EXHIBIT 4.18
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RATIONAL SOFTWARE CORPORATION
1997 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
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[Optionee's Name and Address]
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:
Grant Number _________________________
Date of Grant _________________________
Vesting Commencement Date _________________________
Exercise Price per Share $________________________
Total Number of Shares Granted _________________________
Total Exercise Price $_________________________
Type of Option: ___ Incentive Stock Option
___ Nonstatutory Stock Option
Term/Expiration Date: _________________________
Vesting Schedule:
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This Option may be exercised, in whole or in part, in accordance with the
following schedule:
Termination Period:
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This Option may be exercised for _____ [days/months] after Optionee ceases
to be a Service Provider. Upon the death or Disability of the Optionee, this
Option may be exercised for such longer period as provided in the Plan. In no
event shall this Option be exercised later than the Term/Expiration Date as
provided above.
II. AGREEMENT
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1. Grant of Option. The Plan Administrator of the Company hereby grants
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to the Optionee named in the Notice of Grant attached as Part I of this
Agreement (the "Optionee") an option (the "Option") to purchase the number
of Shares, as set forth in the Notice of Grant, at the exercise price per
share set forth in the Notice of Grant (the "Exercise Price"), subject to
the terms and conditions of the Plan, which is incorporated herein by
reference. Subject to Section 15(c) of the Plan, in the event of a
conflict between the terms and conditions of the Plan and the terms and
conditions of this Option Agreement, the terms and conditions of the Plan
shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option under
Section 422 of the Code. However, if this Option is intended to be an Incentive
Stock Option, to the extent that it exceeds the $100,000 rule of Code Section
422(d) it shall be treated as a Nonstatutory Stock Option ("NSO").
2. Exercise of Option.
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(1) Right to Exercise. This Option is exercisable
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during its term in accordance with the Vesting Schedule
set out in the Notice of Grant and the applicable
provisions of the Plan and this Option Agreement.
(2) Method of Exercise. This Option is exercisable by
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delivery of an exercise notice, in the form attached as
Exhibit A (the "Exercise Notice"), which shall state
the election to exercise the Option, the number of
Shares in respect of which the Option is being
exercised (the "Exercised Shares"), and such other
representations and agreements as may be required by
the Company pursuant to the provisions of the Plan.
The Exercise Notice shall be completed by the Optionee
and delivered to Secretary of the Company. The
Exercise Notice shall be accompanied by payment of the
aggregate Exercise Price as to all Exercised Shares.
This Option shall be deemed to be exercised upon
receipt by the Company of such fully executed Exercise
Notice accompanied by such aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of this Option
unless such issuance and exercise complies with Applicable Laws. Assuming such
compliance, for income tax purposes the Exercised Shares shall be considered
transferred to the Optionee on the date the Option is exercised with respect to
such Exercised Shares.
3. Method of Payment. Payment of the aggregate Exercise Price shall be
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by any of the following, or a combination thereof, at the election of the
Optionee:
(1) cash; or
(2) CHECK[; or
(3) consideration received by the Company under a
cashless exercise program implemented by the Company in
connection with the Plan][; or
(4) surrender of other Shares which (i) in the case of
Shares acquired upon exercise of an option, have been
owned by the Optionee for more than six (6) months on
the date of surrender, and (ii) have a Fair Market
Value on the date of surrender equal to the aggregate
Exercise Price of the Exercised Shares][; or
(5) with the Administrator's consent, delivery of
Optionee's promissory note (the "Note") in the form
attached hereto as Exhibit C, in the amount of the
aggregate Exercise Price of the Exercised Shares
together with the execution and delivery by the
Optionee of the Security Agreement attached hereto as
Exhibit B. The Note shall bear interest at the
"applicable federal rate" prescribed under the Code and
its regulations at time of purchase, and shall be
secured by a pledge of the Shares purchased by the Note
pursuant to the Security Agreement].
4. Non-Transferability of Option. This Option may not be transferred in
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any manner otherwise than by will or by the laws of descent or distribution
and may be exercised during the lifetime of Optionee only by the Optionee.
The terms of the Plan and this Option Agreement shall be binding upon the
executors, administrators, heirs, successors and assigns of the Optionee.
