Document:

Q2 2002 10Q Exhibit 10.1

Exhibit 10.1

RATIONAL SOFTWARE CORPORATION

1997 STOCK PLAN

(As Amended in July 2001)

	Purposes of the Plan. The
purposes of this Stock Plan are:

	to attract and retain the best available personnel for
positions of substantial responsibility, 

	to provide additional incentive to Employees, Directors
and Consultants, and 

	to promote the success of the Company's business.

Options granted under the Plan may be Incentive Stock Options
or Nonstatutory Stock Options, as determined by the Administrator at the time of
grant. Stock Purchase Rights may also be granted under the Plan.

	Definitions. As used herein, the following
definitions shall apply:

	"Administrator" means the Board or any of its
Committees as shall be administering the Plan, in accordance with Section 4 of
the Plan.

	"Applicable Laws" means the requirements relating
to the administration of stock option plans under U. S. state corporate laws,
U.S. federal and state securities laws, the Code, any stock exchange or
quotation system on which the Common Stock is listed or quoted and the
applicable laws of any foreign country or jurisdiction where Options or Stock
Purchase Rights are, or will be, granted under the Plan.

	"Board" means the Board of Directors of the
Company.

	"Code" means the Internal Revenue Code of 1986, as
amended.

	"Committee" means a committee of Directors
appointed by the Board in accordance with Section 4 of the Plan.

	"Common Stock" means the common stock of the
Company.

	"Company" means Rational Software Corporation, a
Delaware corporation.

	"Consultant" means any person, including an
advisor, engaged by the Company or a Parent or Subsidiary to render services to
such entity.

	"Director" means a member of the Board.

	"Disability" means total and permanent disability
as defined in Section 22(e)(3) of the Code.

	"Employee" means any person, including Officers
and Directors, employed by the Company or any Parent or Subsidiary of the
Company. A Service Provider shall not cease to be an Employee in the case of
(i) any leave of absence approved by the Company or (ii) transfers
between locations of the Company or between the Company, its Parent, any
Subsidiary, or any successor. For purposes of Incentive Stock Options, no such
leave may exceed ninety days, unless reemployment upon expiration of such leave
is guaranteed by statute or contract. If reemployment upon expiration of a leave
of absence approved by the Company is not so guaranteed, on the 181st day of
such leave any Incentive Stock Option held by the Optionee shall cease to be
treated as an Incentive Stock Option and shall be treated for tax purposes as a
Nonstatutory Stock Option. Neither service as a Director nor payment of a
director's fee by the Company shall be sufficient to constitute "employment" by
the Company.

	"Exchange Act" means the Securities Exchange Act
of 1934, as amended.

	"Fair Market Value" means, as of any date, the
value of Common Stock determined as follows:

	If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;

	If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other
source as the Administrator deems reliable; or 

	In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the
Administrator.

	"Incentive Stock Option" means an Option intended
to qualify as an incentive stock option within the meaning of Section 422
of the Code and the regulations promulgated thereunder.

	"Nonstatutory Stock Option" means an Option not
intended to qualify as an Incentive Stock Option.

	"Notice of Grant" means a written or electronic
notice evidencing certain terms and conditions of an individual Option or Stock
Purchase Right grant. The Notice of Grant is part of the Option
Agreement.

	"Officer" means a person who is an officer of the
Company within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.

	"Option" means a stock option granted pursuant to
the Plan.

	"Option Agreement" means an agreement between the
Company and an Optionee evidencing the terms and conditions of an individual
Option grant. The Option Agreement is subject to the terms and conditions of the
Plan.

	"Option Exchange Program" means a program whereby
outstanding Options are surrendered in exchange for Options with a lower
exercise price.

	"Optioned Stock" means the Common Stock
subject to an Option or Stock Purchase Right.

	"Optionee" means the holder of an outstanding
Option or Stock Purchase Right granted under the Plan.

	"Parent" means a "parent corporation," whether now
or hereafter existing, as defined in Section 424(e) of the Code.

	"Plan" means this 1997 Stock Option Plan.

	"Restricted Stock" means shares of Common Stock
acquired pursuant to a grant of Stock Purchase Rights under Section 11 of
the Plan.

	"Restricted Stock Purchase Agreement" means a
written agreement between the Company and the Optionee evidencing the terms and
restrictions applying to stock purchased under a Stock Purchase Right. The
Restricted Stock Purchase Agreement is subject to the terms and conditions of
the Plan and the Notice of Grant.

	"Rule 16b-3" means Rule 16b-3 of the Exchange Act
or any successor to Rule 16b-3, as in effect when discretion is being exercised
with respect to the Plan.

	"Section 16(b) " means Section 16(b) of the
Exchange Act.

	"Service Provider" means an Employee, Director or
Consultant.

	"Share" means a share of the Common Stock, as
adjusted in accordance with Section 13 of the Plan.

	"Stock Purchase Right" means the right to purchase
Common Stock pursuant to Section 11 of the Plan, as evidenced by a Notice of
Grant.

	"Subsidiary" means a "subsidiary corporation",
whether now or hereafter existing, as defined in Section 424(f) of the
Code.

	Stock Subject to the Plan.
Subject to the provisions of Section 13 of the Plan, the maximum aggregate
number of Shares which may be optioned and sold under the Plan is 60,145,000
Shares, plus any unused Shares and any forfeited Shares. For purposes of this
Section 3, (i) "unused Shares" means Shares reserved for issuance but not
covered by grants under the 1994 Stock Option Plan (the "1994 Plan") (which 1994
Plan shall be terminated as of the effective date of the Plan), and (ii)
"forfeited Shares" means any Shares covered by grants under the 1994 Plan that
are not issued to participants or that are returned to the Company upon
forfeiture of such Shares.

