Document:

<PAGE>

                                                                   EXHIBIT 10.18
                         RATIONAL SOFTWARE CORPORATION
                         -----------------------------
                             RELOCATION AGREEMENT
                             --------------------

     This Relocation Agreement (the "Agreement") is entered into effective as of
April 12, 2001 (the "Effective Date"), by and between Rational Software
Corporation, a Delaware corporation (the "Company"), and David H. Bernstein (the
"Employee").

     1.   Nature of Employment. The Company agrees to employ Employee as Senior
          --------------------
Vice President, Products. The Company and Employee agree that Employee's
employment with the Company is and shall continue to be "at-will" and may be
terminated at any time with or without cause or notice by either the Company or
Employee. Not withstanding this fact, this agreement shall bind the Company for
reimbursement of all of Employee's expenses as itemized in paragraphs 3-6
inclusive of this Agreement for a period not to exceed two (2) years from the
effective date of this agreement.

     2.   Terms of Relocation Loan. In connection with the transfer of
          ------------------------
Employee's principal place of employment from Massachusetts to California, the
Company will provide Employee with a non-interest bearing loan in the amount of
$2.5 million (the "Loan") for purposes of Employee's acquisition of a new
principal residence located at 27240 Natoma Road, Los Altos Hills, California
(the "California Residence"). The Loan shall be subject to, and governed by, the
terms and conditions of a Promissory Note and mortgage between the Employee and
the Company, the form of which shall be provided to Employee by the Company (the
"Promissory Note"). Company and Employee shall promptly execute such Promissory
Note, and all other documents necessary to effect such Promissory Note, after
execution of this Agreement. The Promissory Note shall state that the Employee
shall grant Company a mortgage security interest in the California Residence (as
more particularly described in the Promissory Note) for the term of the Loan and
that the loan proceeds be used only to purchase the California Residence. The
Promissory Note shall also state that the Loan shall be due and payable upon the
occurrence of a Maturity event as defined in the Promissory Note The Loan is
intended to satisfy the Requirements of Temporary Treasury Regulation Section
1.7872-5T(c)(1)(i) and the Employee and Company agree to execute such documents
as are necessary to reasonably comply therewith.

     3.   Reimbursement/Relocation.
          ------------------------

          (a)  Relocation Costs. Company will reimburse the Employee, under the
               ----------------
Company's standard relocation policy, for all of the Employee's costs reasonably
incurred to relocate from Massachusetts to California. These costs shall
include:

               1.   The cost of selling Employee's home at 25 Glezen Lane,
Wayland, Massachusetts (the "Massachusetts Residence"), including standard,
market-rate brokerage commission.

               2.   The cost of relocating the Employee's family and possessions
located in the Massachusetts Residence to California.
<PAGE>

                    (b)  Loss on Sale (Massachusetts Residence). The Company
                         --------------------------------------
will reimburse Employee for any loss (net of sales costs) that the Employee
sustains as a result of the sale of the Massachusetts Residence ; provided,
however, that Employee shall use reasonable efforts to obtain the maximum market
value for the Massachusetts Residence at any such sale. Company will reimburse
the difference between the Employee's initial purchase price of One Million
Eight Hundred Thousand Dollars ($1,800,000) and the sales price of said property
realized at such sale, less selling costs.

                    (c)  Loss on Sale (California Residence). The Company will
                         -----------------------------------
reimburse Employee for any loss (net of sales costs) that the Employee sustains
as a result of the sale of the California Residence so long as Employee is
employed by the Company on the date of such sale ; provided, however, that
Employee shall use reasonable efforts to obtain the maximum market value for the
California Residence at any such sale. The purchase price of the California
Residence is Five Million Two Hundred Thousand Dollars ($5,200,000).