5. Term of Option. This Option may be exercised only within the term set
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out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option Agreement.
6. Tax Consequences. Some of the federal tax consequences relating to
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this Option, as of the date of this Option, are set forth below. THIS
SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE
SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE
EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(1) Exercising the Option.
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(1) Nonstatutory Stock Option. The Optionee may
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incur regular federal income tax liability upon
exercise of a NSO. The Optionee will be treated
as having received compensation income (taxable at
ordinary income tax rates) equal to the excess, if
any, of the Fair Market Value of the Exercised
Shares on the date of exercise over their
aggregate Exercise Price. If the Optionee is an
Employee or a former Employee, the Company will be
required to withhold from his or her compensation
or collect from Optionee and pay to the applicable
taxing authorities an amount in cash equal to a
percentage of this compensation income at the time
of exercise, and may refuse to honor the exercise
and refuse to deliver Shares if such withholding
amounts are not delivered at the time of exercise.
(2) Incentive Stock Option. If this Option
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qualifies as an ISO, the Optionee will have no
regular federal income tax liability upon its
exercise, although the excess, if any, of the Fair
Market Value of the Exercised Shares on the date
of exercise over their aggregate Exercise Price
will be treated as an adjustment to alternative
minimum taxable income for federal tax purposes
and may subject the Optionee to alternative
minimum tax in the year of exercise. In the event
that the Optionee ceases to be an Employee but
remains a Service Provider, any Incentive Stock
Option of the Optionee that remains unexercised
shall cease to qualify as an Incentive Stock
Option and will be treated for tax purposes as a
Nonstatutory Stock Option on the date
three (3) months and one (1) day following such
change of status.
(2) Disposition of Shares.
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(1) NSO. If the Optionee holds NSO Shares for
---
at least one year, any gain realized on
disposition of the Shares will be treated as long-
term capital gain for federal income tax purposes.
(2) ISO. If the Optionee holds ISO Shares
---
for at least one year after exercise and two years
after the grant date, any gain realized on
disposition of the Shares will be treated as long-
term capital gain for federal income tax purposes.
If the Optionee disposes of ISO Shares within one
year after exercise or two years after the grant
date, any gain realized on such disposition will
be treated as compensation income (taxable at
ordinary income rates) to the extent of the
excess, if any, of the lesser of (A) the
difference between the Fair Market Value of the
Shares acquired on the date of exercise and the
aggregate Exercise Price, or (B) the difference
between the sale price of such Shares and the
aggregate Exercise Price. Any additional gain
will be taxed as capital gain, short-term or long-
term depending on the period that the ISO Shares
were held.
(3) Notice of Disqualifying Disposition of ISO Shares.
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If the Optionee sells or otherwise disposes of any of
the Shares acquired pursuant to an ISO on or before the
later of (i) two years after the grant date, or (ii)
one year after the exercise date, the Optionee shall
immediately notify the Company in writing of such
disposition. The Optionee agrees that he or she may be
subject to income tax withholding by the Company on the
compensation income recognized from such early
disposition of ISO Shares by payment in cash or out of
the current earnings paid to the Optionee.
7. Entire Agreement; Governing Law. The Plan is incorporated herein by
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reference. The Plan and this Option Agreement constitute the entire
agreement of the parties with respect to the subject matter hereof and
supersede in their entirety all prior undertakings and agreements of the
Company and Optionee with respect to the subject matter hereof, and may not
be modified adversely to the Optionee's interest except by means of a
writing signed by the Company and Optionee. This agreement is governed by
the internal substantive laws, but not the choice of law rules, of [STATE].
8. NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES AND AGREES
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THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS
EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY
(AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN OPTION OR
PURCHASING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES
THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE
VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED
PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING
PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH OPTIONEE'S
RIGHT OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S RELATIONSHIP AS A
SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
By your signature and the signature of the Company's representative below,
you and the Company agree that this Option is granted under and governed by the
terms and conditions of the Plan and this Option Agreement. Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions relating to the Plan
and Option Agreement. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.
