<PAGE>
As filed with the Securities and Exchange Commission on May 28, 1997.
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
MERCURY INTERACTIVE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 77-0225776
----------------------- -------------------------------------
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
470 POTRERO AVENUE
SUNNYVALE, CALIFORNIA 94086
(408) 523-9900
(ADDRESS, INCLUDING ZIP CODE, OF REGISTRANTS PRINCIPAL EXECUTIVE OFFICES)
1989 STOCK OPTION PLAN
(FULL TITLE OF THE PLANS)
AMNON LANDAN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
470 POTRERO AVENUE
SUNNYVALE, CALIFORNIA 94086
(NAME, ADDRESS AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
Copies to:
SUSAN J. SKAER, ESQ.
GENERAL COUNSEL ASSOCIATES LLP
1891 LANDINGS ROAD
MOUNTAIN VIEW, CA 94043
(415) 428-3900
================================================================================
<PAGE>
<TABLE>
<CAPTION>
===========================================================================================
CALCULATION OF REGISTRATION FEE
===========================================================================================
Maximum Proposed
Title of Amount Maximum Maximum Proposed
Securities to be Offering Aggregate Amount of
to be Registered Price Per Offering Registration
Registered Common Stock, Share Price Fee
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
$.002 par value... 699,000 shares(1) $9.75(2) $6,815,250.00(3) $2,065.23
Common Stock,
$.002 par value... 48,698 shares(4) $13.625(5) $ 663,510.25 $ 201.06
--------------- ------------- ---------
TOTAL.......... 747,698 shares -- $7,478,760.20 $2,266.29
===========================================================================================
</TABLE>
(1) For the sole purpose of calculating the registration fee, the number of
shares to be registered under this Registration Statement has been broken down
into two sub-totals. This sub-total represents 699,000 shares issuable upon
exercise of presently outstanding options (options that have been granted as of
the date of this Registration Statement) issued under the 1989 Stock Option
Plan.
(2) Estimated in accordance with Rule 457(h) under the Securities Act of 1933
solely for the purpose of calculating the total registration fee. Computation
based on the weighted average exercise price (rounded to the nearest cent) at
which the options whose exercise will result in the issuance of the shares being
registered may be exercised.
(3) Calculated in accordance with Rule 457(h) based on the aggregate exercise
price for all presently outstanding options described in note 1 above.
(4) This subtotal represents the sum of shares issuable upon exercise of
options that have not yet been granted under the 1989 Stock Option Plan as
of the date of this Registration Statement.
(5) Estimated in accordance with Rule 457(h) under the Securities Act of 1933
solely for the purpose of calculating the total registration fee. Computation
based upon the average of the high and low prices of the Common Stock as
reported on the Nasdaq National Market on May 21, 1997 because the price at
which the options to be granted in the future may be exercised is not currently
determinable.
-2-
<PAGE>
PART II:
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INFORMATION INCORPORATED BY REFERENCE
-------------------------------------
The following documents and information heretofore filed with the
Securities and Exchange Commission are hereby incorporated by reference:
ITEM 3(a)
The Registrant's Annual Report on Form 10-K filed on March 26, 1997
pursuant to Section 13 of the Securities Exchange Act of 1934 (the
"Exchange Act") which contains audited financial statements for the
Registrant's latest fiscal year ended December 31, 1996 for which such
statements have been filed.
ITEM 3(b)
All other reports filed by the Registrant pursuant to Sections 13(a)
or 15(d) of the Exchange Act since the end of the fiscal year covered
by the Annual Report on Form 10-K referred to in Item 3(a) above.
ITEM 3(c)
Items 1 and 2 of the Registrant's Registration Statement on Form 8-A
filed on September 9, 1993, as amended by Amendment No. 1 to Form 8-A
filed on October 27, 1993, pursuant to Section 12 of the Exchange Act
and Items 1 and 2 of the Registrant's Registration Statement on Form
8-A filed on July 8, 1996.
All documents subsequently filed by the Registrant pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of
a post-effective amendment which indicates that all securities offered have been
sold or which deregisters all securities then remaining unsold, shall be deemed
to be incorporated by reference in this Registration Statement and to be part
hereof from the date of filing of such documents.
