As filed with the Securities and Exchange Commission on October 15, 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)
1997 STOCK 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.
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>
1997 Stock Plan;
Plan Common Stock, $0.01 par
value (shares reserved for
future grant)... 6,000,000 $30.31 $181,875,000 $50,561.24
---------- --------- ------------- -----------
TOTALS..................6,000,000 $30.31 $181,875,000 $50,561.24
==============================================================================
</TABLE>
(1) This Registration Statement shall also cover any additional shares
of Common Stock which may become issuable under any of the 1997
Stock Plans being registered pursuant to this Registration
Statement by reason of any stock dividend, stock split,
recapitalization or any other similar transaction effected without
the receipt of consideration which results in an increase in the
number of the Registrant's outstanding shares of Common Stock.
(2) Estimated in accordance with Rule 457(h) of the Securities Act of
1933, as amended, solely for the purpose of computing the amount
of the registration fee based on the prices of the Company's
Common Stock as reported on the Nasdaq National Market on
October 13, 1999.
============================================================================
STATEMENT UNDER GENERAL INSTRUCTION E - REGISTRATION OF ADDITIONAL SECURITIES
The Registrant previously filed a Registration Statement on Form S-8
with the Securities 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 the 1997 Stock Plan (the "1997 Plan"). This
Registration Statement registers additional shares of the Registrant's Common
Stock to be issued pursuant to the 1997 Plan. The contents of the Previous
Form S-8, and periodic reports that the Registrant filed after the Previous
S-8 to maintain current information about the Registrant, are hereby
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 Rational 1997 Stock Plan
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation, as the legality of securities being
registered (Counsel to the Registrant)filed herewith
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of KPMG LLP, Independent Auditors
23.3 Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (contained in Exhibit 5.1 hereto)
24.1 Power of Attorney (see page II-3)
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
October 13, 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 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
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: October 13, 1999 /s/ Paul D. Levy
--------------------------------------------
Paul D. Levy, Chairman of the Board
Date: October 13, 1999 /s/ Michael T. Devlin
--------------------------------------------
Michael T. Devlin, Chief Executive Officer
and Director
Date: October 13, 1999 /s/ Timothy A. Brennan
--------------------------------------------
Timothy A. Brennan, Senior Vice President, Chief
Financial Officer, and Secretary
(Principal Financial Officer
& Principal Accounting Officer)
Date: October 13, 1999 /s/ Leslie G. Denand
--------------------------------------------
Leslie G. Denend, Director
Date: October 13, 1999 /s/ John E. Montague
--------------------------------------------
John E. Montague, Director
Date: October 13, 1999 /s/Allison R. Schleicher
--------------------------------------------
Allison R. Schleicher, Director
</TABLE>
<PAGE>
INDEX TO EXHIBITS
Exhibit Number Exhibit Document
- ------------- -----------------------------------------------------
4.1 Rational 1997 Stock Plan
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation, as the legality of securities being
registered (Counsel to the Registrant)filed herewith
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of KPMG LLP, Independent Auditors
23.3 Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (contained in Exhibit 5.1 hereto)
24.1 Power of Attorney (see page II-3)
RATIONAL SOFTWARE CORPORATION
1997 STOCK PLAN
1. Purposes of the Plan. The purposes of this Stock Plan are:
(a) to attract and retain the best available personnel for
positions of substantial responsibility,
(b) to provide additional incentive to Employees, Directors and
Consultants, and
(c) to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the
time of grant. Stock Purchase Rights may also be granted under the
Plan.
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 of the Plan.
(b) "Applicable Laws" means the requirements relating to the
administration of stock option plans under U. S. state corporate laws,
U.S. federal and state securities laws, the Code, any stock exchange or
quotation system on which the Common Stock is listed or quoted and the
applicable laws of any foreign country or jurisdiction where Options or
Stock Purchase Rights are, or will be, granted under the Plan.
(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 of the Plan.
(f) "Common Stock" means the common stock of the
Company.
(g) "Company" means Rational Software Corporation, a
Delaware corporation.
(h) "Consultant" means any person, including an
advisor, engaged by the Company or a Parent or Subsidiary to render
services to such entity.
(i) "Director" means a member of the Board.
(j) "Disability" means total and permanent disability
as defined in Section 22(e)(3) of the Code.