     4.   Reimbursement/Transition. The Company and Employee anticipate that
          ------------------------
employee will spend a significant amount of time in both the Massachusetts
location and the California location during a period of approximately two years
from the Effective Date (the "Transition Period"). During the Transition Period,
Company will reimburse Employee for costs reasonably incurred by the Employee to
maintain two residences, up to $100,000 per year. This amount will be reviewed
one year after the Effective date, and may be adjusted at that time by mutual
consent of the parties.

     5.   Tax Reimbursement. The Company will make a "gross-up" payment with
          -----------------
respect to all taxable payments made under this Agreement at the Employee's tax
rate to compensate the Employee for any incremental federal or state tax
liability that may be incurred by the Employee as a result of payments received
by the Employee from the Employer pursuant to this agreement.

     6.   Arbitration and Equitable Relief.
          --------------------------------

          (a)  Except as provided in Section 6(c) below, the Company and
Employee agree that any dispute or controversy arising out of, relating to, or
in connection with this Agreement, or the interpretation, validity,
construction, performance, breach, or termination thereof shall be settled by
arbitration to be held in Santa Clara County, California in accordance with the
National Rules for the Resolution of Employment Disputes then in effect of the
American Arbitration Association (the "Rules"). The arbitrator may grant
injunctions or other relief in such dispute or controversy. The decision of the
arbitrator shall be final, conclusive and binding on the parties to the
arbitration. Judgment may be entered on the arbitrator's decision in any court
having jurisdiction.

          (b)  The Company shall pay all costs and expenses of such arbitration.

          (c)  The parties may apply to any court of competent jurisdiction for
a temporary restraining order, preliminary injunction or other interim or
conservatory relief as

                                       2
<PAGE>

necessary, without breach of this arbitration agreement and without abridgment
of the powers of the arbitrator.

          (d)  EMPLOYEE HAS READ AND UNDERSTANDS THIS SECTION 6, WHICH DISCUSSES
ARBITRATION. EMPLOYEE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, EMPLOYEE
AGREES, EXCEPT AS PROVIDED IN SECTION 6(c), TO SUBMIT ANY FUTURE CLAIMS ARISING
OUT OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE
INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH, OR TERMINATION
THEREOF TO BINDING ARBITRATION, AND THAT THIS ARBITRATION CLAUSE CONSTITUTES A
WAIVER OF EMPLOYEE'S RIGHT TO A JURY TRAIL AND RELATES TO THE RESOLUTION OF ALL
DISPUTES RELATING TO ALL ASPECTS OF THE EMPLOYER/EMPLOYEE RELATIONSHIP THAT ARE
THE SUBJECT OF THIS AGREEMENT.

     Executed as a sealed instrument as of the effective Date of this Agreement.

                         RATIONAL SOFTWARE CORPORATION (Company)

                         BY:

                         /s/ Timothy A. Brennan, Senior VP, CFO and Secretary
                         ----------------------------------------------------

                         /s/ David H. Bernstein
                         ----------------------------------------------------
                         DAVID H. BERNSTEIN (Employee)

                                       3<PAGE>

                                                                   EXHIBIT 10.19

                                PROMISSORY NOTE
                           SECURED BY DEED OF TRUST

$2,500,000
                                                                    June 1, 2001
                                                           Palo Alto, California

     FOR VALUE RECEIVED, the undersigned, DAVID H. BERNSTEIN (referred to herein
as "Employee" or "Borrower"), promises to pay to the order of RATIONAL SOFTWARE
CORPORATION, a Delaware corporation ("Lender" or the "Company"), at 18880
Homestead Road, Cupertino, CA 95014 (or at such other place as Lender may from
time to time designate by written notice to Borrower), or order, in lawful money
of the United States, the principal sum of Two Million Five Hundred Thousand
Dollars ($2,500,000), together with interest thereon at the rate of zero percent
(0%) per annum.

                                   RECITALS
                                   --------

     A.   Employee is employed by the Company as its Senior Vice President,
          Products.

     B.   Employee is in the process of relocating his residence in order for
          employee to perform his duties as an employee of the company.

