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As filed with the Securities and Exchange Commission on May 19, 2000
Registration No. 333-_____
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
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RATIONAL SOFTWARE CORPORATION
(Exact name of Registrant as specified in its charter)
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Delaware 54-1217099
(State or other jurisdiction of 18880 Homestead Road (I.R.S. Employer
incorporation or organization) Cupertino, California 95014 Identification Number)
(408) 863-9900
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(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
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Michael T. Devlin
Chief Executive Officer
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)
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Copy to:
Katharine A. Martin, Esq.
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304
(415) 493-9300
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Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box.[_]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_] _______________
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_] _______________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
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Calculation of Registration Fee
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Proposed Maximum Proposed Maximum
Title of Each Class of Securities Amount to be Offering Price Per Aggregate Offering Amount of
to be Registered Registered Share(1) Price(1) Registration Fee
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Common Stock...................................... 371,385 $73.25 $27,203,951 $7,185
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(1) Estimated solely for the purpose of computing the amount of the registration
fee based on the average of the high and low prices for the Common Stock as
reported on the Nasdaq Stock Market on May 15, 2000, in accordance with Rule
457(c) under the Securities Act of 1933, as amended.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED MAY 19, 2000
371,385 Shares
RATIONAL SOFTWARE CORPORATION
Common Stock
All of the shares of common stock offered by this Prospectus are being sold
by the selling stockholders. Rational Software Corporation will not receive any
of the proceeds from the sale of these shares.
The reported last sales price of our common stock on the Nasdaq National
Market on April 28, 2000 was $85.13 per share. Our common stock is traded on
the Nasdaq National Market under the symbol "RATL."
Investing in our common stock involves risks. See "Risk Factors" starting
on page 5.
We originally issued all of the shares offered by this prospectus in
connection with our acquisition of ObjecTime Limited. We are registering the
shares pursuant to an agreement between us and the selling stockholders.
The selling stockholders may sell all or a portion of the shares from time
to time on the Nasdaq Stock Market's National Market land at prices which will
be determined by the prevailing market price for the shares.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
This prospectus is dated May __, 2000
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TABLE OF CONTENTS
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Page
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The Company
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Special Note Regarding Forward-Looking Statements...... 3
Where You Can Find More Information.................... 3
Use of Proceeds........................................ 12
Selling Stockholders................................... 12
Legal Matters.......................................... 18
Independent Auditors................................... 18
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You should rely only on the information contained in or incorporated by
reference in this prospectus. We have not authorized anyone to provide you with
different information. We are not making an offer of these securities in any
state where the offer is not permitted. You should not assume that the
information contained in or incorporated by reference in this prospectus
supplement or the prospectus is accurate as of any date other than the date on
the front of this prospectus.
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RATIONAL SOFTWARE CORPORATION
Rational Software Corporation is a leading provider of integrated solutions
that automate the software development process. Our integrated solutions
include unified tools, software engineering best practices and services that
allow customers to successfully and efficiently develop and deploy software.
Rational's solutions help customers organize, automate and simplify the software
development process and enable them to gain a competitive advantage by being
able to more quickly develop and deploy high-quality, mission-critical software.
The focus of our business is e-development, that is, helping customers rapidly
develop high-quality software for the Internet-connected global economy.
Our principal offices are located at 18880 Homestead Road, Cupertino,
California 95014, our telephone number is (408) 863-9900 and our website can be
accessed at www.rational.com. Information contained in our website does not
constitute part of this prospectus. References to Rational, the Company, "we",
"us" and "our" in this Prospectus refer to Rational Software Corporation and its
subsidiaries unless the context requires otherwise.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the documents we incorporate by reference may contain
certain forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Statements in this prospectus that are not
historical facts are hereby identified as "forward-looking statements" for the
purpose of the safe harbor provided by Section 21E of the Exchange Act and
Section 27A of the Securities Act. Words such as "estimate," "project," "Plan,"
"intend," "expect," "believe" and similar expressions are intended to identify
forward-looking statements. These forward-looking statements are found at
various places throughout this prospectus and the other documents incorporated
by reference, including, but not limited to, the Annual Report on Form 10-K for
the year ended March 31, 2000 of Rational, including any amendment. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date of this prospectus. We do not undertake any
obligation to publicly update or release any revisions to these forward-looking
statements to reflect events or circumstance after the date of this prospectus
or to reflect the occurrence of unanticipated events.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the
Commission, in accordance with the Securities Exchange Act of 1934. You may
read and copy our reports, proxy statements and other information filed by us at
the public reference facilities of the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's Regional
Offices; 7 World Trade Center, 13th Floor, New York, New York 10048. Copies of
such materials can be obtained at prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the Commission at 1-800-SEC-0330 for further information about the
public reference rooms. Our reports, proxy statements and other information
filed with the Commission are available to the public over the Internet at the
Commission's World Wide Web site at http://www.sec.gov.
The Commission allows us to "incorporate by reference" into this prospectus
the information we filed with the Commission. This means that we can disclose
important information by referring you to those documents. The information
incorporated by reference is considered to be a part of this prospectus.
Information that we file later with the Commission will automatically update and
supersede this information. We incorporate by reference the documents listed
below and any future filings made by us with the Commission under Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act until our offering is complete:
. Our Annual Report on Form 10-K for the fiscal year ended March 31,
2000;
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. Our Registration Statement on Form 8-A dated May 25, 1984, and amended
on Form 8-A/A, dated May 25, 1995.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Investor Relations Department
Rational Software Corporation
18880 Homestead Road
Cupertino, California 95014-6421
Telephone: (408) 863-9900
You should rely only on the information incorporated by reference or
provided in this prospectus. We have not authorized anyone else to provide you
with different information. We are not making an offer of these securities in
any state where the offer is not permitted. You should not assume the
information in this prospectus is accurate as of any date other than the date on
the front of those documents.
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RISK FACTORS
You should carefully consider these risk factors, together with all of the
other information included or incorporated by reference in this prospectus,
before you decide whether to purchase the notes. The risks set out below are
not the only risks we face.
If any of the following risks occur, our business, financial condition and
results of operations could be materially adversely affected. In such case, the
trading price of the notes and common stock could decline, and you may lose all
or part of your investment.