If an Option or Stock Purchase Right expires or becomes
unexercisable without having been exercised in full, or is surrendered pursuant
to an Option Exchange Program, the unpurchased Shares which were subject thereto
shall become available for future grant or sale under the Plan (unless the Plan
has terminated); provided, however, that Shares that have actually been
issued under the Plan, whether upon exercise of an Option or Right, shall not be
returned to the Plan and shall not become available for future distribution
under the Plan, except that if Shares of Restricted Stock are repurchased by the
Company at their original purchase price, such Shares shall become available for
future grant under the Plan. 

	Administration of the Plan.

	Procedure.

	Multiple Administrative Bodies. The Plan may be
administered by different Committees with respect to different groups of Service
Providers.

	Section 162(m). To the extent that the
Administrator determines it to be desirable to qualify Options granted hereunder
as "performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.

	Rule 16b-3. To the extent desirable to qualify
transactions hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder shall be structured to satisfy the requirements for exemption under
Rule 16b-3.

	Other Administration. Other than as provided
above, the Plan shall be administered by (A) the Board or (B) a
Committee, which committee shall be constituted to satisfy Applicable Laws.

	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:

	to determine the Fair Market Value;

	to select the Service Providers to whom Options and Stock
Purchase Rights may be granted hereunder;

	to determine the number of shares of Common Stock to be
covered by each Option and Stock Purchase Right granted hereunder;

	to approve forms of agreement for use under the
Plan;

	to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any Option or Stock Purchase Right granted
hereunder. Such terms and conditions include, but are not limited to, the
exercise price, the time or times when Options or Stock Purchase Rights may be
exercised (which may be based on performance criteria), any vesting acceleration
or waiver of forfeiture restrictions, and any restriction or limitation
regarding any Option or Stock Purchase Right of the shares of Common Stock
relating thereto, based in each case on such factors as the Administrator, in
its sole discretion, shall determine;

	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;

	to institute an Option Exchange Program;

	to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan;

	to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;

	to modify or amend each Option or Stock Purchase Right
(subject to Section 15(c) of the Plan), including the discretionary authority to
extend the post-termination exercisability period of Options longer than is
otherwise provided for in the Plan;

	to allow Optionees to satisfy withholding tax obligations
by electing to have the Company withhold from the Shares to be issued upon
exercise of an Option or Stock Purchase Right that number of Shares having a
Fair Market Value equal to the amount required to be withheld. The Fair Market
Value of the Shares to be withheld shall be determined on the date that the
amount of tax to be withheld is to be determined. All elections by an Optionee
to have Shares withheld for this purpose shall be made in such form and under
such conditions as the Administrator may deem necessary or advisable;

	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;

	to make all other determinations deemed necessary or
advisable for administering the Plan.

	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.

	Eligibility. Nonstatutory Stock Options and Stock
Purchase Rights may be granted to Service Providers. Incentive Stock Options may
be granted only to Employees.

	Limitations.

	Each Option shall be designated in the Option Agreement
as either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the
order in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is
granted.

	Neither the Plan nor any Option or Stock Purchase Right
shall confer upon an Optionee any right with respect to continuing the
Optionee's relationship as a Service Provider with the Company, nor shall they
interfere in any way with the Optionee's right or the Company's right to
terminate such relationship at any time, with or without cause.

	The following limitations shall apply to grants of
Options:

	No Service Provider shall be granted, in any fiscal year
of the Company, Options to purchase more than 1,000,000 Shares (as appropriately
adjusted pursuant to Section 13(a) ("Changes in Capitalization")
hereof.

	In connection with his or her initial service, a Service
Provider may be granted Options to purchase up to an additional 500,000 Shares
which shall not count against the limit set forth in subsection (i) above (as
appropriately adjusted pursuant to Section 13(a) ("Changes in Capitalization")
hereof.

	The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 13. 

	If an Option is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 13), the cancelled Option will be counted against the
limits set forth in subsections (i) and (ii) above. For this purpose, if the
exercise price of an Option is reduced, the transaction will be treated as a
cancellation of the Option and the grant of a new Option.

	Term of Plan. Subject to Section 19 of
the Plan, the Plan shall become effective upon its adoption by the Board. It
shall continue in effect for a term of ten (10) years unless terminated earlier
under Section 15 of the Plan.

	Term of Option. The term of each Option shall be
stated in the Option Agreement. In the case of an Incentive Stock Option, the
term shall be ten (10) years from the date of grant or such shorter term as
may be provided in the Option Agreement. Moreover, in the case of an Incentive
Stock Option granted to an Optionee who, at the time the Incentive Stock Option
is granted, owns stock representing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any Parent or
Subsidiary, the term of the Incentive Stock Option shall be five (5) years from
the date of grant or such shorter term as may be provided in the Option
Agreement.

	Option Exercise Price and Consideration.

	Exercise Price. The per share exercise price for
the Shares to be issued pursuant to exercise of an Option shall be determined by
the Administrator, subject to the following:

	In the case of an Incentive Stock Option

(A) granted to an Employee who, at the time the Incentive
Stock Option is granted, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.

(B) granted to any Employee other than an Employee described
in paragraph (A) immediately above, the per Share exercise price shall be no
less than 100% of the Fair Market Value per Share on the date of grant.

	In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.

	Notwithstanding the foregoing, Options may be granted
with a per Share exercise price of less than 100% of the Fair Market Value per
Share on the date of grant pursuant to a merger or other corporate
transaction.

	Waiting Period and Exercise Dates. At the time an
Option is granted, the Administrator shall fix the period within which the
Option may be exercised and shall determine any conditions which must be
satisfied before the Option may be exercised. 