     C.   Borrower desires that the Company lend to Borrower the sum of Two
          Million Five Hundred Thousand Dollars ($2,500,000) to assist Borrower
          in purchasing a new principal residence.

     1.   Payment: The principal and interest due pursuant to this Note shall be
          -------
paid as follows:

               (a)  Upon the occurrence of a Maturity Event (as defined herein),
Borrower shall pay to Lender all amounts due under this Note, including all
unpaid principal.

               (b)  Subject to Section 3 below, the entire outstanding principal
balance of this Note, plus any accrued, but unpaid interest thereon, and any
other sum due hereunder shall be due and payable in full on or before the third
(3rd) anniversary date of this Note.

               (c)  Principal shall be payable in lawful money of the United
States. Each payment shall be applied to reduce principal.

               (d)  All payments made hereunder shall be made by Borrower free
and clear of, and without deduction for, any and all present and future taxes,
levies, charges, deductions and withholdings. Borrower shall pay upon demand any
stamp or other taxes, levies or charges of any jurisdiction with respect to the
execution, delivery, performance and enforcement of this Note.
<PAGE>

     2.   Security: This Note is secured by that certain Deed of Trust (the
          --------
"Deed of Trust") of even date herewith made by Borrower, as trustor, to First
American Title Insurance Company, as trustee, for the benefit of Lender, as
beneficiary, which shall be recorded in the Official Records of the County of
Santa Clara, State of California, encumbering certain real property commonly
known as 27240 Natoma Road, in the City of Los Altos Hills and County of Santa
Clara,State of California (the "Property"), described with particularity in the
Deed of Trust, which Borrower intends to occupy as his principal place of
residence. The Deed of Trust provides, among other things, as follows:

               "If the Trustor (herein the Borrower) shall sell,
               convey, encumber, grant any lien upon, or otherwise
               alienate the Property, or any part thereof, or any
               interest therein, or shall be divested of his title or
               any interest therein in any manner or way, whether
               voluntarily or involuntarily, without the written
               consent of the Beneficiary being first had and
               obtained, Beneficiary (herein the Lender) shall have
               the right, at its option, except as prohibited by law,
               to declare any indebtedness or obligations secured
               hereby (including, without limitation, the Note),
               irrespective of the maturity date specified therein,
               immediately due and payable."

     3.   Maturity Event: Upon the occurrence of a Maturity Event (as
          --------------
hereinafter defined), the entire unpaid principal balance, and all other sums
due hereunder, shall become immediately due and payable without further demand
or notice to Borrower. To the extent permitted by law, any of the following
events shall be a "Maturity Event" under this Note and the Deed of Trust:

               (a)  Borrower shall fail to pay any amount of the principal on
this Note when due and shall fail to cure such non-payment within ten (10) days
following written notice of such delinquency.

               (b)  There shall occur a breach or default in the performance of
any obligation of Borrower contained in this Note or the Deed of Trust or any
other agreement now or hereafter entered into by Borrower, on the one hand, and
the Company, on the other hand.

               (c)  There shall occur a breach or default in the performance of
any obligation of Borrower in any other deed of trust or other security
instrument (whether superior or subordinate in rights to the Deed of Trust) now
or hereafter encumbering the Property.

               (d)  Borrower shall sell, convey, encumber, grant any lien upon,
or otherwise alienate the Property, or any part thereof, or any interest
therein, or shall be divested of his title or any interest therein in any manner
or way, whether voluntarily or involuntarily, without the written consent of the
Lender being first had and obtained.

               (e)  Borrower (i) admits in writing his inability to pay debts,
(ii) makes an assignment for the benefit of creditors, (iii) files a voluntary
petition in bankruptcy, effects a plan or other arrangement with creditors,
liquidates his assets under arrangement with creditors, or liquidates his assets
under court supervision, (iv) has an involuntary petition in bankruptcy filed
against him that is not discharged within sixty (60) days after such petition is
filed, or (v) applies for or permits the

                                      -2-
<PAGE>

appointment of a receiver or trustee or custodian for any of his property or
assets which shall not have been discharged within sixty (60) days after the
date of appointment.

