided in Section 19
hereof (such amount under clause (i) or (ii) being the "Available
Amount"), the Company shall make a pro rata allocation of only the
Available Amount, in as uniform a manner as shall be practicable and as
it shall determine to be equitable. In such event, the Company shall
give written notice of such reduction of the number of shares subject to
the option to each Employee affected thereby and shall similarly reduce
the rate of payroll deductions, if necessary.
(b) The participant will have no interest or voting right
in shares covered by his or her option until such option has been
exercised.
(c) Shares to be delivered to a participant under the Plan
will be registered in the name of the participant or in the name of the
participant and his or her spouse.
14. Administration. The Plan shall be administered by the Board
of Directors of the Company or a committee appointed by the Board. The
administration, interpretation or application of the Plan by the Board
or its committee shall be final, conclusive and binding upon all
participants.
15. Designation of Beneficiary.
(a) A participant may file a written designation of a
beneficiary who is to receive any shares and cash, if any, from the
participant's account under the Plan in the event of such participant's
death subsequent to the end of the offering period but prior to delivery
to such participant of such shares and cash. In addition, a participant
may file a written designation of a beneficiary who is to receive any
cash from the participant's account under the Plan in the event of such
participant's death prior to the Exercise Date of the offering period.
If a participant is married and the designated beneficiary is not the
spouse, spousal consent shall be required for such designation to be
effective.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of
a participant and in the absence of a beneficiary validly designated
under the Plan who is living at the time of such participant's death,
the Company shall deliver such shares and/or cash to the executor or
administrator of the estate of the participant, or if no such executor
or administrator has been appointed (to the knowledge of the Company),
the Company, in its discretion, may deliver such shares and/or cash to
the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the
Company, then to such other person as the Company may designate.
16. Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an
option or to receive shares under the Plan may be assigned, transferred,
pledged or otherwise disposed of in any way (other than by will, the
laws of descent and distribution or as provided in Section 15 hereof) by
the participant. Any such attempt at assignment, transfer, pledge or
other disposition shall be without effect, except that the Company may
treat such act as an election to withdraw funds in accordance with
Section 11.
17. Use of Funds. All payroll deductions received or held by
the Company under the Plan may be used by the Company for any corporate
purpose, and the Company shall not be obligated to segregate such
payroll deductions.
18. Reports. Individual accounts will be maintained for each
participant in the Plan. Statements of account will be given to
participating Employees annually promptly following the Exercise Date,
which statements will set forth the amounts of payroll deductions, the
per share purchase price, the number of shares purchased and the
remaining cash balance, if any.
19. Adjustments Upon Changes in Capitalization. Subject to any
required action by the stockholders of the Company, the number of shares
of Common Stock covered by each option under the Plan which has not yet
been exercised and the number of shares of Common Stock which have been
authorized for issuance under the Plan but have not yet been placed
under option (collectively, the "Reserves"), as well as the price per
share of Common Stock covered by each option under the Plan which has
not yet been exercised, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock
resulting from a stock split or the payment of a stock dividend (but
only on the Common Stock) or any other increase or decrease in the
number of 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 Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issue
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.
In the event of the proposed dissolution or liquidation of the
Company, the offering period will terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the
Board. In the event of a proposed sale of all or substantially all of
the assets of the Company, or the merger of the Company with or into
another corporation, each option under the Plan shall be assumed or an
equivalent option shall be substituted by such successor corporation or
a parent or subsidiary of such successor corporation (collectively, a
"Successor"); provided, that if the Successor fails to assume or
substitute for each option, then the Exercise Date for all Offering
Periods then in effect shall be the date one day prior to the closing of
such asset sale or merger and the Plan shall terminate immediately
thereafter. If the Exercise Date for options is accelerated pursuant to
the foregoing sentence, the Board shall notify each participant of such
acceleration at least ten (10) days prior to the new Exercise Date.
The Board may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as
the price per share of Common Stock covered by each outstanding option,
in the event that the Company effects one or more reorganizations,
recapitalizations, rights offerings or other increases or reductions of
shares of its outstanding Common Stock.
20. Amendment or Termination. The Board of Directors of the
Company may at any time amend in any manner or terminate the Plan and
may terminate any Exercise Period or Offering Period by accelerating the
date that such Exercise Period or Offering Period shall end. In
addition, to the extent necessary to comply with Section 423 of the Code
(or any successor rule or provision or any other applicable law or
regulation), the Company shall obtain stockholder approval in such a
manner and to such a degree as so required.
Without shareholder consent and without regard to whether
any participant rights may be considered to have been "adversely
affected," the Board (or its committee) shall be entitled to change the
Offering Periods and/or Exercise Periods, limit the frequency and/or
number of changes in the amount withheld during an Offering Period,
establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess
of the amount designated by a participant in order to adjust for delays
or mistakes in the Company's processing of properly completed
withholding elections, establish reasonable waiting and adjustment
periods and/or accounting and crediting procedures to ensure that
amounts applied toward the purchase of Common Stock for each participant
properly correspond with amounts withheld from the participant's
Compensation, and establish such other limitations or procedures as the
Board (or its committee) determines in its sole discretion advisable
which are consistent with the Plan.
21. Notices. All notices or other communications by a
participant to the Company under or in connection with the Plan shall be
deemed to have been duly given when received in the form specified by
the Company at the location, or by the person, designated by the Company
for the receipt thereof.