(k) "Employee" means any person, including Officers and
Directors, employed by the Company or any Parent or Subsidiary of the
Company. A Service Provider shall not cease to be an Employee in the
case of (i) any leave of absence approved by the Company or (ii)
transfers between locations of the Company or between the Company, its
Parent, any Subsidiary, or any successor. For purposes of Incentive
Stock Options, no such leave may exceed ninety days, unless reemployment
upon expiration of such leave is guaranteed by statute or contract. If
reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181st day of such leave any
Incentive Stock Option held by the Optionee shall cease to be treated as
an Incentive Stock Option and shall be treated for tax purposes as a
Nonstatutory Stock Option. Neither service as a Director nor payment of
a director's fee by the Company shall be sufficient to constitute
"employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(m) "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 Small Cap 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, the Fair Market
Value of a Share of Common Stock 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, as reported in The Wall Street
Journal or such other source as the Administrator deems reliable; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(n) "Incentive Stock Option" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.
(o) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(p) "Notice of Grant" means a written or electronic notice
evidencing certain terms and conditions of an individual Option or Stock
Purchase Right grant. The Notice of Grant is part of the Option
Agreement.
(q) "Officer" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(r) "Option" means a stock option granted pursuant to the Plan.
(s) "Option Agreement" means an 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.
(t) "Option Exchange Program" means a program whereby
outstanding Options are surrendered in exchange for Options with a lower
exercise price.
(u) "Optioned Stock" means the Common Stock subject to
an Option or Stock Purchase Right.
(v) "Optionee" means the holder of an outstanding
Option or Stock Purchase Right granted under the Plan.
(w) "Parent" means a "parent corporation," whether now
or hereafter existing, as defined in Section 424(e) of the Code.
(x) "Plan" means this 1997 Stock Option Plan.
(y) "Restricted Stock" means shares of Common Stock
acquired pursuant to a grant of Stock Purchase Rights under Section 11
of the Plan.
(z) "Restricted Stock Purchase Agreement" means a
written agreement between the Company and the Optionee evidencing the
terms and restrictions applying to stock purchased under a Stock
Purchase Right. The Restricted Stock Purchase Agreement is subject to
the terms and conditions of the Plan and the Notice of Grant.
(aa) "Rule 16b-3" means Rule 16b-3 of the Exchange Act
or any successor to Rule 16b-3, as in effect when discretion is being
exercised with respect to the Plan.
(bb) "Section 16(b)" means Section 16(b) of the Exchange
Act.
(cc) "Service Provider" means an Employee, Director or
Consultant.
(dd) "Share" means a share of the Common Stock, as
adjusted in accordance with Section 13 of the Plan.
(ee) "Stock Purchase Right" means the right to purchase Common
Stock pursuant to Section 11 of the Plan, as evidenced by a Notice of
Grant.
(ff) "Subsidiary" means a "subsidiary corporation",
whether now or hereafter existing, as defined in Section 424(f) of the
Code.
3. Stock Subject to the Plan. Subject to the provisions of Section
13 of the Plan, the maximum aggregate number of Shares which may be
optioned and sold under the Plan is 28,290,000 Shares, plus any unused
Shares and any forfeited Shares. For purposes of this Section 3,
(i) "unused Shares" means Shares reserved for issuance but
not covered by grants under the1994 Stock Option Plan (the "1994 Plan")
(which 1994 Plan shall be terminated as of the effective date of the Plan),
and
(ii) "forfeited Shares" means any Shares covered by grants
under the 1994 Plan that are not issued to participants or that are returned
to the Company upon forfeiture of such Shares.
If an Option or Stock Purchase Right 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, whether upon
exercise of an Option or Right, shall not be returned to the Plan and
shall not become available for future distribution under the Plan,
except that if Shares of Restricted Stock are repurchased by the Company
at their original purchase price, such Shares shall become available for
future grant under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. The Plan may be
administered by different Committees with respect to different groups of
Service Providers.
(ii) Section 162(m). To the extent that the Administrator
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of
the Code, the Plan shall be administered by a Committee of two or more
"outside directors" within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to qualify
transactions hereunder as exempt under Rule 16b-3, the transactions
contemplated hereunder shall be structured to satisfy the requirements
for exemption under Rule 16b-3.
(iv) Other Administration. Other than as provided
above, the Plan shall be administered by (A) the Board or (B) a
Committee, which committee shall be constituted to satisfy Applicable
Laws.