ITEM 4. DESCRIPTION OF SECURITIES
-------------------------
Not Applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
--------------------------------------
Not Applicable.
-3-
<PAGE>
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
-----------------------------------------
As permitted by the Delaware General Corporation Law, the Registrant
has included in its Certificate of Incorporation a provision to eliminate the
personal liability of its directors for monetary damages for breach or alleged
breach of their fiduciary duties as directors, subject to certain exceptions.
In addition, the By-laws of the Registrant provide that the Registrant is
required to indemnify its officers and directors under certain circumstances,
including those circumstances in which indemnification would otherwise be
discretionary, and the Registrant is required to advance expenses to its
officers and directors as incurred in connection with proceedings against them
for which they may be indemnified. The Registrant has entered into
indemnification agreements with its officers and directors containing provisions
that are in some respects broader than the specific indemnification provisions
contained in the Delaware General Corporation Law. The indemnification
agreements may require the Registrant, among other things, to indemnify such
officers and directors against certain liabilities that may arise by reason of
their status or service as directors or officers (other than liabilities arising
from willful misconduct of a culpable nature), to advance expenses incurred as a
result of any proceeding against them as to which they could be indemnified, and
to obtain directors' and officers' insurance if available on reasonable terms.
At present, the Registrant is not aware of any pending or threatened litigation
or proceeding involving a director, officer, employee or agent of the Registrant
in which indemnification would be required or permitted. The Registrant
believes that its charter provisions and indemnification agreements are
necessary to attract and retain qualified persons as directors and officers.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
-----------------------------------
Not Applicable.
ITEM 8 EXHIBITS
--------
Exhibit
Number Document
- ------ -------------------------------------------------------------------
4.1 1989 Stock Option Plan, as amended through February 1997.
5.1 Opinion of Counsel as to Legality of Securities Being Registered.
23.1 Consent of Independent Accountants.
23.2 Consent of Counsel (contained in Exhibit 5.1 hereto).
24.1 Power of Attorney (see page 6).
-4-
<PAGE>
ITEM 9. UNDERTAKINGS
------------
A. 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 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.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933 (the "Securities Act"), each such post-effective
amendment 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.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
C. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, 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 indem
nification by it is against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
-5-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Mercury Interactive Corporation, a corporation organized and
existing under the laws of the State of Delaware, 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 Sunnyvale,
State of California, on May 23, 1997.
MERCURY INTERACTIVE CORPORATION
By: /s/ Sharlene Abrams
----------------------------------------------
Sharlene Abrams, Vice President of Finance and
Administration, Chief Financial Officer and
Secretary
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Aryeh Finegold, Sharlene Abrams and Susan
J. Skaer, jointly and severally, as his or her attorneys-in-fact, each with the
power of substitution, for him or her 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 confirming all that
each of said attorneys-in-fact, or his or her substitute or substitutes, may do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ---------------------- ------------------------------------------- -------------
<S> <C> <C>
/s/ Aryeh Finegold Chairman of the Board of Directors May 23, 1997
- ----------------------
(Aryeh Finegold)
/s/ Sharlene Abrams Vice President of Finance and May 23, 1997
- ---------------------- Administration and Chief Financial
(Sharlene Abrams) Officer (Principal Financial and
Accounting Officer)and Secretary
/s/ Igal Kohavi Director May 23, 1997
- ----------------------
(Igal Kohavi)
/s/ Amnon Landan President and Chief Executive May 23, 1997
- ---------------------- Officer and Director
(Amnon Landan) (Principal Executive Officer)
/s/ Yair Shamir Director May 23, 1997
- ----------------------
(Yair Shamir)
/s/ Giora Yaron Director May 23 , 1997
- ----------------------
(Giora Yaron)
</TABLE>
-6-
<PAGE>
EXHIBIT INDEX
Exhibit
Number Document
------ --------
4.1 1989 Stock Option Plan, as amended through February 1997.
5.1 Opinion of Counsel as to Legality of Securities Being
Registered.