               (f)  The occurrence of the third (3rd) anniversary of the date of
this Note.

               (g)  The occurrence of the ninetieth (90th) day following the
termination by Employee of his employment with Lender for Cause. For the
purposes of this Note, "Cause" shall mean(i) Employee's conviction by, or entry
of a plea of guilty or nolo contendere in, a court of competent and final,
jurisdiction for any intentional crime which constitutes a felony in the
jurisdiction involved; or (ii) Employee's conviction of an act of fraud or
misappropriation of material property, subsequent to the date hereof, upon the
Company, or any of its respective affiliates.

               (h)  The occurrence of the one hundred eightieth (180th) day
following the termination by Employee of his employment to Lender without Cause.

               (i)  Any representation of Borrower contained herein or in any
certificate or agreement entered into between Borrower for the benefit of Lender
in connection herewith shall prove to be false or misleading in any material
respect.

               (j)  The Deed of Trust is not recorded against the Property
within sixty (90) days after the closing of the purchase by Borrower of the
Property or at any time ceases to be a valid first lien on the Property.

               (k)  Borrower has failed to deliver to Lender, within sixty (90)
days after the closing of the purchase by Borrower of the Property a copy of a
U.S. FIRPTA certificate, and the state equivalent certificate, executed by
seller of the Property, acceptable to Lender and providing that no withholding
of any portion of the purchase prices must be withheld.

               (l)  Any lien or other monetary encumbrance is imposed against
the Property; provided, however, that in the event that a lien or monetary
encumbrance is imposed against the Property without the consent of any Borrower,
a Maturity Event shall not occur until the lien or other monetary encumbrance is
imposed against the Property for a period of at least thirty (30) days.

               (m)  One (1) year following the death of the Employee.

               (n)  Borrower defaults in his obligation to pay any sum or to
perform any obligation, which is secured by a deed of trust, mortgage, lien, or
other encumbrance on the Property (other than the Deed of Trust).

               (o)  Borrower shall sell, convey, encumber, grant any lien upon,
or otherwise alienate the property located at, and commonly known as, 25 Glezen
Lane, Wayland, Massachusetts (the "Massachusetts Property"), or any part
thereof, or any interest therein, or shall be divested of his title or any
interest therein in any manner or way, whether voluntarily or involuntarily,
provided that the entire principal balance shall not be due if Borrower sells
the Massachusetts Property with Lender's

                                      -3-
<PAGE>

consent, not to be unreasonably withheld, and one hundred percent (100%) of the
net proceeds of such sale are concurrently paid to Lender to reduce the
outstanding principal balance of the Note.

     4.   Late Charge: Because the actual damage to Lender resulting from
          -----------
any default by Borrower in the payment of any installment of principal when due
is impractical and extremely difficult to ascertain, in addition to its other
rights and remedies, Lender shall be entitled to recover six percent (1%) of the
amount of any such delinquent installment as liquidated damages, if Borrower
fails to pay any installment within ten (10) days after Borrower receives
written notice from Lender of the amount due and owing.

     5.   Borrower's Representations: Borrower hereby makes the following
          --------------------------
representations to the Lender and acknowledges that Lender is relying on such
representations in making the loan:

               (a)  Borrower shall have good and marketable title to the
Property free and clear of any security interests, liens or encumbrances other
than the deed of trust in favor of Lender securing this Note;

               (b)  The consent of no other person or entity is required to
grant to Lender the security interest in the Property evidenced by the Deed of
Trust.

               (c)  There are no actions, proceedings, claims, or disputes
pending or, to the Borrower's knowledge, threatened against or affecting the
Borrower, the Property or the Massachusetts Property.

               (d)  Borrower has delivered to Lender true, correct and complete
copies of all Loan Documents.