Keep these risk factors in mind when you read "forward-looking" statements
elsewhere in this prospectus and in the documents incorporated herein by
reference. These are statements that relate to our expectations for future
events and time periods. Generally, the words "anticipate," "expect," "intend"
and similar expressions identify forward-looking statements. Forward-looking
statements involve risks and uncertainties, and future events and circumstances
could differ significantly from those anticipated in the forward-looking
statements.
Significant unanticipated fluctuations in our quarterly revenues and operating
results may cause us not to meet securities analysts' or investors' expectations
and may result in a decline in the price of our Common Stock.
Our net revenues and operating results are difficult to predict and may
fluctuate significantly from quarter to quarter. If our revenues, operating
results, earnings, or future projections are below the levels expected by
securities analysts, our stock price is likely to decline.
Factors that may cause quarterly fluctuations in our operating results
include:
. the discretionary nature of our customers' purchase and budget cycles;
. difficulty predicting the size and timing of customer orders;
. long sales cycles;
. seasonal variations in operating results;
. introduction or enhancement of our products or our competitors'
products;
. changes in our pricing policies or the pricing policies of our
competitors;
. an increase in our operating costs;
. whether we are able to expand our sales and marketing programs;
. the mix of our products and services sold;
. the level of sales incentives for our direct sales force;
. the mix of sales channels through which our products and services are
sold;
. the mix of our domestic and international sales;
. an increase in the level of our product returns;
. fluctuations in foreign currency exchange rates;
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. costs associated with acquisitions; and
. global economic conditions.
In addition, the timing of our product revenues is difficult to predict
because our sales cycles vary substantially from product to product and customer
to customer. We base our operating expenses on our expectations regarding future
revenue levels. As a result, if total revenues for a particular quarter are
below our expectations, we could not proportionately reduce operating expenses
for that quarter. Therefore, a revenue shortfall would have a disproportionate
effect on our operating results for that quarter. In addition, because our
service revenues are largely correlated with our license revenues, a decline in
license revenue could also cause a decline in our service revenues in the same
quarter or subsequent quarters.
As a result of these and other factors, our operating results are subject
to significant variation from quarter to quarter, and we believe that period-to-
period comparisons of our results of operations are not necessarily useful. If
our operating results are below investors' or securities analysts' expectations,
the price of our Common Stock could decline significantly.
If market acceptance of our sophisticated software development tools fails to
grow adequately, our business may suffer.
Our future growth and financial performance will depend in part on broad
market acceptance of off-the-shelf products that address critical elements of
the software development process. Currently, the number of software developers
using our products is relatively small compared with the number of developers
using more traditional technology and products, internally developed tools, or
manual approaches. Potential customers may be unwilling to make the significant
capital investment needed to purchase our products and retrain their software
developers to build software using our products rather than traditional
techniques. Many of our customers have purchased only small quantities of our
products, and these or new customers may decide not to broadly implement or
purchase additional units of our products.
If industry standards relating to our business do not gain general acceptance,
we may be unable to continue to develop and market our products and our business
may suffer.
Our future growth and financial performance depends on the development of
industry standards that facilitate the adoption of component-based development,
as well as enhance our ability to play a leading role in the establishment of
those standards. For example, we developed the Unified Modeling Language for
visual modeling, which was adopted by the Object Management Group, or OMG, a
software industry consortium, for inclusion in its object analysis and design
facility specification. The official sanction in the future of a competing
standard by the OMG or the promulgation of a competing standard by one or more
major platform vendors could harm our marketing and sales efforts and, in turn,
our business.
If we do not develop and enhance new and existing products to keep pace with
technological, market, and industry changes, our revenues may decline.
The industry for tools automating software application development and
management is characterized by rapid technological advances, changes in customer
requirements, and frequent new product introductions and enhancements. If we
fail to anticipate or respond adequately to technology developments, industry
standards, or practices and customer requirements, or if we experience any
significant delays in product development, introduction, or integration, our
products may become obsolete or unmarketable, our ability to compete may be
impaired, and our revenues may decline. We must respond rapidly to developments
related to Internet and intranet applications, hardware platforms, operating
systems, and programming languages. These developments will require us to make
substantial product-development investments.
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In addition, rapid growth of, interest in, and use of Internet and intranet
environments is a recent and emerging phenomenon. Our success may depend, in
part, on the compatibility of our products with Internet and intranet
applications. We may fail to effectively adapt our products for use in Internet
or intranet environments, or to produce competitive Internet and intranet
applications.
If we do not effectively compete with new and existing competitors, our revenues
and operating margins will decline.
The industry for tools that automate software development and management is
extremely competitive and rapidly changing. We expect competition to intensify
in the future. We believe our continued success will become increasingly
dependent on our ability to:
. support multiple platforms, including Microsoft Windows and Windows NT,
IBM, commercial UNIX, and Linux;
. use the latest technologies to support Web-based development of
business-critical applications;
. develop and market a broader line of products for programming languages
such as C++, Visual Basic, Java, Visual Java++, and Java Beans; and
. continually support the rapidly changing standards and technologies used
in the development of Web-based applications as well as off-the-shelf products.
We face intense competition for each of our products, generally from both
Windows and UNIX vendors. Because individual product sales often lead to a
broader customer relationship, each of our products must be able to successfully
compete with numerous competitors' offerings. Many of our competitors or
potential competitors are much larger than we are and may have significantly
more resources and more experience. Moreover, many of our strategic partners
compete with each other and this may adversely impact our relationship with an
individual partner or a number of partners.
The recent formation of Catapulse, a new Internet company, by our founders could
divert the attention of our management away from our business and affairs,
creating potential conflicts of interest.
On December 3, 1999, we closed a $50,000,000 investment in the Series A
Preferred Stock of Catapulse, founded by Paul Levy and Mike Devlin. As of March
31, 2000, after taking into account additional investments by third parties in
Catapulse, our Series A Preferred Stock represented approximately 40% of the
voting power of the outstanding capital stock of this entity. Paul Levy serves
as its Chief Executive Officer and Mike Devlin serves as the Vice-Chairman of
the board of directors. Catapulse's board of directors is made up of five
directors. Rational has the right to designate two of the members of its board
of directors. As of the date hereof, four of its directors also serve on our
board of directors. Paul Levy and Mike Devlin will continue in their roles as
our Chairman of the Board and Chief Executive Officer, respectively. Catapulse
is a business-to-business application service provider that will focus on
developing a portal to meet the needs of the global community of software
professionals. Catapulse also intends to develop an electronic marketplace for
products and services relating to software development and intends to develop
and deploy a hosted development service for Internet software development.