23.1 Consent of Independent Accountants.
23.2 Consent of Counsel (contained in Exhibit 5.1 hereto).
24.1 Power of Attorney (see page 6).
<PAGE>
EXHIBIT 4.1
MERCURY INTERACTIVE CORPORATION
1989 STOCK OPTION PLAN
(as Amended through February 1997)
1. Purposes of the Plan. The purposes of this Stock Option Plan are to
--------------------
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to such individuals of the
Company and to promote the success of the Company's business.
Options granted hereunder may be either Incentive Stock Options or
Nonstatutory Stock Options, at the discretion of the Administrator and as
reflected in the terms of the written option agreement.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" shall mean the Committee, if one has been
-------------
appointed, or the Board of Directors of the Company, if no Committee is
appointed.
(b) "Board" shall mean the Board of Directors of the Company.
-----
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended.
----
(d) "Committee" shall mean the Committee appointed by the Board of
---------
Directors in accordance with paragraph (a) of Section 4 of the Plan, if one is
appointed.
(e) "Common Stock" shall mean the Common Stock of the Company.
------------
(f) "Company" shall mean Mercury Interactive Corporation, a Delaware
-------
corporation.
(g) "Consultant" shall mean any person who is engaged by the Company
----------
or any Parent or Subsidiary to render consulting services and is compensated for
such consulting services, the term Consultant shall not include directors who
are not compensated for their services or are paid only a director's fee by the
Company.
(h) "Continuous Status as an Employee or Consultant" means that the
----------------------------------------------
employment or consulting relationship is not interrupted or terminated by the
Company, any Parent or Subsidiary. Continuous Status as an Employee or
Consultant shall not be considered interrupted in the case of: (i) any leave of
absence approved by the Administrator, including sick leave, military leave, or
any other personal leave; provided, however, that for purposes of Incentive
Stock Options, any such leave may not exceed ninety (90) days, unless
reemployment upon the expiration of such leave is guaranteed by contract
(including certain Company policies)
<PAGE>
or statute; or (ii) transfers between locations of the Company or between the
Company, its Parent, its Subsidiaries or its successor.
(i) "Employee" shall mean any person, including officers and
--------
directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934,
------------
as amended.
(k) "Incentive Stock Option" shall mean any Option intended to qualify
----------------------
as an incentive stock option within the meaning of Section 422 of the Code.
(l) "Nonstatutory Stock Option" shall mean an Option not intended to
-------------------------
qualify as an Incentive Stock Option.
(m) "Option" shall mean a stock option granted pursuant to the Plan.
------
(n) "Optioned Stock" shall mean the Common Stock subject to an Option.
--------------
(o) "Optionee" shall mean an Employee or Consultant who receives an
--------
Option.
(p) "Parent" shall mean a "parent corporation", whether now or
------
hereafter existing, as defined in Section 424(e) of the Code.
(q) "Plan" shall mean this 1989 Stock Option Plan.
----
(r) "Share" shall mean a share of the Common Stock, as adjusted in
-----
accordance with Section 11 of the Plan.
(s) "Subsidiary" shall mean 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 to Section 11 of
-------------------------
the Plan, the total number of shares reserved and available for issuance under
the Plan is 5,001,439 Shares (such number includes the 4% increases in 1996
and 1997 as described below), increased on the first day of each new fiscal year
of the company from and including the 1996 fiscal year by a number of shares
equal to 4% of the sum of the number of Shares outstanding as of the last
business day preceding each such first day of each new fiscal year plus the
number of shares subject to outstanding and unexercised options. However,
notwithstanding the preceding sentence,
-2-
<PAGE>
the maximum number of Shares reserved and available for issuance pursuant to
Incentive Stock Options is 3,544,271 Shares.
Subject to Section 11 of the Plan, if any Shares that have been optioned
under an Option or Stock Purchase Right cease to be subject to such Option or
Stock Purchase Right (other than through exercise of the Option or Stock
Purchase Right), or if any Option granted hereunder is forfeited, or any such
award otherwise terminates prior to the issuance of Common Stock to the
participant, the Shares that were subject to such Option or Stock Purchase
Right shall again be available for distribution in connection with future
Option or Stock Purchase Right grants under the Plan. Shares that have
actually been issued under the Plan, whether upon exercise of an Option or
Stock Purchase Right, shall not in any event be returned to the Plan and shall
not become available for future distribution under the Plan.