(b) Powers of the Administrator. Subject to the provisions of
the Plan, and in the case of a Committee, subject to the specific duties
delegated by the Board to such Committee, 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 and
Stock Purchase Rights may be granted hereunder;
(iii) to determine the number of shares of Common Stock
to be covered by each Option and Stock Purchase Right granted hereunder;
(iv) to approve forms of agreement for use under the
Plan;
(v) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any Option or Stock Purchase
Right granted hereunder. Such terms and conditions include, but are not
limited to, the exercise price, the time or times when Options or Stock
Purchase Rights may be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture
restrictions, and any restriction or limitation regarding any Option or
Stock Purchase Right of the shares of Common Stock relating thereto,
based in each case on such factors as the Administrator, in its sole
discretion, shall determine;
(vi) to reduce the exercise price of any Option or Stock
Purchase Right to the then current Fair Market Value if the Fair Market
Value of the Common Stock covered by such Option or Stock Purchase Right
shall have declined since the date the Option or Stock Purchase Right
was granted;
(vii) to institute an Option Exchange Program;
(viii) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan;
(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;
(x) to modify or amend each Option or Stock Purchase
Right (subject to Section 15(c) of the Plan), including the
discretionary authority to extend the post-termination exercisability
period of Options longer than is otherwise provided for in the Plan;
(xi) to allow Optionees to satisfy withholding tax
obligations by electing to have the Company withhold from the Shares to
be issued upon exercise of an Option or Stock Purchase Right that number
of Shares having a Fair Market Value equal to the amount required to be
withheld. The Fair Market Value of the Shares to be withheld shall be
determined on the date that the amount of tax to be withheld is to be
determined. All elections by an Optionee to have Shares withheld for
this purpose shall be made in such form and under such conditions as the
administrator may deem necessary or advisable;
(xii) to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of an Option or
Stock Purchase Right previously granted by the Administrator;
(xiii) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final and binding
on all Optionees and any other holders of Options or Stock Purchase
Rights.
5. Eligibility. Nonstatutory Stock Options and Stock Purchase
Rights may be granted to Service Providers. Incentive Stock Options may
be granted only to Employees.
6. Limitations.
(a) Each Option shall be designated in the Option Agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designation, to the extent that the
aggregate Fair Market Value of the Shares with respect to which
Incentive Stock Options are exercisable for the first time by the
Optionee during any calendar year (under all plans of the Company and
any Parent or Subsidiary) exceeds $100,000, such Options shall be
treated as Nonstatutory Stock Options. For purposes of this Section
6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall
be determined as of the time the Option with respect to such Shares is
granted.
(b) Neither the Plan nor any Option or Stock Purchase Right
shall confer upon an Optionee any right with respect to continuing the
Optionee's relationship as a Service Provider with the Company, nor
shall they interfere in any way with the Optionee's right or the
Company's right to terminate such relationship at any time, with or
without cause.
(c) The following limitations shall apply to grants of Options:
(i) No Service Provider shall be granted, in any fiscal
year of the Company, Options to purchase more than 500,000 Shares (as
appropriately adjusted pursuant to Section 13(a) ("Changes in Capitalization")
hereof.
(ii) In connection with his or her initial service, a
Service Provider may be granted Options to purchase up to an additional
500,000 Shares which shall not count against the limit set forth in
subsection (i) above (as appropriately adjusted pursuant to Section
13(a) ("Changes in Capitalization") hereof.
(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's
capitalization as described in Section 13.
(iv) If an Option is canceled in the same fiscal year of
the Company in which it was granted (other than in connection with a
transaction described in Section 13), the canceled Option will be
counted against the limits set forth in subsections (i) and (ii) above.
For this purpose, if the exercise price of an Option is reduced, the
transaction will be treated as a cancellation of the Option and the
grant of a new Option.
7. Term of Plan. Subject to Section 19 of the Plan, the Plan
shall become effective upon its adoption by the Board. It shall
continue in effect for a term of ten (10) years unless terminated
earlier under Section 15 of the Plan.
8. Term of Option. The term of each Option shall be stated in the
Option Agreement. In the case of an Incentive Stock Option, the term
shall be ten (10) years from the date of grant or such shorter term as
may be provided in the Option Agreement. Moreover, in the case of an
Incentive Stock Option granted to an Optionee who, at the time the
Incentive Stock Option is granted, owns stock representing more than ten
percent (10%) of the total combined voting power of all classes of stock
of the Company or any Parent or Subsidiary, the term of the Incentive
Stock Option shall be five (5) years from the date of grant or such
shorter term as may be provided in the Option Agreement.
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the Shares to
be issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option, (A) granted
to an Employee who, at the time the Incentive Stock Option is granted, owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the per Share
exercise price shall be no less than 110% of the Fair Market Value per Share
on the date of grant, or (B) granted to any Employee other than an Employee
described in paragraph (A) immediately above, the per Share exercise price
shall be no less than 100% of the Fair Market Value per Share on the date of
grant.