Rational and Catapulse intend to enter into a strategic business relationship on
terms negotiated at arms-length. This strategic relationship could give rise to
conflicts of interest involving the two companies and the founders in the
future. In addition, Catapulse could divert the attention of Paul Levy and Mike
Devlin away from the business and affairs of Rational.
If we are unable to manage our growth, our business will suffer.
We have experienced rapid growth in recent years. This growth has placed a
significant strain on our financial, operational, management, marketing, and
sales systems and resources. If we are unable to
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effectively manage growth, our business, competitive position, results of
operations, and financial condition could suffer.
To achieve and manage continued growth, we must continue to expand and
upgrade our information-technology infrastructure and its scalability, including
improvements to various operations, financial, and management information
systems, and expand, train, and manage our work force. We may not be successful
in implementing these initiatives effectively and in a timely fashion.
Our international operations expose us to greater management, collections,
currency, intellectual property, regulatory, and other risks.
International sales accounted for approximately 41% of our revenues in
fiscal 2000, 40% in 1999, and 34% in 1998. We expect that international sales
will continue to account for a significant portion of our revenues in future
periods. Our business would be harmed if our international operations
experienced a material downturn. In addition, international sales are subject to
inherent risks, including:
. unexpected changes in regulatory requirements and tariffs;
. unexpected changes in global economic conditions;
. difficulties in staffing and managing foreign operations;
. longer payment cycles;
. greater difficulty in accounts receivable collection;
. potentially adverse tax consequences;
. price controls or other restrictions on foreign currency;
. difficulties in obtaining export and import licenses;
. costs of localizing products for some markets;
. lack of acceptance of localized products in international markets; and
. the effects of high local wage scales and other expenses.
Our international sales are generally transacted through our international
sales subsidiaries. The revenues generated by these subsidiaries, as well as
their local expenses, are generally denominated in local currencies.
Accordingly, the functional currency of each international sales subsidiary is
the local currency. We have engaged in limited hedging activities to protect us
against losses arising from remeasuring assets and liabilities denominated in
currencies other than the functional currency of the related subsidiary. We are
also exposed to foreign exchange rate fluctuations as the financial results of
international subsidiaries are translated into U.S. dollars in consolidation. As
exchange rates vary, these results, when translated, may vary from expectations
and adversely impact our overall expected profitability. We currently do not
hedge against this exposure. Fluctuations in foreign currencies could harm our
financial condition and operating results.
We are subject to risks associated with the European monetary conversion.
In January 1999, the new "Euro" currency was introduced in certain
European countries that are part of the European Monetary Union, or EMU. During
2002, all EMU countries are expected to begin operating with the Euro as their
single currency. A significant amount of uncertainty exists as to the effect the
Euro will have on the marketplace generally and, additionally, all of the final
rules and regulations have not yet been
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defined and finalized by the European Commission with regard to the Euro
currency. We are currently assessing the effect the introduction of the Euro
will have on internal accounting systems and the sales of products. We are not
aware of any material operational issues or costs associated with preparing
internal systems for the Euro. However, we do utilize third-party vendor
equipment and software products that may or may not be EMU-compliant. The
failure of any critical components to operate properly after introduction of the
Euro may harm our business or results of operations or require additional costs
to remedy these problems.
If we lose key personnel or cannot hire enough qualified personnel, our ability
to manage our business, develop new products, and increase our revenues will
suffer.
We believe that the hiring and retaining of qualified individuals at all
levels in our organization will be essential to our ability to sustain and
manage growth successfully. Competition for highly qualified technical personnel
is intense and we may not be successful in attracting and retaining the
necessary personnel, which may limit the rate at which we can develop products
and generate sales. We will be particularly dependent on the efforts and
abilities of our senior management personnel. The departure of any of our senior
management members or other key personnel could harm our business. Merger
activities can be accompanied or followed by the departure of key personnel,
which can compound the difficulty of integrating the operations of the parties
to the business combination.
If we fail to maintain and expand our distribution channels, our business will
suffer.
We currently distribute our products primarily through field sales
personnel teamed with highly trained technical support personnel as well as
through our telesales organizations, our Web site, and indirectly through
channels such as value-added resellers and distributors. Our ability to achieve
revenue growth in the future will depend in large part on our success in
expanding our direct sales force and in maintaining a high level of technical
consulting, training, and customer support.
We depend on strategic relationships and business alliances for continued growth
of our business.
Our development, marketing, and distribution strategies rely increasingly
on our ability to form long-term strategic relationships with major software and
hardware vendors, many of whom are substantially larger than Rational. These
business relationships often consist of cooperative marketing programs, joint
customer seminars, lead referrals, or joint development projects. Although
certain aspects of some of these relationships are contractual in nature, many
important aspects of these relationships depend on the continued cooperation of
each party with us. Merger activity, such as the acquisition of ObjecTime Ltd.,
may disrupt these relationships or activities, and some companies may reassess
the value of their relationship with us as a result of this merger activity.
Divergence in strategy or change in focus by or competitive product offerings by
any of these companies may interfere with our ability to develop, market, sell,
or support our products, which in turn could harm our business. In addition, one
or more of these companies may use the information they gain from their
relationship with us to develop or market competing products.
Our products could contain software defects that could reduce our revenues and
make it more difficult for us to achieve market acceptance of our products.
Software products as complex as those sold by us often contain undetected
errors, or "bugs," or performance problems. These defects are most frequently
found during the period immediately following the introduction of new products
or enhancements to existing products. Despite extensive product testing prior to
introduction, our products have in the past contained software errors that were
discovered after commercial introduction. Errors or performance problems may
also be discovered in the future. Any future software defects discovered after
shipment of our products could result in loss of revenues or delays in market
acceptance, which could harm our business. Further, because we rely on our own
products in connection with the development of our software, these errors may
make it more difficult to sell our products in the future.