	Form of Consideration. The Administrator shall
determine the acceptable form of consideration for exercising an Option,
including the method of payment. In the case of an Incentive Stock Option, the
Administrator shall determine the acceptable form of consideration at the time
of grant. Such consideration may consist entirely of:

	cash;

	check;

	promissory note;

	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;

	consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the
Plan;

	a reduction in the amount of any Company liability to the
Optionee, including any liability attributable to the Optionee's participation
in any Company-sponsored deferred compensation program or arrangement;

	any combination of the foregoing methods of payment;
or

	such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws.

	Exercise of Option.

	Procedure for Exercise; Rights as a
Shareholder. Any Option granted hereunder shall be exercisable according to
the terms of the Plan and at such times and under such conditions as determined
by the Administrator and set forth in the Option Agreement. Unless the
Administrator provides otherwise, vesting of Options granted hereunder shall be
tolled during any unpaid leave of absence. An Option may not be exercised for a
fraction of a Share.

An Option shall be deemed exercised when the Company
receives: (i) written or electronic notice of exercise (in accordance with the
Option Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 13 of the Plan.

Exercising an Option in any manner shall decrease the number
of Shares thereafter available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.

	Termination of Relationship as a Service
Provider. If an Optionee ceases to be a Service Provider, other than upon
the Optionee's death or Disability, the Optionee may exercise his or her Option
within such period of time as is specified in the Option Agreement to the extent
that the Option is vested on the date of termination (but in no event later than
the expiration of the term of such Option as set forth in the Option Agreement).
In the absence of a specified time in the Option Agreement, the Option shall
remain exercisable for three (3) months following the Optionee's termination.
If, on the date of termination, the Optionee is not vested as to his or her
entire Option, the Shares covered by the unvested portion of the Option shall
revert to the Plan. If, after termination, the Optionee does not exercise his or
her Option within the time specified by the Administrator, the Option shall
terminate, and the Shares covered by such Option shall revert to the
Plan.

	Disability of Optionee. If an Optionee ceases to
be a Service Provider as a result of the Optionee's Disability, the Optionee may
exercise his or her Option within such period of time as is specified in the
Option Agreement to the extent the Option is vested on the date of termination
(but in no event later than the expiration of the term of such Option as set
forth in the Option Agreement). In the absence of a specified time in the Option
Agreement, the Option shall remain exercisable for twelve (12) months following
the Optionee's termination. If, on the date of termination, the Optionee is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified herein,
the Option shall terminate, and the Shares covered by such Option shall revert
to the Plan.

	Death of Optionee. If an Optionee dies
while a Service Provider, the Option may be exercised within such period of time
as is specified in the Option Agreement (but in no event later than the
expiration of the term of such Option as set forth in the Notice of Grant), by
the Optionee's estate or by a person who acquires the right to exercise the
Option by bequest or inheritance, but only to the extent that the Option is
vested on the date of death. In the absence of a specified time in the Option
Agreement, the Option shall remain exercisable for twelve (12) months following
the Optionee's termination. If, at the time of death, the Optionee is not vested
as to his or her entire Option, the Shares covered by the unvested portion of
the Option shall immediately revert to the Plan. The Option may be exercised by
the executor or administrator of the Optionee's estate or, if none, by the
person(s) entitled to exercise the Option under the Optionee's will or the laws
of descent or distribution. If the Option is not so exercised within the time
specified herein, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.

	Buyout Provisions. The Administrator may at any
time offer to buy out for a payment in cash or Shares an Option previously
granted based on such terms and conditions as the Administrator shall establish
and communicate to the Optionee at the time that such offer is
made.

	Stock Purchase Rights.

	Rights to Purchase. Stock Purchase Rights may be
issued either alone, in addition to, or in tandem with other awards granted
under the Plan and/or cash awards made outside of the Plan. After the
Administrator determines that it will offer Stock Purchase Rights under the
Plan, it shall advise the offeree in writing or electronically, by means of a
Notice of Grant, of the terms, conditions and restrictions related to the offer,
including the number of Shares that the offeree shall be entitled to purchase,
the price to be paid, and the time within which the offeree must accept such
offer. The offer shall be accepted by execution of a Restricted Stock Purchase
Agreement in the form determined by the Administrator.

	Repurchase Option. Unless the Administrator
determines otherwise, the Restricted Stock Purchase Agreement shall grant the
Company a repurchase option exercisable upon the voluntary or involuntary
termination of the purchaser's service with the Company for any reason
(including death or Disability). The purchase price for Shares repurchased
pursuant to the Restricted Stock Purchase Agreement shall be the original price
paid by the purchaser and may be paid by cancellation of any indebtedness of the
purchaser to the Company. The repurchase option shall lapse at a rate determined
by the Administrator.

	Other Provisions. The Restricted Stock Purchase
Agreement shall contain such other terms, provisions and conditions not
inconsistent with the Plan as may be determined by the Administrator in its sole
discretion. 

	Rights as a Shareholder. Once the Stock Purchase
Right is exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 13
of the Plan.

	Non-Transferability of Options and Stock
Purchase Rights. Unless determined otherwise by the Administrator, an Option
or Stock Purchase Right may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee. If the Administrator makes an Option or Stock
Purchase Right transferable, such Option or Stock Purchase Right shall contain
such additional terms and conditions as the Administrator deems
appropriate.

	Adjustments Upon Changes in Capitalization,
Dissolution, Merger or Asset Sale. 