OPTIONEE: RATIONAL SOFTWARE CORPORATION
___________________________________ ______________________________________
Signature By
___________________________________ ______________________________________
Print Name Title
___________________________________
Residence Address
___________________________________
CONSENT OF SPOUSE
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The undersigned spouse of Optionee has read and hereby approves the terms
and conditions of the Plan and this Option Agreement. In consideration of the
Company's granting his or her spouse the right to purchase Shares as set forth
in the Plan and this Option Agreement, the undersigned hereby agrees to be
irrevocably bound by the terms and conditions of the Plan and this Option
Agreement and further agrees that any community property interest shall be
similarly bound. The undersigned hereby appoints the undersigned's spouse as
attorney-in-fact for the undersigned with respect to any amendment or exercise
of rights under the Plan or this Option Agreement.
_______________________________________
Spouse of Optionee
EXHIBIT A
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RATIONAL SOFTWARE CORPORATION
1997 STOCK OPTION PLAN
EXERCISE NOTICE
Rational Software Corporation
0000 Xxx Xxxxx Xxxxxxxxxx
Xxxxx Xxxxx, XX 00000
Attention: Secretary
1. Exercise of Option. Effective as of today, ________________, 199__,
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the undersigned ("Purchaser") hereby elects to purchase ______________ shares
(the "Shares") of the Common Stock of Rational Software Corporation (the
"Company") under and pursuant to the 1997 Stock Option Plan (the "Plan") and the
Stock Option Agreement dated _____________, 19___ (the "Option Agreement"). The
purchase price for the Shares shall be $_____________, as required by the Option
Agreement.
2. Delivery of Payment. Purchaser herewith delivers to the Company the
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full purchase price for the Shares.
3. Representations of Purchaser. Purchaser acknowledges that Purchaser
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has received, read and understood the Plan and the Option Agreement and agrees
to abide by and be bound by their terms and conditions.
4. Rights as Shareholder. Until the issuance (as evidenced by the
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appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the Shares, no right to vote or receive dividends or
any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Shares so acquired shall
be issued to the Optionee as soon as practicable after exercise of the Option.
No adjustment will be made for a dividend or other right for which the record
date is prior to the date of issuance, except as provided in [SECTION 13] of the
Plan.
5. Tax Consultation. Purchaser understands that Purchaser may suffer
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adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.
6. Entire Agreement; Governing Law. The Plan and Option Agreement are
_______________________________
incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Purchaser with respect to the subject matter
hereof, and may not be modified adversely to the Purchaser's interest except by
means of a writing signed by the Company and Purchaser. This agreement is
governed by the internal substantive laws, but not the choice of law rules, of
[STATE].
Submitted by: Accepted by:
PURCHASER: RATIONAL SOFTWARE CORPORATION
_________________________________ ____________________________________
Signature By
_________________________________ ____________________________________
Print Name Its
Address: Address:
_______ _______
_________________________________ Rational Software Corporation
2800 San Xxxxx Expressway
_________________________________ Xxxxx Xxxxx, XX 00000
_________________________________ Date Received
EXHIBIT B
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SECURITY AGREEMENT
This Security Agreement is made as of __________, 19___ between Rational
Software Corporation, a Delaware corporation ("Pledgee"), and
_________________________ ("Pledgor").
Recitals
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Pursuant to Pledgor's election to purchase Shares under the Option
Agreement dated ________ (the "Option"), between Pledgor and Pledgee under
Pledgee's 1997 Stock Option Plan, and Pledgor's election under the terms of the
Option to pay for such shares with his promissory note (the "Note"), Pledgor has
purchased _________ shares of Pledgee's Common Stock (the "Shares") at a price
of $________ per share, for a total purchase price of $__________. The Note and
the obligations thereunder are as set forth in Exhibit C to the Option.
NOW, THEREFORE, it is agreed as follows:
1. Creation and Description of Security Interest. In consideration of
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the transfer of the Shares to Pledgor under the Option Agreement, Pledgor,
pursuant to the California Commercial Code, hereby pledges all of such Shares
(herein sometimes referred to as the "Collateral") represented by certificate
number ______, duly endorsed in blank or with executed stock powers, and
herewith delivers said certificate to the Secretary of Pledgee ("Pledgeholder"),
who shall hold said certificate subject to the terms and conditions of this
Security Agreement.