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If we fail to adequately protect our intellectual property rights, competitors
may use our technology and trademarks, which could weaken our competitive
position, reduce our revenues, and increase our costs.
We rely on a combination of copyright, trademark, patent, and trade-secret
laws, employee and third-party nondisclosure agreements, and other arrangements
to protect our proprietary rights. Despite these precautions, it may be possible
for unauthorized third parties to copy our products or obtain and use
information that we regard as proprietary to create products that compete
against ours. In addition, some license provisions protecting against
unauthorized use, copying, transfer, and disclosure of our licensed programs may
be unenforceable under the laws of certain jurisdictions and foreign countries.
In addition, the laws of some countries do not protect proprietary rights
to the same extent as do the laws of the United States. To the extent that we
increase our international activities, our exposure to unauthorized copying and
use of our products and proprietary information will increase.
The scope of United States patent protection in the software industry is
not well-defined and will evolve as the United States Patent and Trademark
Office grants additional patents. Because patent applications in the United
States are not publicly disclosed until the patent is issued, applications may
have been filed that would relate to our products.
We rely on software licensed from third parties that is used in our products.
We also rely on some software that we license from third parties, including
software that is integrated with internally developed software and used in our
products to perform key functions. These third-party software licenses may not
be available to us on commercially reasonable terms or at all. Further, the
software may not be appropriately supported, maintained, or enhanced by the
licensors. The loss of licenses to or the inability to support, maintain, and
enhance any of this software could result in increased costs or in delays or
reductions in our product shipments until equivalent software could be
developed, identified, licensed, and integrated.
Third parties could assert that our software products and services infringe on
their intellectual property rights, which could expose us to increased costs and
litigation.
We expect that we will be increasingly subject to infringement claims as
the number of products and competitors grows and the functionality of products
in different industry segments overlaps. Third parties may assert infringement
claims against us in the future and their claims may or may not be successful.
We could incur substantial costs in defending ourselves and our customers
against their claims. Parties making their claims may be able to obtain
injunctive or other equitable relief that could effectively block our ability to
sell our products in the United States and abroad and could result in an award
of substantial damages against us. In the event of a claim of infringement, we
may be required to obtain one or more licenses from third parties. We cannot be
sure that we can obtain necessary licenses from third parties at a reasonable
cost or at all. Defense of any lawsuit or failure to obtain any required license
could delay shipment of our products and increase our costs.
Year 2000 issues could negatively affect our business.
Although to date we have not experienced any material problems attributable
to the year 2000 problem with respect to our software products and internal
systems, it is possible that our current products could contain undetected
errors or defects associated with year 2000 date functions that may result in
material costs or liabilities to us in the future. Moreover, our software
directly and indirectly interacts with a large number of third-party hardware
and software systems, each of which may contain or introduce undetected errors
or defects. We are unable to predict to what extent our business may be affected
if our software or the systems that operate in conjunction with our software
experience a material year 2000 related failure. Any
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year 2000 defect in our products or the software and hardware systems with which
our products operate, as well as any year 2000 errors caused by older non-
current products that were not upgraded by our customers, could expose us to
litigation that could require us to incur significant costs in defending the
litigation or expose us to the risk of significant damages. The risks of this
litigation may be particularly acute due to the mission-critical applications
for which our products are used.
Promotional product versions may adversely impact our actual product sales.
Our marketing strategy relies in part on making elements of our technology
available for no charge or at a very low price, either directly or by
incorporating these elements into products offered by third parties, such as
Microsoft, with whom we have strategic alliances. This strategy is designed to
expose our products to a broader customer base than to our historical customer
base and to encourage potential customers to purchase an upgrade or other
higher-priced product from us. We may not be able to introduce enhancements to
our full-price products or versions of our products with intermediate
functionality at a rate necessary to adequately differentiate them from the
promotional versions, particularly in cases where our partners are distributing
versions of our products with other desirable features, which could reduce sales
of our products.
If we cannot successfully integrate our past and future acquisitions and achieve
intended financial or strategic benefits, our revenues may decline and our
expenses increase.
We have acquired a number of businesses, technologies, and products, most
recently in January 2000. If we fail to achieve the intended financial or
strategic benefits of past and future acquisitions, our operating results will
suffer. Acquisitions entail numerous risks, including:
. difficulty with the assimilation of acquired operations and products;
. failure to achieve targeted synergies;
. inability to retain key employees of the acquired companies;
. loss of key business relationships of the acquired company; and
. diversion of the attention of our management team.
In addition, if we undertake future acquisitions, we may issue dilutive
securities, assume or incur additional debt obligations, incur large, one-time
expenses, or acquire intangible assets that would result in significant future
amortization expense. Any of these events could harm our business.
Revenues in any quarter are substantially dependent on orders booked and
shipped in that quarter. Because staffing and operating expenses are based on
anticipated revenue levels and a high percentage of the costs are fixed, small
variations in the timing of the recognition of specific revenues could cause
significant variations in operating results from quarter to quarter.
Historically, the Company has earned a substantial portion of its revenues in
the last weeks of the quarter. To the extent these trends continue, the failure
to achieve such revenues in the last weeks of any given quarter will have a
material adverse effect on the Company's financial results for that quarter. The
Company's revenues are difficult to forecast because Rational's sales cycles,
from initial evaluation to purchase, vary substantially from customer to
customer and from product to product, and because the markets for Rational's
products are rapidly evolving. In addition, the Company's results will be
affected by the number, timing, and significance of new product announcements by
it and its competitors, its ability to develop, introduce, and market new,
enhanced, and integrated versions of its products on a timely basis, the level
of product and price competition, changes in operating expenses, changes in
average selling prices and product mix, any changes in its sales incentive
strategy, the experience level of and any changes in sales personnel, any
changes in sales cycles, the mix of direct and indirect sales,
-11-
<PAGE>
product returns, and general economic factors, among others. The Company's sales
will also be sensitive to existing and prospective customers' budgeting
practices and global economic conditions.