	Changes in Capitalization. Subject to any required
action by the shareholders of the Company, the number of shares of Common Stock
covered by each outstanding Option and Stock Purchase Right, and the number of
shares of Common Stock which have been authorized for issuance under the Plan
but as to which no Options or Stock Purchase Rights have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option or Stock Purchase Right, as well as the price per share of Common Stock
covered by each such outstanding Option or Stock Purchase Right and the
limitations on issuance as set forth in Sections 6(c)(i) and 6(c)(ii) hereof,
shall be proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split, reverse stock split,
stock dividend, combination or reclassification of the Common Stock, or any
other increase or decrease in the number of issued shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration." Such adjustment shall
be made by the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an Option or Stock Purchase Right.

	Dissolution or Liquidation. In the event of the
proposed dissolution or liquidation of the Company, the Administrator shall
notify each Optionee as soon as practicable prior to the effective date of such
proposed transaction. The Administrator in its discretion may provide for an
Optionee to have the right to exercise his or her Option until ten (10) days
prior to such transaction as to all of the Optioned Stock covered thereby,
including Shares as to which the Option would not otherwise be exercisable. In
addition, the Administrator may provide that any Company repurchase option
applicable to any Shares purchased upon exercise of an Option or Stock Purchase
Right shall lapse as to all such Shares, provided the proposed dissolution or
liquidation takes place at the time and in the manner contemplated. To the
extent it has not been previously exercised, an Option or Stock Purchase Right
will terminate immediately prior to the consummation of such proposed
action.

	Merger or Asset Sale. In the event of a merger of
the Company with or into another corporation, or the sale of substantially all
of the assets of the Company, each outstanding Option and Stock Purchase Right
shall be assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the event
that the successor corporation refuses to assume or substitute for the Option or
Stock Purchase Right, the Optionee shall fully vest in and have the right to
exercise the Option or Stock Purchase Right as to all of the Optioned Stock,
including Shares as to which it would not otherwise be vested or exercisable. If
an Option or Stock Purchase Right becomes fully vested and exercisable in lieu
of assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee in writing or electronically that the
Option or Stock Purchase Right shall be fully vested and exercisable for a
period of fifteen (15) days from the date of such notice, and the Option or
Stock Purchase Right shall terminate upon the expiration of such period. For the
purposes of this paragraph, the Option or Stock Purchase Right shall be
considered assumed if, following the merger or sale of assets, the option or
right confers the right to purchase or receive, for each Share of Optioned Stock
subject to the Option or Stock Purchase Right immediately prior to the merger or
sale of assets, the consideration (whether stock, cash, or other securities or
property) received in the merger or sale of assets by holders of Common Stock
for each Share held on the effective date of the transaction (and if holders
were offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding Shares); provided, however, that if
such consideration received in the merger or sale of assets is not solely common
stock of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Option or Stock Purchase Right, for each Share
of Optioned Stock subject to the Option or Stock Purchase Right, to be solely
common stock of the successor corporation or its Parent equal in fair market
value to the per share consideration received by holders of Common Stock in the
merger or sale of assets.

	Date of Grant. The date of grant of an Option or
Stock Purchase Right shall be, for all purposes, the date on which the
Administrator makes the determination granting such Option or Stock Purchase
Right, or such other later date as is determined by the Administrator. Notice of
the determination shall be provided to each Optionee within a reasonable time
after the date of such grant.

	Amendment and Termination of the Plan.

	Amendment and Termination. The Board may at any
time amend, alter, suspend or terminate the Plan. 

	Shareholder Approval. The Company shall obtain
shareholder approval of any Plan amendment to the extent necessary and desirable
to comply with Applicable Laws. 

	Effect of Amendment or Termination.
No amendment, alteration, suspension or termination of the Plan shall impair the
rights of any Optionee, unless mutually agreed otherwise between the Optionee
and the Administrator, which agreement must be in writing and signed by the
Optionee and the Company. Termination of the Plan shall not affect the
Administrator's ability to exercise the powers granted to it hereunder with
respect to Options granted under the Plan prior to the date of such
termination.

	Conditions Upon Issuance of Shares.

	Legal Compliance. Shares shall not be issued
pursuant to the exercise of an Option or Stock Purchase Right unless the
exercise of such Option or Stock Purchase Right and the issuance and delivery of
such Shares shall comply with Applicable Laws and shall be further subject to
the approval of counsel for the Company with respect to such
compliance.

	Investment Representations. As a condition to the
exercise of an Option or Stock Purchase Right, the Company may require the
person exercising such Option or Stock Purchase Right to represent and warrant
at the time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the Company, such a representation is
required.

	Inability to Obtain Authority. The inability of
the Company to obtain authority from any regulatory body having jurisdiction,
which authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.

	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.

	Shareholder Approval. The Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months after the
date the Plan is adopted. Such shareholder approval shall be obtained in the
manner and to the degree required under Applicable Laws. 

 APPENDIX A

Terms and Conditions for French Option Grants

The following terms and conditions shall apply in the
case of Option grants to French residents.

	Definitions. As used herein, the
following definitions shall apply:

	"Applicable Laws" means the legal requirements
relating to the administration of stock option plans under French corporate,
securities, and tax laws.

	"Disability" means total and permanent disability,
as defined under Applicable Laws.

	"Employee" means any person, including officers
and Directors, employed by the Company or any Parent or Subsidiary of the
Company, who does not own more than 10% of the voting power of all classes of
stock of the Company, or any Parent or Subsidiary of the Company, who is a
resident of the Republic of France.

	"Fair Market Value" means, as of any date, the
dollar value of Common Stock determined as follows:

	If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market of the Nasdaq Stock Market, its Fair Market Value shall be the
average quotation price for the last 20 days preceding the date of determination
for such stock (or the average closing bid for such 20 day period, if no sales
were reported) as quoted on such exchange or system and reported in The Wall
Street Journal or such other source as the Administrator deems
reliable;

	If the Common Stock is quoted on the Nasdaq Stock market
(but not on the Nasdaq National Market thereof) or regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean between the high bid and low asked prices for the
Common Stock for the last 20 days preceding the date of determination; or

	In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.