4. Administration of the Plan.
--------------------------
(a) Procedure.
---------
(i) Multiple Administrative Bodies. If permitted by Rule 16b-3,
------------------------------
the Plan may be administered by different bodies with respect to Directors,
Officers who are not Directors, and Employees who are neither Directors nor
Officers.
(ii) Administration With Respect to Directors and Officers
-----------------------------------------------------
Subject to Section 16(b). With respect to Option or Stock Purchase Right
- ------------------------
grants made to Employees who are also Officers or Directors subject to Section
16(b) of the Exchange Act, the Plan shall be administered by (A) the Board, if
the Board may administer the Plan in compliance with the rules governing a
plan intended to qualify as a discretionary plan under Rule 16b-3, or (B) a
committee designated by the Board to administer the Plan, which committee
shall be constituted to comply with the rules governing a plan intended to
qualify as a discretionary plan under Rule 16b-3. Once appointed, such
Committee shall continue to serve in its designated capacity until otherwise
directed by the Board. From time to time the Board may increase the size of
the Committee and appoint additional members, remove members (with or without
cause) and substitute new members, fill vacancies (however caused), and remove
all members of the Committee and thereafter directly administer the Plan, all
to the extent permitted by the rules governing a plan intended to qualify as a
discretionary plan under Rule 16b-3.
(iii) Administration With Respect to Other Persons. With respect
--------------------------------------------
to Option or Stock Purchase Right grants made to Employees or Consultants who
are neither Directors nor Officers of the Company, the Plan shall be
administered by (A) the Board or (B) a committee designated by the Board,
which committee shall be constituted to satisfy Applicable Laws. Once
appointed, such Committee shall serve in its designated capacity until
otherwise directed by the Board. The Board may increase the size of the
Committee and appoint additional
-3-
<PAGE>
members, remove members (with or without cause) and substitute new members,
fill vacancies (however caused), and remove all members of the Committee and
thereafter directly administer the Plan, all to the extent permitted by
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 of the Common Stock,
in accordance with Section 8(b) of the Plan;
(ii) to select the Consultants and Employees to whom Options
and Stock Purchase Rights may be granted hereunder;
(iii) to determine whether and to what extent Options and Stock
Purchase Rights or any combination thereof, are granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each Option and Stock Purchase Right granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award 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 or the shares of Common Stock relating thereto,
based in each case on such factors as the Administrator, in its sole
discretion, shall determine;
(vii) 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;
(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;
-4-
<PAGE>
(x) to modify or amend each Option or Stock Purchase Right
(subject to Section 15(c) of the Plan);
(xi) 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;
(xii) to institute an Option Exchange Program;
(xiii) to determine the terms and restrictions applicable to
Options and Stock Purchase Rights and any Restricted Stock; and
(xiv) 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.
-----------
(a) Nonstatutory Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees.
(b) Each Option shall be designated in the written option agreement
as either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair
Market Value of the Shares with respect to which Options designated as Incentive
Stock Options are exercisable for the first time by any Optionee during any
calendar year (under all plans of the Company) exceeds $100,000, such Options
shall be treated as Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Options shall be taken into account
in the order in which they were granted, and the Fair Market Value of the Shares
shall be determined as of the time the Option with respect to such Shares is
granted.
(d) Nothing in the Plan or any Option granted hereunder shall confer
upon any Optionee any right with respect to continuation of employment or
consulting relationship with the Company, nor shall it interfere in any way with
the Optionee's right or the Company's right to terminate his employment or
consulting relationship at any time, with or without cause.
(e) The following limitations shall apply to grants of Options to
Employees:
-5-
<PAGE>
(i) No Employee shall be granted, in any fiscal year of the
Company, Options to purchase more than 200,000 Shares.
(ii) The foregoing limitation shall be adjusted proportionately
in connection with any change in the Company's capitalization as described
in Section 11.