The pledged stock (together with an executed blank stock assignment for use
in transferring all or a portion of the Shares to Pledgee if, as and when
required pursuant to this Security Agreement) shall be held by the Pledgeholder
as security for the repayment of the Note, and any extensions or renewals
thereof, to be executed by Pledgor pursuant to the terms of the Option, and the
Pledgeholder shall not encumber or dispose of such Shares except in accordance
with the provisions of this Security Agreement.
2. Pledgor's Representations and Covenants. To induce Pledgee to enter
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into this Security Agreement, Pledgor represents and covenants to Pledgee, its
successors and assigns, as follows:
a. Payment of Indebtedness. Pledgor will pay the principal sum of
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the Note secured hereby, together with interest thereon, at the time and in the
manner provided in the Note.
b. Encumbrances. The Shares are free of all other encumbrances,
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defenses and liens, and Pledgor will not further encumber the Shares without the
prior written consent of Pledgee.
c. Margin Regulations. In the event that Pledgee's Common Stock is
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now or later becomes margin-listed by the Federal Reserve Board and Pledgee is
classified as a "lender" within the meaning of the regulations under Part 207 of
Title 12 of the Code of Federal Regulations ("Regulation G"), Pledgor agrees to
cooperate with Pledgee in making any amendments to the Note or providing any
additional collateral as may be necessary to comply with such regulations.
3. Voting Rights. During the term of this pledge and so long as all
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payments of principal and interest are made as they become due under the terms
of the Note, Pledgor shall have the right to vote all of the Shares pledged
hereunder.
4. Stock Adjustments. In the event that during the term of the pledge
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any stock dividend, reclassification, readjustment or other changes are declared
or made in the capital structure of Pledgee, all new, substituted and additional
shares or other securities issued by reason of any such change shall be
delivered to and held by the Pledgee under the terms of this Security Agreement
in the same manner as the Shares originally pledged hereunder. In the event of
substitution of such securities, Pledgor, Pledgee and Pledgeholder shall
cooperate and execute such documents as are reasonable so as to provide for the
substitution of such Collateral and, upon such substitution, references to
"Shares" in this Security Agreement shall include the substituted shares of
capital stock of Pledgor as a result thereof.
5. Options and Rights. In the event that, during the term of this
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pledge, subscription Options or other rights or options shall be issued in
connection with the pledged Shares, such rights, Options and options shall be
the property of Pledgor and, if exercised by Pledgor, all new stock or other
securities so acquired by Pledgor as it relates to the pledged Shares then held
by Pledgeholder shall be immediately delivered to Pledgeholder, to be held under
the terms of this Security Agreement in the same manner as the Shares pledged.
6. Default. Pledgor shall be deemed to be in default of the Note and of
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this Security Agreement in the event:
a. Payment of principal or interest on the Note shall be delinquent
for a period of 10 days or more; or
b. Pledgor fails to perform any of the covenants set forth in the
Option or contained in this Security Agreement for a period of 10 days after
written notice thereof from Pledgee.
In the case of an event of Default, as set forth above, Pledgee shall have
the right to accelerate payment of the Note upon notice to Pledgor, and Pledgee
shall thereafter be entitled to pursue its remedies under the California
Commercial Code.
7. Release of Collateral. Subject to any applicable contrary rules under
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Regulation G, there shall be released from this pledge a portion of the pledged
Shares held by Pledgeholder hereunder upon payments of the principal of the
Note. The number of the pledged Shares which shall be
released shall be that number of full Shares which bears the same proportion to
the initial number of Shares pledged hereunder as the payment of principal bears
to the initial full principal amount of the Note.
8. Withdrawal or Substitution of Collateral. Pledgor shall not sell,
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withdraw, pledge, substitute or otherwise dispose of all or any part of the
Collateral without the prior written consent of Pledgee.
9. Term. The within pledge of Shares shall continue until the payment of
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all indebtedness secured hereby, at which time the remaining pledged stock shall
be promptly delivered to Pledgor, subject to the provisions for prior release of
a portion of the Collateral as provided in paragraph 7 above.