	Eligibility. Options granted pursuant to this
Appendix A may be granted only to Employees; provided, however, that the
Président Directeur Général, the Directeur
Général and other directors who are also Employees of a
Subsidiary may be granted Options hereunder. 

	Stock Subject to the Plan. The total number of
Options outstanding at any time may at no time exceed one-third of the Company's
capital stock. 

	Term of Plan. Options may be granted under this
Appendix A from the date of the adoption of the Plan by the Board. It shall
continue in effect until the date five years from the date of its original
adoption by the Board, unless terminated earlier under Section 15 of the
Plan.

	Limitations Upon Granting of Options.

	Declaration of Dividend; Capital Increase. Options
cannot be granted during the 20 daily sessions from (i) the detachment of a
coupon giving rise to a dividend or (ii) a capital increase.

	Non-Public Information. Notwithstanding any other
provision of the Plan, Options cannot be granted:

	during the period corresponding to ten (10) stock
exchange sessions preceding and following the date on which the consolidated
accounts, or failing this the annual accounts, are made public; 

	during the period between the date on which the Company's
corporate bodies become aware of information which, if made public, could have a
material impact on the price of the Company's Shares, and the date ten (10)
stock exchange sessions after such information is made public.

	Option Price. The exercise price for the Shares to
be issued pursuant to exercise of an Option shall be determined by the
Administrator upon the date of grant of the Option and stated in the Option
Agreement, but in no event shall be lower than one-hundred percent (100%) of the
Fair Market Value on the date the Option is granted or of the average purchase price of these Shares by the
Company. The Option price is fixed and
shall be adjusted only upon the occurrence of the events specified under July
24, 1966 corporate law (section L 225-181) in accordance with Applicable
Laws, which such events include a capital increase in cash, a capital increase
with a distribution of Shares following the capitalization of premiums or
retained earnings, the issuance of bonds giving the right to the acquisition of
Shares, the distribution of retained earnings either in cash or in Shares held
by the Company, a capital reduction due to losses and the issuance of non-voting
preferred stock.

	Exercise of Option; Restriction on Sale.

	Vesting Schedule. Any Option granted hereunder
shall be exercisable according to the terms of the Plan and at such times and
under such conditions as determined by the Administrator and set forth in the
Option Agreement. 

	Restriction on Sale. The Administrator shall
determine whether or not the Shares subject to an Option may be transferred,
assigned or hypothecated in any manner otherwise than by will or by the laws of
descent or distribution after an Option is exercised; provided, however, that
the duration of any such restriction on sale shall only be for a period of time
permitted by Applicable Laws; provided, further, that any such restriction
placed on the sale of Shares following the exercise of an Option shall
automatically be adjusted to conform with any changes to the holding period
required for favorable tax and social security treatment under Applicable Laws
to the extent permitted by Applicable Laws.

	Termination of Employment Relationship. In the
event that an Optionee's status as an Employee terminates (other than upon the
Optionee's death or Disability), the Optionee may exercise his or her Option
within thirty (30) days of the date of such termination, but only to the extent
that the Optionee was entitled to exercise it at the date of termination and in
no event later than the expiration of the term of such Option as set forth in
the Option Agreement.

	Disability of Optionee. In the event that an
Optionee's status as an Employee terminates as a result of the Optionee's
Disability, the Optionee may exercise his or her Option at any time within six
(6) months from the date of such termination, but only to the extent that the
Optionee was entitled to exercise it at the date of such termination and in no
event later than the expiration of the term of such Option as set forth in the
Option Agreement.

	Death of Optionee. In the event of the death of an
Optionee while an Employee, the Option may be exercised at any time within six
(6) months following the date of death 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 that the Optionee was entitled to exercise the Option at the
date of death and in no event later than the expiration of the term of such
Option as set forth in the Option Agreement.Q2 2002 10Q Exhibit 10.2

Exhibit 10.2

RATIONAL SOFTWARE CORPORATION

1997 SUPPLEMENTAL STOCK PLAN

(As Amended in July 2001)

1.Purposes of the Plan. The
purposes of this Supplemental Stock Plan are:

	to attract and retain the best available personnel for
positions of substantial responsibility, 

	to provide additional incentive to Employees, Directors
and Consultants, and 

	to promote the success of the Company's business.  

Options granted under the Plan will be Nonstatutory Stock
Options. 

2.Definitions. As used herein, the following
definitions shall apply:

(a)"Administrator" means the Board or any of its
Committees as shall be administering the Plan, in accordance with Section 4 of
the Plan.

(b)"Applicable Laws" means the requirements
relating to the administration of stock option plans under U. S. state corporate
laws, U.S. federal and state securities laws, the Code, any stock exchange or
quotation system on which the Common Stock is listed or quoted and the
applicable laws of any foreign country or jurisdiction where Options are, or
will be, granted under the Plan.

(c)"Board" means the Board of Directors of the
Company.

(d)"Code" means the Internal Revenue Code of 1986,
as amended.

(e)"Committee" means a committee of Directors
appointed by the Board in accordance with Section 4 of the Plan.

(f)"Common Stock" means the Common Stock of the
Company.

(g)"Company" means Rational Software Corporation,
a Delaware corporation.

(h)"Consultant" means any person, including an
advisor, engaged by the Company or a Parent or Subsidiary to render services to
such entity.

(i)"Director" means a member of the Board.

(j)"Disability" means total and permanent
disability as defined in Section 22(e)(3) of the Code.