Although Rational has experienced growth in revenues in recent years, there
can be no assurance that, in the future, Rational will sustain revenue growth or
be profitable on a quarterly or annual basis. Further, the revenues and
operating income (exclusive of nonrecurring operating, restructuring, and
merger-related expenses) experienced by Rational in recent quarters are not
necessarily indicative of future results, and period-to-period comparisons of
Rational's financial results should not be relied on as an indication of future
performance. Fluctuations in operating results have previously resulted and may
continue to result in volatility in the price of Rational's Common Stock.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares. All proceeds
from the sale of the Rational Software Corporation Common Stock will be for the
account of the selling stockholders, as described below. See "selling
stockholders" and "Plan of Distribution" described below.
SELLING STOCKHOLDERS
The following table sets forth information with respect to the number of
shares of common stock owned by the selling stockholders named below and as
adjusted to give effect to the sale of the shares offered hereby. The
information in the table below is current as of the date of this prospectus. The
shares are being registered to permit public secondary trading of the shares,
and the selling stockholders may offer the shares for resale from time to time.
The shares being offered by the selling stockholders were acquired in
connection with our acquisition of ObjecTime Limited. In the acquisition, shares
of common stock were issued pursuant to an exemption from the registration
requirements of the Securities Act. In connection with the acquisition, we
agreed to register the shares of Rational Software Corporation common stock
received by the former stockholders of ObjecTime Limited on the registration
statement, of which this prospectus is part.
Shares of common stock subject to options are treated as outstanding and to
be beneficially owned by the person holding the options for the purpose of
computing the percentage ownership of the person and are listed below under the
"Number of Shares Underlying Options" column below, but these options are not
treated as outstanding for the purpose of computing the percentage ownership of
any other person. None of the selling stockholders owns more than 1% of the
outstanding common stock of Rational Software Corporation.
The shares offered by this prospectus may be offered from time to time by
the selling stockholders named below:
<TABLE>
<CAPTION>
Number of Shares Number of Shares
Beneficially Beneficially
Owned Prior to Number of Shares Owned After the
Name of Selling Stockholder the Offering Being Offered Offering
- -------------------------------- ---------------- ---------------- ----------------
<S> <C> <C> <C>
James McGee 80,028 80,028 *
- -------------------------------- ---------------- ---------------- ----------------
Garth Gullekson 53,679 53,679 *
- -------------------------------- ---------------- ---------------- ----------------
Ian Engelberg 53,679 53,679 *
- -------------------------------- ---------------- ---------------- ----------------
</TABLE>
-12-
<PAGE>
<TABLE>
<S> <C> <C> <C>
Branislav Selic 42,957 42,957 *
- -------------------------------- ---------------- ---------------- ----------------
Rodney Iversen 16,284 16,284 *
- -------------------------------- ---------------- ---------------- ----------------
Larry Williams 16,284 16,284 *
- -------------------------------- ---------------- ---------------- ----------------
Serban Gheorghe 10,341 10,341 *
- -------------------------------- ---------------- ---------------- ----------------
Dave Daoust 9,771 9,771 *
- -------------------------------- ---------------- ---------------- ----------------
Jim Ablett 8,645 8,645 *
- -------------------------------- ---------------- ---------------- ----------------
Raymond Tigg 8,142 8,142 *
- -------------------------------- ---------------- ---------------- ----------------
Joe May 6,514 6,514 *
- -------------------------------- ---------------- ---------------- ----------------
Tom Moore 6,188 6,188 *
- -------------------------------- ---------------- ---------------- ----------------
Charley DeShiffart 5,217 5,217 *
- -------------------------------- ---------------- ---------------- ----------------
Mark Baker 3,528 3,528 *
- -------------------------------- ---------------- ---------------- ----------------
Stephan Saunders 3,420 3,420 *
- -------------------------------- ---------------- ---------------- ----------------
David Longbottom 3,228 3,228 *
- -------------------------------- ---------------- ---------------- ----------------
John Prokopenko 2,972 2,972 *
- -------------------------------- ---------------- ---------------- ----------------
Scott Darlington 2,677 2,677 *
- -------------------------------- ---------------- ---------------- ----------------
R. William Taylor 2,489 2,489 *
- -------------------------------- ---------------- ---------------- ----------------
David Williamson 2,433 2,433 *
- -------------------------------- ---------------- ---------------- ----------------
Stephan Courtney 2,352 2,352 *
- -------------------------------- ---------------- ---------------- ----------------
Rob Rose 2,280 2,280 *
- -------------------------------- ---------------- ---------------- ----------------
Simon Redding 2,244 2,244 *
- -------------------------------- ---------------- ---------------- ----------------
Carol Fairbairn 1,843 1,843 *
- -------------------------------- ---------------- ---------------- ----------------
Ted Nothorn 1,520 1,520 *
- -------------------------------- ---------------- ---------------- ----------------
Keith Campbell 1,342 1,342 *
- -------------------------------- ---------------- ---------------- ----------------
Brian Alexson 1,164 1,164 *
- -------------------------------- ---------------- ---------------- ----------------
Sky Matthews 1,140 1,140 *
- -------------------------------- ---------------- ---------------- ----------------
David Cork 1,035 1,035 *
- -------------------------------- ---------------- ---------------- ----------------
John Hogg 1,032 1,032 *
- -------------------------------- ---------------- ---------------- ----------------
Jeffrey Campbell 818 818 *
- -------------------------------- ---------------- ---------------- ----------------
John Laws 776 776 *
- -------------------------------- ---------------- ---------------- ----------------
Robert Van Slooten 742 742 *
- -------------------------------- ---------------- ---------------- ----------------
</TABLE>
-13-
<PAGE>
<TABLE>
<S> <C> <C> <C>
James Graham 697 697 *
- -------------------------------- ---------------- ---------------- ----------------
Andrew Lyons 628 628 *
- -------------------------------- ---------------- ---------------- ----------------
Khawar Ahmed 602 602 *
- -------------------------------- ---------------- ---------------- ----------------
Fredrick Abrahamson 544 544 *
- -------------------------------- ---------------- ---------------- ----------------
Anthony Hunter 487 487 *
- -------------------------------- ---------------- ---------------- ----------------
Adrian Panoiu 486 486 *
- -------------------------------- ---------------- ---------------- ----------------
Doug Schaefer 460 460 *
- -------------------------------- ---------------- ---------------- ----------------
Stefan Bayarow 436 436 *
- -------------------------------- ---------------- ---------------- ----------------
Peter Leap 402 402 *
- -------------------------------- ---------------- ---------------- ----------------
Mark Sweeney 394 394 *
- -------------------------------- ---------------- ---------------- ----------------
Ian MacWilliam 345 345 *
- -------------------------------- ---------------- ---------------- ----------------
Nashib Qadri 327 327 *