               (e)  Borrower shall use the proceeds of this indebtedness solely
for the purpose of purchasing the Property

               (f)  Borrower understands that both the proceeds of this
indebtedness and this Note are not transferable by Borrower and are conditioned
on the future performance of substantial services by the Employee.

               (g)  The proceeds of this indebtedness shall be used only to
purchase a principal residence of Borrower being acquired in connection with the
commencement of employment at a "new principal place of work" within the meaning
of Section 217 of the Internal Revenue Code of 1986.

               (h)  The Massachusetts Property shall not be converted to
business or investment use.

     6.   Borrower's Additional Obligations: Borrower shall take any and all
          ---------------------------------
further actions that may from time to time be required to ensure that the Deed
of Trust creates a valid first priority lien on the Property in favor of the
Lender as security for the Note. Borrower shall not further encumber the
Property or permit any lien to encumber the Property. Upon request by Lender,
but not more frequently than once during any calendar year, Borrower shall
furnish evidence reasonably satisfactory to the Lender that: (i) Borrower has
good and marketable title to the Property; (ii) the

                                      -4-
<PAGE>

consent of no other person or entity is required to grant a first priority
security interest in the Property to the Company; (iii) the Deed of Trust is a
first priority security interest in the Property, and (iv) there are no other
deeds of trust, mortgages or encumbrances against the Property. If it should be
hereafter determined that there are defects against title or matters which could
result in defects against title to the Property, or that the consent of another
person or entity is required to grant to and perfect in the Lender a valid
first-priority lien on the Property, Borrower shall promptly take all action
necessary to remove such defects and to obtain such consent and grant (or cause
to be granted) and perfect such lien on the Property. Failure of the Deed of
Trust to be a valid first lien against the Property shall be deemed a Maturity
Event as aforesaid.

     7.   Notice: This Note is subject to Section 2924(i) and 2966 of the
          ------
California Civil Code which provides that the holder of this Note shall give
written notice to Borrower or his successors-in-interest, of prescribed
information (as set forth in said Civil Code Sections) at least ninety (90) days
and not more than one hundred and fifty (150) days before any Balloon Payment is
due.

     8.   Attorneys' Fees: In the event of Borrower's default hereunder,
          ---------------
Borrower shall pay all costs of collection, including reasonable attorneys' fees
incurred by the holder hereof on account of such collection, whether or not suit
is filed hereon.

     9.   Notices, Addresses and Methods: All notices and other communications
          ------------------------------
required or permitted hereunder shall be in writing and may be given by (a)
personal delivery, (b) certified mail, postage prepaid, return-receipt
requested, (c) courier service, fully prepaid for next business day delivery, or
(d) facsimile. Any such notice shall be properly addressed Lender at 18880
Homestead Road, Cupertino, CA 95014 or to Borrower at 27240 Natoma, Los Altos
Hills CA and shall be deemed to have been given (i) if personally delivered,
when delivered, (ii) if by certified mail, return-receipt requested, when
delivered or refused, (iii) if by courier service, on the next business day
following deposit, cost prepaid, with Federal Express or similar private
carrier, or (iv) if by facsimile, instantaneously upon confirmation of receipt
of facsimile. The Company or Borrower may change its address by giving notice of
the same in accordance with this paragraph. The term "business day" shall mean a
day on which national banks are open for business in San Francisco, California.

     10.  Waiver: The waiver by Lender of any breach of or default under any
          ------
term, covenant or condition contained herein or in any other agreement referred
to above shall not be deemed to be a waiver of any subsequent breach of or
default under the same or any other such term, covenant or condition.