(ii) In the case of a Nonstatutory Stock Option, the per
Share exercise price shall be determined by the Administrator. In the
case of a Nonstatutory Stock Option intended to qualify as "performance-
based compensation" within the meaning of Section 162(m) of the Code,
the per Share exercise price shall be no less than 100% of the Fair
Market Value per Share on the date of grant.
(iii) Notwithstanding the foregoing, Options may be
granted with a per Share exercise price of less than 100% of the Fair
Market Value per Share on the date of grant pursuant to a merger or
other corporate transaction.
(b) Waiting Period and Exercise Dates. At the time an Option is
granted, the Administrator shall fix the period within which the Option
may be exercised and shall determine any conditions which must be
satisfied before the Option may be exercised.
(c) Form of Consideration. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the
method of payment. In the case of an Incentive Stock Option, the
Administrator shall determine the acceptable form of consideration at
the time of grant. Such consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for
more than six months on the date of surrender, and (B) have a Fair
Market Value on the date of surrender equal to the aggregate exercise
price of the Shares as to which said Option shall be exercised;
(v) consideration received by the Company under a
cashless exercise program implemented by the Company in connection with
the Plan;
(vi) a reduction in the amount of any Company liability
to the Optionee, including any liability attributable to the Optionee's
participation in any Company-sponsored deferred compensation program or
arrangement;
(vii) any combination of the foregoing methods of
payment; or
(viii) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. 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. Unless the
Administrator provides otherwise, vesting of Options granted hereunder
shall be tolled during any unpaid leave of absence. An Option may not
be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company
receives: (i) written or electronic notice of exercise (in accordance
with the Option Agreement) from the person entitled to exercise the
Option, and (ii) full payment for the Shares with respect to which the
Option is exercised.
Full payment may consist of any consideration and method of payment
authorized by the Administrator and permitted by the Option Agreement
and the Plan. 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 duly authorized transfer agent of the Company), no right to vote or
receive dividends or any other rights as a shareholder shall exist with
respect to the Optioned Stock, 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 13 of the Plan.
Exercising an Option in any manner shall decrease 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 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 to the extent 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 twelve (12) 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 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 (but in no event later than the
expiration of the term of such Option as set forth in the Notice of
Grant), by the Optionee's estate or by a person who acquires the right
to exercise the Option by bequest or inheritance, but only to the extent
that the Option is vested on the date of death. 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 his or her
entire Option, the Shares covered by the unvested portion of the Option
shall immediately revert to the Plan. The Option may be exercised by
the executor or administrator of the Optionee's estate or, if none, by
the person(s) entitled to exercise the Option under the Optionee's will
or the laws of descent or distribution. 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.
(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.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued either
alone, in addition to, or in tandem with other awards granted under the
Plan and/or cash awards made outside of the Plan. After the
Administrator determines that it will offer Stock Purchase Rights under
the Plan, it shall advise the offeree in writing or electronically, by
means of a Notice of Grant, of the terms, conditions and restrictions
related to the offer, including the number of Shares that the offeree
shall be entitled to purchase, the price to be paid, and the time within
which the offeree must accept such offer. The offer shall be accepted
by execution of a Restricted Stock Purchase Agreement in the form
determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines
otherwise, the Restricted Stock Purchase Agreement shall grant the
Company a repurchase option exercisable upon the voluntary or
involuntary termination of the purchaser's service with the Company for
any reason (including death or Disability). The purchase price for
Shares repurchased pursuant to the Restricted Stock Purchase Agreement
shall be the original price paid by the purchaser and may be paid by
cancellation of any indebtedness of the purchaser to the Company. The
repurchase option shall lapse at a rate determined by the Administrator.
(c) Other Provisions. The Restricted Stock Purchase Agreement
shall contain such other terms, provisions and conditions not
inconsistent with the Plan as may be determined by the Administrator in
its sole discretion.
(d) Rights as a Shareholder. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is
entered upon the records of the duly authorized transfer agent of the
Company. No adjustment will be made for a dividend or other right for
which the record date is prior to the date the Stock Purchase Right is
exercised, except as provided in Section 13 of the Plan.
12. Non-Transferability of Options and Stock Purchase Rights.
Unless determined otherwise by the Administrator, an Option or Stock
Purchase Right 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. If the Administrator
makes an Option or Stock Purchase Right transferable, such Option or
Stock Purchase Right shall contain such additional terms and conditions
as the Administrator deems appropriate.