(k)"Employee" means any person, excluding any
Officer or Director, employed by the Company or any Parent or Subsidiary of the
Company. An Employee shall not cease to be a Service Provider (as defined
herein) in the case of (i) any leave of absence approved by the Company or
(ii) transfers between locations of the Company or between the Company, its
Parent, any Subsidiary, or any successor. 

(l)"Exchange Act" means the Securities Exchange
Act of 1934, as amended.

(m)"Fair Market Value" means, as of any date, the
value of Common Stock determined as follows:

(i)If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;

(ii)If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the last market trading day prior
to the day of determination, as reported in The Wall Street Journal or
such other source as the Administrator deems reliable;

(iii)In the absence of an established market for the
Common Stock, the Fair Market Value shall be determined in good faith by the
Administrator.

(n)"Notice of Grant" means a written or electronic
notice evidencing certain terms and conditions of an individual Option grant.
The Notice of Grant is part of the Option Agreement.

(o)"Officer" means a person who is an officer of
the Company within the meaning of Section 16 of the Exchange Act and the rules
and regulations promulgated thereunder.

(p)"Option" means a nonstatutory stock option
granted pursuant to the Plan, that is not intended to qualify as an incentive
stock option within the meaning of Section 422 of the Code and the regulations
promulgated thereunder.

(q)"Option Agreement" means an agreement between
the Company and an Optionee evidencing the terms and conditions of an individual
Option grant. The Option Agreement is subject to the terms and conditions of the
Plan.

(r)"Option Exchange Program" means a program
whereby outstanding options are surrendered in exchange for options with a lower
exercise price.

(s)"Optioned Stock" means the Common Stock
subject to an Option.

(t)"Optionee" means the holder of an outstanding
Option granted under the Plan.

(u)"Parent" means a "parent corporation," whether
now or hereafter existing, as defined in Section 424(e) of the Code.

(v)"Plan" means this 1997 Supplemental Stock
Plan.

(w)"Service Provider" means an Employee or
Consultant.

(x)"Share" means a share of the Common Stock, as
adjusted in accordance with Section 12 of the Plan.

(y)"Subsidiary" means a "subsidiary corporation",
whether now or hereafter existing, as defined in Section 424(f) of the
Code.

3.Stock Subject to the Plan.
Subject to the provisions of Section 12 of the Plan, the maximum aggregate
number of Shares which may be optioned and sold under the Plan is fifteen
million and seven hundred thousand (15,700,000) Shares. The Shares may be
authorized, but unissued, or reacquired Common Stock. 

If an Option expires or becomes unexercisable without having
been exercised in full, or is surrendered pursuant to an Option Exchange
Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated).

4.Administration of the Plan.

(a)The Plan shall be administered by (A) the Board
or (B) a Committee, which committee shall be constituted to satisfy
Applicable Laws. 

(b)Powers of the Administrator.
Subject to the provisions of the Plan, and in the case of a Committee, subject
to the specific duties delegated by the Board to such Committee, the
Administrator shall have the authority, in its discretion:

(i)to determine the Fair Market Value of the Common
Stock;

(ii)to select the Service Providers to whom Options may
be granted hereunder;

(iii)to determine whether and to what extent Options are
granted hereunder;

(iv)to determine the number of shares of Common Stock to
be covered by each Option 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 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 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 to the
then current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option shall have declined since the date the Option was
granted;

(viii)to institute an Option Exchange Program;

(ix)to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan;

(x)to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;

(xi)to modify or amend each Option (subject to Section
14(b) of the Plan), including the discretionary authority to extend the post-
termination exercisability period of Options longer than is otherwise provided
for in the Plan;

(xii)to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of an Option or previously
granted by the Administrator;

(xiii)to determine the terms and restrictions applicable
to Options; 

(xiv)to allow Optionees to satisfy withholding tax
obligations by electing to have the Company withhold from the Shares to be
issued upon exercise of an Option or Stock Purchase Right that number of Shares
having a Fair Market Value equal to the amount required to be withheld. The Fair
Market Value of the Shares to be withheld shall be determined on the date that
the amount of tax to be withheld is to be determined. All elections by an
Optionee to have Shares withheld for this purpose shall be made in such form and
under such conditions as the Administrator may deem necessary or advisable;
and

(xv)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.

5.Eligibility. Options hereunder may be granted
only to Service Providers. Options may not be granted to Officers or
Directors.

6.Limitation. Neither the Plan nor any Option
shall confer upon an Optionee any right with respect to continuing the
Optionee's relationship as a Service Provider with the Company, nor shall they
interfere in any way with the Optionee's right or the Company's right to
terminate such relationship at any time, with or without cause.

7.Term of Plan. The Plan shall become
effective upon its adoption by the Board. It shall continue in effect for ten
(10) years, unless sooner terminated under Section 14 of the Plan. 

8.Term of Option. The term of each Option shall be
stated in the Option Agreement. 

9.Option Exercise Price and Consideration.

(a)Exercise Price. The per share exercise price
for the Shares to be issued pursuant to exercise of an Option shall be
determined by the Administrator.

(b)Waiting Period and Exercise Dates. At the time
an Option is granted, the Administrator shall fix the period within which the
Option may be exercised and shall determine any conditions which must be
satisfied before the Option may be exercised.

(c)Form of Consideration. The Administrator shall
determine the acceptable form of consideration for exercising an Option,
including the method of payment. Such consideration may consist entirely of:

(i)cash;

(ii)check;

(iii)promissory note;

(iv)other Shares which (A) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six months on the date of surrender, and (B) have a Fair Market Value
on the date of surrender equal to the aggregate exercise price of the Shares as
to which said Option shall be exercised;

(v)consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan;

(vi)a reduction in the amount of any Company liability to
the Optionee, including any liability attributable to the Optionee's
participation in any Company-sponsored deferred compensation program or
arrangement;

(vii)such other consideration and method of payment for
the issuance of Shares to the extent permitted by Applicable Laws; or

(viii)any combination of the foregoing methods of
payment.