10. Insolvency. Pledgor agrees that if a bankruptcy or insolvency
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proceeding is instituted by or against it, or if a receiver is appointed for the
property of Pledgor, or if Pledgor makes an assignment for the benefit of
creditors, the entire amount unpaid on the Note shall become immediately due and
payable, and Pledgee may proceed as provided in the case of default.
11. Pledgeholder Liability. In the absence of willful or gross
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negligence, Pledgeholder shall not be liable to any party for any of his acts,
or omissions to act, as Pledgeholder.
12. Invalidity of Particular Provisions. Pledgor and Pledgee agree that
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the enforceability or invalidity of any provision or provisions of this Security
Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid.
13. Successors or Assigns. Pledgor and Pledgee agree that all of the
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terms of this Security Agreement shall be binding on their respective successors
and assigns, and that the term "Pledgor" and the term "Pledgee" as used herein
shall be deemed to include, for all purposes, the respective designees,
successors, assigns, heirs, executors and administrators.
14. Governing Law. This Security Agreement shall be interpreted and
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governed under the internal substantive laws, but not the choice of law rules,
of the State of California.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
"PLEDGOR" _________________________________
Signature
_________________________________
Print Name
Address: _________________________________
_________________________________
"PLEDGEE" RATIONAL SOFTWARE CORPORATION,
a Delaware corporation
________________________________
Signature
________________________________
Print Name
________________________________
Title
"PLEDGEHOLDER" ________________________________
Secretary of
Rational Software Corporation
EXHIBIT C
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NOTE
$ _______________ Santa Clara, California
______________, 19___
FOR VALUE RECEIVED, _______________ promises to pay to Rational Software
Corporation, a Delaware corporation (the "Company"), or order, the principal sum
of _______________________ ($_____________), together with interest on the
unpaid principal hereof from the date hereof at the rate of _______________
percent (____%) per annum, compounded semiannually.
Principal and interest shall be due and payable on __________, 19___.
Payment of principal and interest shall be made in lawful money of the United
States of America.
The undersigned may at any time prepay all or any portion of the principal
or interest owing hereunder.
This Note is subject to the terms of the Option, dated as of
________________. This Note is secured in part by a pledge of the Company's
Common Stock under the terms of a Security Agreement of even date herewith and
is subject to all the provisions thereof.
The holder of this Note shall have full recourse against the undersigned,
and shall not be required to proceed against the collateral securing this Note
in the event of default.
In the event the undersigned shall cease to be an employee, director or
consultant of the Company for any reason, this Note shall, at the option of the
Company, be accelerated, and the whole unpaid balance on this Note of principal
and accrued interest shall be immediately due and payable.
Should any action be instituted for the collection of this Note, the
reasonable costs and attorneys' fees therein of the holder shall be paid by the
undersigned.
____________________________________
____________________________________
RATIONAL SOFTWARE CORPORATION
1997 STOCK OPTION PLAN
NOTICE OF GRANT OF STOCK PURCHASE RIGHT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Notice of Grant.
[Grantee's Name and Address]
You have been granted the right to purchase Common Stock of the Company,
subject to the Company's Repurchase Option and your ongoing status as a Service
Provider (as described in the Plan and the attached Restricted Stock Purchase
Agreement), as follows:
Grant Number _________________________
Date of Grant _________________________
Price Per Share $________________________
Total Number of Shares Subject _________________________
to This Stock Purchase Right
Expiration Date: _________________________
YOU MUST EXERCISE THIS STOCK PURCHASE RIGHT BEFORE THE EXPIRATION DATE OR
IT WILL TERMINATE AND YOU WILL HAVE NO FURTHER RIGHT TO PURCHASE THE SHARES. By
your signature and the signature of the Company's representative below, you and
the Company agree that this Stock Purchase Right is granted under and governed
by the terms and conditions of the 1997 Stock Option Plan and the Restricted
Stock Purchase Agreement, attached hereto as Exhibit A-1, both of which are made
a part of this document. You further agree to execute the attached Restricted
Stock Purchase Agreement as a condition to purchasing any shares under this
Stock Purchase Right.
GRANTEE: RATIONAL SOFTWARE CORPORATION
___________________________ ________________________________
Signature By
___________________________ ________________________________