- -------------------------------- ---------------- ---------------- ----------------
Kelly Armstrong 317 317 *
- -------------------------------- ---------------- ---------------- ----------------
Renee Hill 313 313 *
- -------------------------------- ---------------- ---------------- ----------------
Davey Wong 297 297 *
- -------------------------------- ---------------- ---------------- ----------------
Simon Addis 289 289 *
- -------------------------------- ---------------- ---------------- ----------------
Brad Wolf 282 282 *
- -------------------------------- ---------------- ---------------- ----------------
Richard Lowisz 259 259 *
- -------------------------------- ---------------- ---------------- ----------------
Don Walker 254 254 *
- -------------------------------- ---------------- ---------------- ----------------
Christopher Tyson 253 253 *
- -------------------------------- ---------------- ---------------- ----------------
Atual Ahmed 251 251 *
- -------------------------------- ---------------- ---------------- ----------------
Stelio D'Alo 248 248 *
- -------------------------------- ---------------- ---------------- ----------------
Joy Muraca 248 248 *
- -------------------------------- ---------------- ---------------- ----------------
Ken Webb 244 244 *
- -------------------------------- ---------------- ---------------- ----------------
Reedy Feggins, Jr. 227 227 *
- -------------------------------- ---------------- ---------------- ----------------
Cory Bialowas 209 209 *
- -------------------------------- ---------------- ---------------- ----------------
Ian Engelberg 206 206 *
- -------------------------------- ---------------- ---------------- ----------------
Yuhang Wu 205 205 *
- -------------------------------- ---------------- ---------------- ----------------
Bill Graham 197 197 *
- -------------------------------- ---------------- ---------------- ----------------
Diane Nasso 182 182 *
- -------------------------------- ---------------- ---------------- ----------------
</TABLE>
-14-
<PAGE>
<TABLE>
<S> <C> <C> <C>
Yves Grenier 177 177 *
- -------------------------------- ---------------- ---------------- ----------------
Brent Nicolle 174 174 *
- -------------------------------- ---------------- ---------------- ----------------
Arindam Das 171 171 *
- -------------------------------- ---------------- ---------------- ----------------
Keith Anderson 170 170 *
- -------------------------------- ---------------- ---------------- ----------------
Kevin Grignon 165 165 *
- -------------------------------- ---------------- ---------------- ----------------
Lori Lafreniere 160 160 *
- -------------------------------- ---------------- ---------------- ----------------
David Lander 150 150 *
- -------------------------------- ---------------- ---------------- ----------------
Jack Carden 143 143 *
- -------------------------------- ---------------- ---------------- ----------------
Simon Heald 138 138 *
- -------------------------------- ---------------- ---------------- ----------------
Ken Paton 137 137 *
- -------------------------------- ---------------- ---------------- ----------------
Stephan Rooks 129 129 *
- -------------------------------- ---------------- ---------------- ----------------
Anthony Niro 128 128 *
- -------------------------------- ---------------- ---------------- ----------------
Steven Shaw 122 122 *
- -------------------------------- ---------------- ---------------- ----------------
Stefan Schurman 121 121 *
- -------------------------------- ---------------- ---------------- ----------------
Deborah Slaunwhite 121 121 *
- -------------------------------- ---------------- ---------------- ----------------
Ian Leslie 113 113 *
- -------------------------------- ---------------- ---------------- ----------------
Karla Ducharme 110 110 *
- -------------------------------- ---------------- ---------------- ----------------
Emeka Nwafor 106 106 *
- -------------------------------- ---------------- ---------------- ----------------
Monique Ouellete 106 106 *
- -------------------------------- ---------------- ---------------- ----------------
Paul Rechsteiner 106 106 *
- -------------------------------- ---------------- ---------------- ----------------
Frederic Plante 95 95 *
- -------------------------------- ---------------- ---------------- ----------------
Kevin Marler 94 94 *
- -------------------------------- ---------------- ---------------- ----------------
Tim Creamer 91 91 *
- -------------------------------- ---------------- ---------------- ----------------
Christine Monuk 89 89 *
- -------------------------------- ---------------- ---------------- ----------------
Richard Losier 87 87 *
- -------------------------------- ---------------- ---------------- ----------------
Kelley LaRiccia 81 81 *
- -------------------------------- ---------------- ---------------- ----------------
Jean-Michal Lemieux 81 81 *
- -------------------------------- ---------------- ---------------- ----------------
Andrew Eidness 77 77 *
- -------------------------------- ---------------- ---------------- ----------------
Debbie Beaton 67 67 *
- -------------------------------- ---------------- ---------------- ----------------
Mark Hermeling 66 66 *
- -------------------------------- ---------------- ---------------- ----------------
</TABLE>
-15-
<PAGE>
<TABLE>
<S> <C> <C> <C>
Louise Labuda 65 65 *
- -------------------------------- ---------------- ---------------- ----------------
Denis Breault 64 64 *
- -------------------------------- ---------------- ---------------- ----------------
Robert Prager 61 61 *
- -------------------------------- ---------------- ---------------- ----------------
Cynthia Woods 57 57 *
- -------------------------------- ---------------- ---------------- ----------------
Tom Reaume 56 56 *
- -------------------------------- ---------------- ---------------- ----------------
Gina Stefanelli 56 56 *
- -------------------------------- ---------------- ---------------- ----------------
Corinna Descarie 51 51 *
- -------------------------------- ---------------- ---------------- ----------------
Jack Azoulay 49 49 *
- -------------------------------- ---------------- ---------------- ----------------
Heather Fraser-Dube 38 38 *
- -------------------------------- ---------------- ---------------- ----------------
Colin Ho 36 36 *
- -------------------------------- ---------------- ---------------- ----------------
Melanie Levesque 36 36 *
- -------------------------------- ---------------- ---------------- ----------------
Wendy Trudeau 34 34 *
- -------------------------------- ---------------- ---------------- ----------------
Sean Evoy 30 30 *
- -------------------------------- ---------------- ---------------- ----------------
Teresa Boyd 28 28 *
- -------------------------------- ---------------- ---------------- ----------------
Jean Pierre Jauvin 26 26 *
- -------------------------------- ---------------- ---------------- ----------------
Jack Pelletier 21 21 *
- -------------------------------- ---------------- ---------------- ----------------
Greg Free 10 10 *
- -------------------------------- ---------------- ---------------- ----------------
Michael Lang 8 8 *
- -------------------------------- ---------------- ---------------- ----------------
Scott Young 8 8 *
- -------------------------------- ---------------- ---------------- ----------------
Jason Smith 6 6 *
- -------------------------------- ---------------- ---------------- ----------------
Kevin Hale 5 5 *
- -------------------------------- ---------------- ---------------- ----------------
Timothy MJason Smith 5 5 *
- -------------------------------- ---------------- ---------------- ----------------
Cherie Mahoney 4 4 *
- -------------------------------- ---------------- ---------------- ----------------
Darren Coffin 3 3 *
- -------------------------------- ---------------- ---------------- ----------------
</TABLE>
* Less than percent.