10.Exercise of Option.

(a)Procedure for Exercise; Rights as a
Shareholder. Any Option granted hereunder shall be exercisable according to
the terms of the Plan and at such times and under such conditions as determined
by the Administrator and set forth in the Option Agreement. An Option may not be
exercised for a fraction of a Share.

An Option shall be deemed exercised when the Company
receives: (I) written or electronic notice of exercise (in accordance with the
Option Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 12 of the Plan.

Exercising an Option in any manner shall decrease the number
of Shares thereafter available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.

(b)Termination of Relationship as a Service
Provider. If an Optionee ceases to be a Service Provider, other than upon
the Optionee's death or Disability, the Optionee may exercise his or her Option,
but only within such period of time as is specified in the Option Agreement, and
only to the extent that the Option is vested on the date of termination (but in
no event later than the expiration of the term of such Option as set forth in
the Option Agreement). In the absence of a specified time in the Option
Agreement, the Option shall remain exercisable for three (3) months following
the Optionee's termination. If, on the date of termination, the Optionee is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified by the
Administrator, the Option shall terminate, and the Shares covered by such Option
shall revert to the Plan.

(c)Disability of Optionee. If an Optionee ceases
to be a Service Provider as a result of the Optionee's Disability, the Optionee
may exercise his or her Option within such period of time as is specified in the
Option Agreement, to the extent the Option is vested on the date of termination
(but in no event later than the expiration of the term of such Option as set
forth in the Option Agreement). In the absence of a specified time in the Option
Agreement, the Option shall remain exercisable for twelve (12) months following
the Optionee's termination. If, on the date of termination, the Optionee is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified herein,
the Option shall terminate, and the Shares covered by such Option shall revert
to the Plan.

(d)Death of Optionee. If an Optionee
dies while a Service Provider, the Option may be exercised within such period of
time as is specified in the Option Agreement (but in no event later than the
expiration of the term of such Option as set forth in the Notice of Grant), by
the Optionee's estate or by a person who acquires the right to exercise the
Option by bequest or inheritance, but only to the extent that the Option is
vested on the date of death. In the absence of a specified time in the Option
Agreement, the Option shall remain exercisable for twelve (12) months following
the Optionee's termination. If, at the time of death, the Optionee is not vested
as to his or her entire Option, the Shares covered by the unvested portion of
the Option shall immediately revert to the Plan. The Option may be exercised by
the executor or administrator of the Optionee's estate or, if none, by the
person(s) entitled to exercise the Option under the Optionee's will or the laws
of descent or distribution. If the Option is not so exercised within the time
specified herein, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.

(e)Buyout Provisions. The Administrator may at any
time offer to buy out for a payment in cash or Shares, an Option previously
granted based on such terms and conditions as the Administrator shall establish
and communicate to the Optionee at the time that such offer is made.

11.Non-Transferability of Options .
Unless determined otherwise by the Administrator, an 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. If the Administrator
makes an Option transferable, such Option shall contain such additional terms
and conditions as the Administrator deems appropriate.

12.Adjustments Upon Changes in Capitalization,
Dissolution, Merger or Asset Sale. 

(a)Changes in Capitalization. Subject to any
required action by the shareholders of the Company, the number of shares of
Common Stock covered by each outstanding Option, and 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, the Administrator shall
notify each Optionee as soon as practicable prior to the effective date of such
proposed transaction. The Administrator in its discretion may provide for an
Optionee to have the right to exercise his or her Option until ten (10) days
prior to such transaction as to all of the Optioned Stock covered thereby,
including Shares as to which the Option would not otherwise be exercisable. In
addition, the Administrator may provide that any Company repurchase option
applicable to any Shares purchased upon exercise of an Option shall lapse as to
all such Shares, provided the proposed dissolution or liquidation takes place at
the time and in the manner contemplated. To the extent it has not been
previously exercised, an Option will terminate immediately prior to the
consummation of such proposed action.

(c)Merger or Asset Sale. In the event of a merger
of the Company with or into another corporation, or the sale of substantially
all of the assets of the Company, each outstanding Option shall be assumed or an
equivalent option or right substituted by the successor corporation or a Parent
or Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the Option, the Optionee shall
fully vest in and have the right to exercise the Option as to all of the
Optioned Stock, including Shares as to which it would not otherwise be vested or
exercisable. If an Option becomes fully vested and exercisable in lieu of
assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee in writing or electronically that the
Option shall be fully vested and 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 or
right confers the right to purchase or receive, for each Share of Optioned
Stock, immediately prior to the merger or sale of assets, the consideration
(whether stock, cash, or other securities or property) received in the merger or
sale of assets by holders of Common Stock for each Share held on the effective
date of the transaction (and if holders were offered a choice of consideration,
the type of consideration chosen by the holders of a majority of the outstanding
Shares); provided, however, that if such consideration received in the merger or
sale of assets is not solely common stock of the successor corporation or its
Parent, the Administrator may, with the consent of the successor corporation,
provide for the consideration to be received upon the exercise of the Option,
for each Share of Optioned Stock 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.

13.Date of Grant. The date of grant of an Option
shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option, or such other later date as is determined by
the Administrator. Notice of the determination shall be provided to each
Optionee within a reasonable time after the date of such grant.

14.Amendment and Termination of the
Plan.

(a)Amendment and Termination. The Board may at any
time amend, alter, suspend or terminate the Plan. 

(b)Effect of Amendment or Termination
. No amendment, alteration, suspension or termination of the Plan shall
impair the rights of any Optionee, unless mutually agreed otherwise between the
Optionee and the Administrator, which agreement must be in writing and signed by
the Optionee and the Company. Termination of the Plan shall not affect the
Administrator's ability to exercise the powers granted to it hereunder with
respect to options granted under the Plan prior to the date of such
termination.