     11.  No Usury: Borrower hereby represents and warrants that at no time
          --------
shall the proceeds of the indebtedness evidenced hereby be used "primarily for
personal, family, or household purposes" as that term is defined and used in
Article XV of the California Constitution (as amended from time to time).
Anything in this Note to the contrary notwithstanding, it is expressly
stipulated and agreed that the intent of Borrower and Lender is to comply at all
times with all usury and other laws relating to this Note. If the laws of the
State of California would now or hereafter render usurious, or are revised,
repealed or judicially interpreted so as to render usurious, any amount called
for under this Note, or contracted for, charged or received with respect to the
loan evidenced by this Note, or if any prepayment by Borrower results in
Borrower having paid any interest in excess of that permitted by

                                      -5-
<PAGE>

law, then it is Borrower's and Lender's express intent that all excess amounts
theretofore collected by Lender be credited to the principal balance of this
Note (or, if this Note has been paid in full, refunded to Borrower), and the
provisions of this Note immediately be deemed reformed and the amounts therefor
collectible hereunder reduced, without the necessity of execution of any new
document, so as to comply with the then applicable law, but so as to permit the
recovery of the fullest amount otherwise called for hereunder.

     12. Prepayment: Borrower may prepay all or any portion of this Note at any
         ----------
time prior to the Maturity Date, with no premium or penalty.

     13. No Covenant for Employment or Advances: Employee understands and
         --------------------------------------
acknowledges that this Note and the underlying indebtedness do not modify
Employee's at-will status at the Company and do not constitute an employment
agreement or a promise by the Company to continue Employee's employment. Either
the Company or Employee may terminate such employment relationship at any time,
with or without Cause.

     14. General Provisions: This Note shall be governed by and construed in
         ------------------
accordance with the laws of the State of California. The makers of this Note
hereby waive presentment for payment, protest and demand, notice of protest,
demand and dishonor and nonpayment of this Note, and consent that Lender may
extend the time for payment or otherwise modify the terms of payment or any part
of the whole of the debt evidenced by this Note, at the request of any person
liable hereon, and such consent shall not alter nor diminish the liability of
any person. Borrower hereby waives the defense of the statute of limitations in
any action on this Note to the extent permitted by law. Time is of the essence
of this Note, the Deed of Trust and any other document executed by Borrower in
connection therewith. Liability hereunder shall be joint and several both
between Borrower and among all other persons and entities now or hereafter
liable for all or any part of the Loan.

     15.  Acknowledgement by Borrower: THIS NOTE, THE LOAN AGREEMENT, THE DEED
          ---------------------------
OF TRUST, AND ALL RELATED DOCUMENTATION ARE EXECUTED VOLUNTARILY AND WITHOUT ANY
DURESS OR UNDUE INFLUENCE ON THE PART OF OR ON BEHALF OF THE PARTIES HERETO,
WITH THE FULL INTENT OF CREATING THE OBLIGATIONS AND SECURITY INTERESTS
DESCRIBED HEREIN AND THEREIN. THE PARTIES ACKNOWLEDGE THAT: (a) THEY HAVE READ
SUCH DOCUMENTATION; (b) THEY HAVE BEEN REPRESENTED IN THE PREPARATION,
NEGOTIATION AND EXECUTION OF SUCH DOCUMENTATION BY LEGAL COUNSEL OF THEIR OWN
CHOICE; (c) THEY UNDERSTAND THE TERMS AND CONSEQUENCES OF THIS NOTE, THE LOAN
AGREEMENT, THE DEED OF TRUST, AND ALL RELATED AGREEMENTS AND DOCUMENTATION AND
THE OBLIGATIONS THEY CREATE; AND (d) THEY ARE FULLY AWARE OF THE LEGAL AND
BINDING EFFECT OF THIS NOTE, THE DEED OF TRUST AND THE OTHER DOCUMENTS
CONTEMPLATED BY OR ENTERED INTO IN CONNECTION WITH THIS NOTE.

                           [Signatures on next page]

                                      -6-
<PAGE>

     IN WITNESS WHEREOF, Borrower has executed this Note as of the day and year
first above written.

     /s/ David H. Bernstein
     ----------------------
     DAVID H. BERNSTEIN

                                      -7-

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