Pursuant to the terms of the Agreement and Plan of Acquisition and
Arrangement by and among Rational Software Corporation, Rational International,
3037936 Nova Scotia Company, 1386501 Ontario Limited, 1386503 Ontario Limited
and ObjecTime Limited, Rational Software Corporation undertook to use
commercially reasonable efforts to register certain of the shares held by the
selling stockholders within 20 days of the date of filing of Rational Software
Corporation's Form 10-K for the year ended March 31, 2000. The Agreement and
Plan of Acquisition and Arrangement also includes certain indemnification
arrangements with the selling stockholders.
-16-
<PAGE>
PLAN OF DISTRIBUTION
The shares may be sold from time to time by the selling stockholders or by
pledgees, donees, transferees or other successors in interest. Such sales may
be made in any one or more transactions (which may involve block transactions)
on the Nasdaq National Market, or any exchange on which the common stock of
Rational Software Corporation may then be listed, in the over-the-counter market
or otherwise in negotiated transactions or a combination of such methods of
sale, at market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. The selling stockholders may
effect such transactions by selling shares to or through broker-dealers, and
such broker-dealers may sell the shares as agent or may purchase such shares as
principal and resell them for their own account pursuant to this prospectus.
Such broker-dealers may receive compensation in the form of underwriting
discounts, concessions or commissions from the selling stockholders and/or
purchasers the shares, for whom they may act as agent (which compensation may be
in excess of customary commissions).
The aggregate proceeds to the selling stockholders from the sale of the
shares will be the purchase price of the common stock sold less the aggregate
agents' commissions if any, and other expenses of issuance and distribution not
borne by Rational Software Corporation. The selling stockholders and any
dealers or agents that participate in the distribution of the shares may be
deemed to be "underwriters" within the meaning of the Securities Act, and any
profit on the sale of the shares by them and any commissions received by any
such dealers or agents might be deemed to be underwriting discounts and
commissions under the Securities Act.
To the extent required, the specific shares of common stock to be sold, the
names of the selling stockholders, purchase price, public offering price, the
names of any such agent, dealer or underwriter, and any applicable commission or
discount with respect to a particular offering will be set forth in an
accompanying prospectus supplement.
We have agreed to bear certain expenses of registration of the common stock
under the federal and state securities laws and of any offering and sale
hereunder not including certain expenses, such as commissions of dealers or
agents, and fees attributable to the sale of the shares.
The Agreement and Plan of Acquisition and Arrangement provides that we will
indemnify the selling stockholders against certain liabilities, including
liabilities under the Securities Act.
We may suspend the use of this prospectus for a discrete period of time,
not exceeding 30 days, if, in the good faith determination of our board of
directors, a development has occurred or condition exists as a result of which
the Registration Statement or this prospectus contains or incorporates by
reference a material misstatement or omission, the correction of which would
require the premature disclosure of confidential information that would, in the
good faith determination of the board of directors, materially and adversely
affect the Company. We may not exercise this delay right more than twice in any
twelve-month period. We are obligated in the event of such suspension to use our
reasonable efforts to ensure that the use of the prospectus may be resumed as
soon as practicable. This offering will terminate on the earliest of (a) the
first anniversary of the effective date of the acquisition of ObjecTime Limited
by Rational Software Corporation or (b) the date on which all shares offered
hereby have been sold by the selling stockholders.
Any securities covered by this prospectus which qualify for sale pursuant
to Rule 144 under the Securities Act may be sold under that Rule rather than
pursuant to this prospectus.
There can be no assurance that the selling stockholders will sell any or
all of the shares of Rational Software Corporation common stock offered by them
hereunder.
-17-
<PAGE>
LEGAL MATTERS
The validity of the issuance of Rational Software Corporation's securities
offered by this prospectus will be passed upon for Rational Software Corporation
by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto,
California.
INDEPENDENT AUDITORS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedule included in our Annual report on form 10-K for
the year ended March 31, 2000, as set forth in their report, which is
incorporated by reference in this prospectus and elsewhere in the registration
statement. Our financial statements and schedule are incorporated by reference
in reliance on Ernst & Young LLP's report, given on their authority as experts
in accounting and auditing.
-18-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS. ITEM 14. OTHER EXPENSES OF
ISSUANCE AND DISTRIBUTION
The aggregate estimated (other than the registration fee) expenses to be
paid by the Registrant in connection with this offering are as follows:
Securities and Exchange Commission registration fee.................. $ 7,185
Legal fees and expenses.............................................. 10,000
Accounting fees and expenses......................................... 10,000
Miscellaneous........................................................ 5,000
--------
Total............................................................ $32,185
========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS OF RATIONAL
CERTIFICATE OF INCORPORATION
Article 10 of our Certificate of Incorporation provides that, to the
fullest extent permitted by Delaware law, as the same now exists or may
hereafter be amended, a director shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director. Delaware law provides that directors of a corporation will
not be personally liable for monetary damages for breach of their fiduciary
duties as directors, except for liability:
. for any breach of their duty of loyalty to the corporation or its
stockholders,
. for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law,
. for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General
Corporation Law, or
. for any transaction from which the director derived an improper personal
benefit.