(iii) If an Option is canceled (other than in connection
with a transaction described in Section 11), the canceled Option will be
counted against the limit set forth in Section 5(e)(i). 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.
6. Term of Plan. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company as described in Section 17 of the Plan. It shall
continue in effect for a term of ten (10) years from that date unless sooner
terminated under Section 13 of the Plan.
7. Term of Option. The term of each Incentive Stock Option shall be no
--------------
more than ten (10) years from the date of grant. However, 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 voting power of all classes of stock of the Company or any Parent or
Subsidiary, the term of the Incentive Stock Option shall be no more than five
(5) years from the date of grant.
8. Exercise Price and Consideration.
--------------------------------
(a) The per Share exercise price under each Option shall be such
price as is determined by the Board, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the grant of
such Incentive Stock Option, 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.
(B) granted to any Employee, the per Share exercise price
shall be no less than 100% of the Fair Market Value per Share on the date of
grant.
-6-
<PAGE>
(ii) In the case of a Nonstatutory Stock Option the per Share
exercise price shall be determined by the Administrator.
For purposes of this Section 8(a), in the event that an Option is amended to
reduce the exercise price, the date of grant of such Option shall thereafter be
considered to be the date of such amendment.
(b) The Fair Market Value shall be determined by the Board in good
faith; provided, however, that where there is a public market for the Common
Stock, the Fair Market Value per Share shall be the mean of the bid and asked
prices (or the closing price per share if the Common Stock is listed on the
National Association of Securities Dealers Automated Quotation ("NASDAQ")
National Market System) of the Common Stock for the date of grant, as reported
in the Wall Street Journal (or, if not so reported, as otherwise reported by the
NASDAQ System) or, in the event the Common Stock is listed on a stock exchange,
the Fair Market Value per Share shall be the closing price on such exchange on
the date of grant of the Option, as reported in the Wall Street Journal.
(c) 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) delivery of a properly executed exercise notice together
with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price;
(vi) any combination of the foregoing methods of payment; or
-7-
<PAGE>
(vii) such other consideration and method of payment for
the issuance of Shares to the extent permitted by applicable laws.
(d) Prior to issuance of the Shares upon exercise of an Option, the
Optionee shall pay or make adequate provision for any federal or state
withholding obligations of the Company, if applicable.
9. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Stockholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Board at the time of grant, including performance criteria
with respect to the Company and/or the Optionee, and as shall be permissible
under the terms of the Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(c) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a stockholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause
to be issued) such stock certificate promptly upon exercise of the Option. In
the event that the exercise of an Option is treated in part as the exercise of
an Incentive Stock Option and in part as the exercise of a Nonstatutory Stock
Option pursuant to Section 5(b), the Company shall issue a separate stock
certificate evidencing the Shares treated as acquired upon exercise of an
Incentive Stock Option and a separate stock certificate evidencing the Shares
treated as acquired upon exercise of a Nonstatutory Stock Option, and shall
identify each such certificate accordingly in its stock transfer records. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be 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 Status as an Employee or Consultant. In the event
--------------------------------------------------
of termination of an Optionee's Continuous Status as an Employee or Consultant
with the Company
-8-
<PAGE>
(but not in the event of a change of status from Employee to Consultant (in
which case an Employee's Incentive Stock Option shall automatically convert to
a Nonstatutory Stock Option on the ninety-first (91st) day following such
change of status) or from Consultant to Employee), such Optionee may, but only
within such period of time as is determined by the Administrator, of at least
thirty (30) days, with such determination in the case of an Incentive Stock
Option not exceeding three (3) months after the date of such termination (but
in no event later than the expiration date of the term of such Option as set
forth in the Option Agreement), exercise his or her Option to the extent that
Optionee was entitled to exercise it at the date of such termination. To the
extent that Optionee was not entitled to exercise the Option at the date of
such termination, or if Optionee does not exercise such Option to the extent
so entitled within the time specified herein, the Option shall terminate.