22. Conditions Upon Issuance of Shares. Shares shall not be
issued with respect to an option unless the exercise of such option and
the issuance and delivery of such shares pursuant thereto shall comply
with all applicable provisions of law, domestic or foreign, including,
without limitation, the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon
which the shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an option, the Company 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 by any of the aforementioned applicable
provisions of law.
23. Term of Plan. The Plan shall become effective upon the
earlier to occur of its adoption by the Board of Directors or its
approval by the stockholders of the Company. It shall continue in
effect for a term of ten (10) years unless sooner terminated under
paragraph 20.
RATIONAL SOFTWARE CORPORATION
1998 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Date:
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. __________________________________ hereby elects to participate in
the Rational Software Corporation Employee Stock Purchase Plan
(the "Stock Purchase Plan") and subscribes to purchase shares of
the Company's Common Stock, without par value, in accordance with
this Subscription Agreement and the Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the
amount of _____% (maximum 10%) of my Compensation on each payday
during the Offering Period in accordance with the Stock Purchase
Plan, provided, however, that if I am currently participating in
the Company's 1994 Employee Stock Purchase Plan (the "1994 Plan"),
then during the First Offering Period (as defined in the Stock
Purchase Plan) I hereby elect to contribute to the Stock Purchase
Plan such amount as would otherwise be returned to me in the event
of a pro rata distribution pursuant to Section 12(a) of the 1994
Plan on October 30, 1998 in lieu of the foregoing contribution in
the First Offering Period only. Such deductions are to continue
for succeeding Offering Periods until I give written instructions
for a change in or termination of such deductions.
3. I understand that said payroll deductions shall be accumulated for
the purchase of shares of Common Stock, without par value, at the
applicable purchase price determined in accordance with the Stock
Purchase Plan. I further understand that, except as otherwise set
forth in the Stock Purchase Plan, shares will be purchased for me
automatically on each Exercise Date of the offering period unless
I otherwise withdraw from the Stock Purchase Plan by giving
written notice to the Company for such purpose.
4. I have received a copy of the complete "Rational Software
Corporation Employee Stock Purchase Plan." I understand that my
participation in the Stock Purchase Plan is in all respects
subject to the terms of the Plan. I have been provided with a
prospectus describing the Stock Purchase Plan. I understand that
I may withdraw from the Stock Purchase Plan and have payroll
deductions refunded (without interest) on the next payroll date
following notice of withdrawal at any time during the Offering
Period.
5. Shares purchased for me under the Stock Purchase Plan should be
issued in the name(s) of:
.
6. I understand that if I dispose of any shares received by me
pursuant to the Stock Purchase Plan within 2 years after the
Offering Date (the first day of the offering period during which I
purchased such shares) or within one year after the date on which
such shares were transferred to me, I will be treated for federal
income tax purposes as having received ordinary income at the time
of such disposition in an amount equal to the excess of the fair
market value of the shares at the time such shares were
transferred to me over the price which I paid for the shares, and
that I may be required to provide income tax withholding on that
amount. I hereby agree to notify the Company in writing within 30
days after the date of any such disposition. However, if I
dispose of such shares at any time after the expiration of the
two-year and one-year holding periods, I understand that I will be
treated for federal income tax purposes as having received income
only at the time of such disposition, and that such income will be
treated as ordinary income only to the extent of an amount equal
to the lesser of (1) the excess of the fair market value of the
shares at the time of such disposition over the purchase price
which I paid for the shares under the option, or (2) the excess of
the fair market value of the shares over the option price,
measured as if the option had been exercised on the Offering Date.
The remainder of the gain or loss, if any, recognized on such
disposition will be treated as capital gain or loss. The federal
income tax treatment of ordinary income and capital gain and loss
is described in the Company's prospectus relating to the Stock
Purchase Plan.
7. I hereby agree to be bound by the terms of the Stock Purchase
Plan. The effectiveness of this Subscription Agreement is
dependent upon my eligibility to participate in the Stock Purchase
Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under
the Stock Purchase Plan:
NAME: (Please print)
(First) (Middle) (Last)
Relationship
(Address)
NAME: (Please print)
(First) (Middle) (Last)
Relationship
(Address)
Employee's Social
Security Number:
Employee's Address:*
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT
THROUGHOUT SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:
Signature of Employee
* It is the participant's responsibility to notify the Company's stock
administrator in the event of a change of address.
<PAGE>
Exhibit 5.1
January 22, 1999
Rational Software Corporation
18880 Homestead Road
Cupertino, CA 95014
Re: Registration Statement on Form S-8
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 January 22,
1999 (the "Registration Statement") in connection with the registration
under the Securities Act of 1933, as amended, of the 1998 Employee
Stock Purchase Plan (as to 191,261 shares) (the "1998 ESPP" and the
"Shares" as appropriate). 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 issuance and sale of the Shares
pursuant to the 1998 ESPP. In addition, for purposes of this opinion
we have assumed that the consideration received by the Company in
connection with each issuance of the 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 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.
It is our opinion that the Shares, when issued and sold in the manner
described in the 1998 ESPP and pursuant to the agreement that
accompanies each grant under the 1998 ESPP, 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
Exhibit 23.1
CONSENT OF ERNST & YOUNG L.L.P., INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement (Form S-8) pertaining to the 1998 Employee Stock Purchase
Plan of Rational Software Corporation of our reports dated April 21,
1998, except for Note Fifteen, as to which the date is April 23, 1998,
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, 1998 and the related financial statement schedule
included herein, filed with the Securities and Exchange Commission.
/s/ Ernst & Young L.L.P.
Palo Alto, California
January 15, 1999