BYLAWS
INDEMNIFICATION ARRANGEMENTS
Our bylaws provide that our directors, officers and agents shall be
indemnified against expenses including attorneys' fees, judgments, fines,
settlements actually and reasonably incurred in connection with any proceeding
arising out of their status as such, if such director, officer or agent acted in
good faith and in a manner he or she reasonably believed to be in or not opposed
to the best interests of Rational Software Corporation, and, with the respect to
any criminal action or proceeding, had no reasonable cause to believe such
conduct was unlawful.
We have entered into agreements to indemnify our directors and officers, in
addition to the indemnification provided for in our Certificate of Incorporation
and Bylaws. These agreements, among other things, indemnify our directors and
officers for certain expenses, including attorney's fees, judgments, fines and
settlement amounts incurred by any such person in any action or proceeding,
including any action by or in the right of Rational, arising out of such
person's services as a director or officer of Rational, any subsidiary of
Rational or any other company or enterprise to which the person provides
services at the request of Rational.
II-1
<PAGE>
ITEM 16. EXHIBITS
The following exhibits are filed herewith or incorporated by reference
herein:
EXHIBIT EXHIBIT TITLE
NUMBER -------------
- -------
4.1 Agreement and Plan of Acquisition and Arrangement by and among the
Registrant, Rational International, 3037936 Nova Scotia Company, 1386501
Ontario Limited, 1386503 Ontario Limited and ObjecTime Limited is
incorporated herein by reference to Exhibit 10.1 filed with the
Registrant's 8-K dated January 21, 2000.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation
(included in Exhibit 5.1).
24.1 Power of Attorney of certain directors and officers of Rational Software
Corporation (see page II-5 of this Form S-3).
______________
ITEM 17. UNDERTAKINGS
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:
(a) To include any prospectus required by Section 10(a)(3) of the
Securities Act,
(b) 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.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement,
(c) 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 clauses (a) and (b) do not apply if the information required to be
included in a post-effective amendment by such clauses is contained in periodic
reports filed with or furnished to the Securities and Exchange Commission by the
Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange
Act of 1934 (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, each such post-effective amendment shall be deemed a new
registration statement relating to the securities offered 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.
II-2
<PAGE>
(4) 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 that is incorporated by reference in this
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 the initial bona fide offering thereof.
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 provisions described under Item 15 above, 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 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.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus 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
the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement on Form S-3 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Cupertino, State of California, on May 19, 2000.
RATIONAL SOFTWARE CORPORATION
By: /s/ TIMOTHY A. BRENNAN
----------------------
Name: Timothy A. Brennan
Title: Senior Vice President, Chief
Executive Officer and Secretary
II-4
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Thomas F. Bogan and Timothy A.
Brennan, and each of them acting individually, as his attorney-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-3, and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or any substitute, 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>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ PAUL D. LEVY Founder and Chairman of the Board May 19, 2000
- ---------------------------------------
Paul D. Levy
/s/ MICHAEL T. DEVLIN Founder, Chief Executive Officer and May 19, 2000
- --------------------------------------- Director
Michael T. Devlin
/s/ THOMAS F. BOGAN President and Chief Operating Officer May 19, 2000
- ---------------------------------------
Thomas F. Bogan
/s/ TIMOTHY A. BRENNAN Senior Vice President, Chief Financial May 19, 2000
- --------------------------------------- Officer, and Secretary (Principal
Timothy A. Brennan Financial Officer and Principal
Accounting Officer)
/s/ LESLIE G. DENEND Director May 19, 2000
- ---------------------------------------
Leslie G. Denend
/s/ JOHN E. MONTAGUE Director May 19, 2000
- ----------------------------------------
John E. Montague
/s/ ALLISON R. SCHLEICHER Director May 19, 2000
- ----------------------------------------
Allison R. Schleicher
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBIT TITLE
- ------ -------------
4.1 Agreement and Plan of Acquisition and Arrangement by and among the
Registrant, Rational International, 3037936 Nova Scotia Company, 1386501
Ontario Limited, 1386503 Ontario Limited and ObjecTime Limited is
incorporated herein by reference to Exhibit 10.1 filed with the
Registrant's 8-K dated January 21, 2000.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation
(included in Exhibit 5.1).
24.1 Power of Attorney of certain directors and officers of Rational Software
Corporation (see page II-5 of this Form S-3).
II-6
<PAGE>
Exhibit 5.1
May 19, 2000
Rational Software Corporation
18880 Homestead Road
Cupertino, California 95014
RE: REGISTRATION STATEMENT OF FORM S-3
Ladies and Gentlemen:
We are acting as counsel for Rational Software Corporation, a Delaware
corporation (the "Company") in connection with the registration under the
Securities Act of 1933, as amended, of 371,385 shares of your common stock
(the "Common Stock"), all of which are authorized and have been previously
issued to the selling stockholders named therein in connection with the
acquisition by you of ObjecTime Limited.
The Shares are to be offered by the selling stockholders for sale to the
public as described in the Registration Statement. As your counsel in
connection with this transaction, we have examined the proceedings taken and
proposed to be taken in connection with the sale of the Shares. It is our
opinion that, upon completion of the proceedings being taken or contemplated to
be taken prior to the registration of the Share, including such proceedings to
be carried out in accordance with the securities laws of the various states,
where required, the Shares, when sold in the manner referred to in the
Registration Statement, will be legally and validly issued, fully paid and
nonassessable.
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 the prospectus constituting a part thereof,
and any amendment thereto.
Sincerely,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
/s/ WILSON SONSINI GOODRICH & ROSATI, P.C.
<PAGE>
Exhibit 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference of our firm under the caption "Independent Auditors"
in the Registration Statement (Form S-3) and related Prospectus of Rational
Software Corporation for the registration of 371,385 shares of its common stock
and to the incorporation by reference therein of our report dated April 18,
2000, 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, 2000, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Palo Alto, California
May 19, 2000