(c) Disability of Optionee. Notwithstanding the provisions of Section
----------------------
9(b) above, in the event of termination of an Optionee's Continuous Status as an
Employee or Consultant as a result of his total and permanent disability (as
defined in Section 22(e)(3) of the Code), he may, exercise his Option to the
extent he was entitled to exercise it at the date of such termination within
twelve (12) months (or such shorter period as is specified in the grant) from
the date of such termination (but in no event later than the date of expiration
of the term of such Option as set forth in the Option Agreement). To the extent
that the Optionee was not entitled to exercise the Option at the date of
termination, or does not exercise such Option (to the extent exercisable) within
the time specified herein, the Option shall terminate.
(d) Death of Optionee. Notwithstanding the provisions of Section 9(b)
-----------------
above, in the event of the death of an Optionee:
(i) during the term of the Option who is at the time of his
death an Employee or Consultant of the Company and who shall have been in
Continuous Status as an Employee or Consultant since the date of grant of the
Option, the Option may be exercised, at any time within six (6) months (or
such shorter period as is specified in the grant) following the date of death
(but in no event later than the date of expiration of the term of such Option
as set forth in the Option Agreement), by the Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or inheritance, but
only to the extent of the right to exercise that would have accrued had the
Optionee continued living and remained in Continuous Status as an Employee or
Consultant six (6) months after the date of death; or
(ii) within three (3) months (or such shorter period as is
specified in the grant) or such shorter period as may be specified at time of
grant after the termination of Continuous Status as an Employee or Consultant,
the Option may be exercised, at any time within six (6) months following the
date of death (but in no event later than the date of expiration of the term
of such Option as set forth in the Option Agreement), by the Optionee's estate
or by a person
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<PAGE>
who acquired the right to exercise the Option by bequest or inheritance, but
only to the extent of the right to exercise that had accrued at the date of
termination.
10. Non-Transferability of Options. The Option may not be sold, pledged,
------------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
11. Adjustments Upon Changes in Capitalization, Dissolution, Merger, Asset
----------------------------------------------------------------------
Sale or Change of Control.
-------------------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have
yet been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock
covered by each such outstanding Option, shall be proportionately adjusted for
any increase or decrease in the number of issued shares of Common Stock
resulting from a stock split, reverse stock split, stock dividend, combination
or reclassification of the Common Stock, or any other increase or decrease in
the number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made by
the 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.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it will terminate immediately prior to the
consummation of such proposed action. The Board may, in the exercise of its
sole discretion in such instances, declare that any Option shall terminate as of
a date fixed by the Board and give each Optionee the right to exercise his or
her Option as to all or any part of the Optioned Stock, including Shares as to
which the Option would not otherwise be exercisable.
(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:
(i) Each outstanding Option shall be assumed or an equivalent
option substituted by the successor corporation or a Parent or Subsidiary of
the successor corporation. Any
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<PAGE>
Shares subject to a repurchase option of the Company shall be exchanged for
the consideration (whether stock, cash, or other securities or property)
received in the merger or asset sale by the holders of the Common Stock for
the successor corporation or a parent or subsidiary of such successor
corporation for each Share held on the effective date of the transaction and
such consideration shall, in the case of securities of the successor
corporation, be subject to a repurchase option with terms consistent to the
Company's repurchase option and in the case of any other property shall be
subject to vesting according to the schedule for the lapse of the repurchase
option.
(ii) In the event that the successor corporation refuses to
assume or substitute for the Option, the Optionee shall have the right to
exercise the Option as to all of the Optioned Stock, including Shares as to
which it would not otherwise be exercisable, and such Shares shall be fully
vested and not subject to any repurchase option. In the event that the
successor corporation fails to assume the restricted stock purchase agreement
pursuant to which the Optionee purchased unvested Shares, the Company's
repurchase option shall lapse and the shares shall be fully vested. If an
Option is exercisable in lieu of assumption or substitution in the event of a
merger or sale of assets, the Administrator shall notify the Optionee that the
Option shall be fully exercisable for a period of fifteen (15) days from the
date of such notice, and the Option shall terminate upon the expiration of
such period. For the purposes of this paragraph, the Option shall be
considered assumed if, following the merger or sale of assets, the option
confers the right to purchase or receive, for each Share of Optioned Stock
subject to the Option immediately prior to the merger or sale of assets, the
consideration (whether stock, cash, or other securities or property) received
in the merger or sale of assets by holders of Common Stock for each Share held
on the effective date of the transaction (and if holders were offered a choice
of consideration, the type of consideration chosen by the holders of a
majority of the outstanding Shares); provided, however, that if such
consideration received in the merger or sale of assets was not solely Common
Stock of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Option, for each Share of Optioned Stock
subject to the Option, to be solely common stock of the successor corporation
or its Parent equal in Fair Market Value to the per share consideration
received by holders of Common Stock in the merger or sale of assets.