13. Adjustments Upon Changes in Capitalization, Dissolution, Merger
or Asset Sale.
(a) Changes in Capitalization. Subject to any required action
by the shareholders of the Company, the number of shares of Common Stock
covered by each outstanding Option and Stock Purchase Right, and the
number of shares of Common Stock which have been authorized for issuance
under the Plan but as to which no Options or Stock Purchase Rights have
yet been granted or which have been returned to the Plan upon
cancellation or expiration of an Option or Stock Purchase Right, as well
as the price per share of Common Stock covered by each such outstanding
Option or Stock Purchase Right and the limitations on issuance as set
forth in Sections 6(c)(i) and 6(c)(ii) hereof, 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 Board, 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 or Stock Purchase Right.
(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 ten (10) 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. In addition, the Administrator may provide
that any Company repurchase option applicable to any Shares purchased
upon exercise of an Option or Stock Purchase Right shall lapse as to all
such Shares, provided the proposed dissolution or liquidation takes
place at the time and in the manner contemplated. To the extent it has
not been previously exercised, an Option or Stock Purchase Right 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 and Stock
Purchase Right shall be assumed or an equivalent option or right
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 or Stock Purchase Right,
the Optionee shall fully vest in and have the right to exercise the
Option or Stock Purchase Right as to all of the Optioned Stock,
including Shares as to which it would not otherwise be vested or
exercisable. If an Option or Stock Purchase Right 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
writing or electronically that the Option or Stock Purchase Right shall
be fully vested and exercisable for a period of fifteen (15) days from
the date of such notice, and the Option or Stock Purchase Right shall
terminate upon the expiration of such period. For the purposes of this
paragraph, the Option or Stock Purchase Right shall be considered
assumed if, following the merger or sale of assets, the option or right
confers the right to purchase or receive, for each Share of Optioned
Stock subject to the Option or Stock Purchase Right 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 or Stock Purchase Right, for
each Share of Optioned Stock subject to the Option or Stock Purchase
Right, 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.
14. Date of Grant. The date of grant of an Option or Stock
Purchase Right shall be, for all purposes, the date on which the
Administrator makes the determination granting such Option or Stock
Purchase Right, or such other later date as is determined by the
Administrator. Notice of the determination shall be provided to each
Optionee within a reasonable time after the date of such grant.
15. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or terminate the Plan.
(b) Shareholder Approval. The Company shall obtain shareholder
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.
16. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to
the exercise of an Option or Stock Purchase Right unless the exercise of
such Option or Stock Purchase Right 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.
(b) Investment Representations. As a condition to the exercise
of an Option or Stock Purchase Right, the Company may require the person
exercising such Option or Stock Purchase Right 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.
17. 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.
18. Reservation of Shares. The Company, during the term of this
Plan, will at all times reserve and keep available such number of Shares
as shall be sufficient to satisfy the requirements of the Plan.
19. Shareholder Approval. The Plan shall be subject to approval by
the shareholders of the Company within twelve (12) months after the date
the Plan is adopted. Such shareholder approval shall be obtained in the
manner and to the degree required under Applicable Laws.
Adopted by the stockholders on 2/26/97.
Amended by the stockholders on 9/25/97.
<PAGE>
Exhibit 5.1
October 13, 1999
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 an additional 6,000,000 shares of
Common Stock (the "Option Shares") of Rational Software Corporation (the
"Company") for issuance pursuant to the amendment to the Company's 1997 Stock
Plan (the "1997 Plan") . As legal counsel for the Company, 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
pursuant to the 1997 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 1997 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,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
/s/ Wilson Sonsini Goodrich & Rosati
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 1997 Stock Plan of Rational Software
Corporation of our report dated April 14, 1999, with respect to the
consolidated financial statements and schedule of Rational Software
Corporation included in its Annual Report (Form 10-K) for the year ended March
31, 1999, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Palo Alto, California
October 12, 1999
Exhibit 23.2
CONSENT OF KPMG LLP, INDEPENDENT AUDITORS
We consent to incorporation herein by reference of our report dated January 21,
1997, except as to Note 2, which is as of January 31, 1997, relating to the
consolidated statements of operations, stockholders' equity, and cash
flows of Pure Atria Corporation and subsidiaries for the year ended
December 31, 1996, which report appears in the March 31, 1999, annual
report on Form 10-K of Rational Software Corporation.
/s/ KPMG LLP
Mountain View, California
October 11, 1999