15.Conditions Upon Issuance of Shares
. 

(a)Legal Compliance. 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 shall comply with Applicable Laws and shall
be further subject to the approval of counsel for the Company with respect to
such compliance.

(b)Investment Representations. As a condition to
the exercise of an Option 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.

16.Inability to Obtain Authority. The inability of
the Company to obtain authority from any regulatory body having jurisdiction,
which authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.

17.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.

APPENDIX A

Terms and Conditions for French Option Grants

The following terms and conditions shall apply in the
case of Option grants to French residents.

	Definitions. As used herein, the following
definitions shall apply:

	"Applicable Laws" means the legal requirements
relating to the administration of stock option plans under French corporate,
securities, and tax laws.

	"Disability" means total and permanent disability,
as defined under Applicable Laws.

	"Employee" means any person, excluding Officers
and Directors, employed by the Company or any Parent or Subsidiary of the
Company, who does not own more than 10% of the voting power of all classes of
stock of the Company, or any Parent or Subsidiary of the Company, who is a
resident of the Republic of France.

	"Fair Market Value" means, as of any date, the
dollar value of Common Stock determined as follows:

	If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market of the Nasdaq Stock Market, its Fair Market Value shall be the
average quotation price for the last 20 days preceding the date of determination
for such stock (or the average closing bid for such 20 day period, if no sales
were reported) as quoted on such exchange or system and reported in The Wall
Street Journal or such other source as the Administrator deems
reliable;

	If the Common Stock is quoted on the Nasdaq Stock market
(but not on the Nasdaq National Market thereof) or regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean between the high bid and low asked prices for the
Common Stock for the last 20 days preceding the date of determination; or

	In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.

	Eligibility. Options granted pursuant to this
Appendix A may be granted only to Employees; provided, however, that the
Président Directeur Général, the Directeur
Général and other directors who are also Employees of a
Subsidiary may be granted Options hereunder; provided further that Options shall
not be granted to Officers and Directors. 

	Stock Subject to the Plan. The total number of
Options outstanding at any time may at no time exceed one-third of the Company's
capital stock. 

	Term of Plan. Options may be granted under this
Appendix A from the date of the adoption of the Plan by the Board. It shall
continue in effect until the date five (5) years from the date of its original
adoption by the Board, unless terminated earlier under Section 14 of the
Plan.

	Limitations Upon Granting of Options.

	Declaration of Dividend; Capital Increase. Options
cannot be granted during the 20 daily sessions from (i) the detachment of a
coupon giving rise to a dividend or (ii) a capital increase.

	Non-Public Information. Notwithstanding any other
provision of the Plan, Options cannot be granted:

	during the period corresponding to ten (10) stock
exchange sessions preceding and following the date on which the consolidated
accounts, or failing this the annual accounts, are made public; 

	during the period between the date on which the Company's
corporate bodies become aware of information which, if made public, could have a
material impact on the price of the Company's Shares, and the date ten (10)
stock exchange sessions after such information is made public.

	Option Price. The exercise price for the Shares to
be issued pursuant to exercise of an Option shall be determined by the
Administrator upon the date of grant of the Option and stated in the Option
Agreement, but in no event shall be lower than one-hundred percent (100%) of the
Fair Market Value on the date the Option is granted or of the average purchase price of these Shares by the
Company. The Option price is fixed and
shall be adjusted only upon the occurrence of the events specified under July
24, 1966 corporate law (section L 225-181) in accordance with Applicable
Laws, which such events include a capital increase in cash, a capital increase
with a distribution of Shares following the capitalization of premiums or
retained earnings, the issuance of bonds giving the right to the acquisition of
Shares, the distribution of retained earnings either in cash or in Shares held
by the Company, a capital reduction due to losses and the issuance of non-voting
preferred stock.

	Exercise of Option; Restriction on Sale.

	Vesting Schedule. Any Option granted hereunder
shall be exercisable according to the terms of the Plan and at such times and
under such conditions as determined by the Administrator and set forth in the
Option Agreement. 

	Restriction on Sale. The Administrator shall
determine whether or not the Shares subject to an Option may be transferred,
assigned or hypothecated in any manner otherwise than by will or by the laws of
descent or distribution after an Option is exercised; provided, however, that
the duration of any such restriction on sale shall only be for a period of time
permitted by Applicable Laws; provided, further, that any such restriction
placed on the sale of Shares following the exercise of an Option shall
automatically be adjusted to conform with any changes to the holding period
required for favorable tax and social security treatment under Applicable Laws
to the extent permitted by Applicable Laws.

	Termination of Employment Relationship. In the
event that an Optionee's status as an Employee terminates (other than upon the
Optionee's death or Disability), the Optionee may exercise his or her Option
within thirty (30) days of the date of such termination, but only to the extent
that the Optionee was entitled to exercise it at the date of termination and in
no event later than the expiration of the term of such Option as set forth in
the Option Agreement.

	Disability of Optionee. In the event that an
Optionee's status as an Employee terminates as a result of the Optionee's
Disability, the Optionee may exercise his or her Option at any time within six
(6) months from the date of such termination, but only to the extent that the
Optionee was entitled to exercise it at the date of such termination and in no
event later than the expiration of the term of such Option as set forth in the
Option Agreement.

	Death of Optionee. In the event of the death of an
Optionee while an Employee, the Option may be exercised at any time within six
(6) months following the date of death 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 that the Optionee was entitled to exercise the Option at the
date of death and in no event later than the expiration of the term of such
Option as set forth in the Option Agreement.

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