12. Time of Granting Options. The date of grant of an Option shall, for
------------------------
all purposes, be the date on which the Board makes the determination granting
such Option. Notice of the determination shall be given to each Employee or
Consultant to whom an Option is so granted within a reasonable time after the
date of such grant.
13. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may amend or terminate the
-------------------------
Plan from time to time in such respects as the Board may deem advisable;
provided that, the following
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<PAGE>
revisions or amendments shall require approval of the stockholders of the
Company in the manner described in Section 17 of the Plan:
(i) any increase in the number of Shares subject to the Plan,
other than in connection with an adjustment under Section 11 of the Plan;
(ii) any change in the designation of the class of persons
eligible to be granted Options; or
(iii) any material increase in the benefits accruing to
participants under the Plan.
(b) Stockholder Approval. Stockholder approval shall be solicited as
--------------------
described in Section 17 of the Plan.
(c) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.
14. Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
15. 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.
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
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<PAGE>
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
16. Option Agreement. Options shall be evidenced by written option
----------------
agreements in such form as the Board shall approve.
17. Stockholder Approval.
--------------------
(a) Continuance of the Plan shall be subject to approval by the
stockholders of the Company within twelve (12) months before or after the date
the Plan is adopted.
(b) Any required approval of the stockholders of the Company shall be
solicited substantially in accordance with Section 14(a) of the Exchange Act and
the rules and regulations promulgated thereunder.
(c) If any required approval by the stockholders of the Plan itself or
of any amendment thereto is solicited at any time otherwise than in the manner
described in Section 17(b) hereof, then the Company shall, at or prior to the
first annual meeting of stockholders held subsequent to the later of (1) the
first registration of any class of equity securities of the Company under
Section 12 of the Exchange Act or (2) the granting of an Option hereunder to an
officer or director after such registration, do the following:
(i) furnish in writing to the holders entitled to vote for the
Plan substantially the same information which would be required (if proxies to
be voted with respect to approval or disapproval of the Plan or amendment were
then being solicited) by the rules and regulations in effect under Section
14(a) of the Exchange Act at the time such information is furnished; and
(ii) file with, or mail for filing to, the Securities and
Exchange Commission four copies of the written information referred to in
subsection (i) hereof not later than the date on which such information is
first sent or given to stockholders.
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<PAGE>
EXHIBIT 5.1
May 28, 1997
Mercury Interactive Corporation
470 Potrero Avenue
Sunnyvale, California 94086
RE: REGISTRATION STATEMENT ON FORM S-8
----------------------------------
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-8 to be filed by you
with the Securities and Exchange Commission on or about May 28, 1997 (the
"Registration Statement") in connection with the registration under the
Securities Act of 1933, as amended, of a total of 747,698 shares of your Common
Stock (the "Shares") reserved for issuance under the 1989 Stock Option Plan (the
"Plan"). As legal counsel for Mercury Interactive Corporation, 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 Shares under the Plan.
It is our opinion that, when issued and sold in the manner referred to in
the Plan and pursuant to the agreement which accompanies each grant under the
Plan, the Shares 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 it appears in the
Registration Statement and any amendments thereto.
Very truly yours,
GENERAL COUNSEL ASSOCIATES LLP
/s/ General Counsel Associates LLP
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this
Registration Statement on Form S-8 of our report dated January 31, 1997
appearing on page F-1 of Mercury Interactive Corporation's Annual Report on Form
10-K for the year ended December 31, 1996.
/s/ PRICE WATERHOUSE LLP
San Jose, California
May 28, 1997
