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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 19, 1999
REGISTRATION NO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------
MSC.SOFTWARE CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
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<S> <C>
DELAWARE 95-2239450
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
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815 COLORADO BOULEVARD
LOS ANGELES, CALIFORNIA 90041
(323) 258-9111
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
------------------------------
LOUIS A. GRECO
CHIEF FINANCIAL OFFICER AND SECRETARY
MSC.SOFTWARE CORPORATION
815 COLORADO BOULEVARD
LOS ANGELES, CALIFORNIA 90041
(323) 258-9111
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent For Service)
------------------------------
WITH COPIES TO:
D. STEPHEN ANTION, ESQ.
O'MELVENY & MYERS LLP
1999 AVENUE OF THE STARS
LOS ANGELES, CALIFORNIA 90067
(310) 553-6700
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
FROM TIME TO TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT, AS
DETERMINED
BY THE SELLING HOLDERS IN LIGHT OF MARKET CONDITIONS.
------------------------------
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------------
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PRICE PER UNIT(1) AGGREGATE OFFERING REGISTRATION FEE
<S> <C> <C> <C> <C>
Warrants to Purchase Shares of Common
Stock............................... 1,400,000 $10.00 $14,000,000 $3,892
Common Stock $.01 Par Value (2)(3).... 1,400,000 $-- $-- $--
</TABLE>
(1) Calculated on the basis of the exercise price of warrants pursuant to
Rule 457(g).
(2) Pursuant to Rule 457(g), no separate registration fee is being paid to
register these securities.
(3) Such number represents the number of shares of common stock of the
Registrant as may be initially issuable upon exercise of the warrants. There
are also being registered hereunder an additional indeterminate number of
shares of common stock of the Registrant as may become issuable upon
exercise of the warrants by reason of adjustment to the number of shares
purchasable upon exercise of the warrants made pursuant to the Warrant
Agreement dated as of June 18, 1999 between the Registrant and ChaseMellon
Shareholder Services, L.L.C., as warrant agent. The common stock includes
rights ("Rights") issuable pursuant to the Rights Agreement dated as of
October 5, 1998 between the Registrant and ChaseMellon Shareholder Services,
L.L.C., as right agent. One Right will be issued with respect to each share
of common stock of the Registrant issued upon exercise of the warrants.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH
SECTION 8(A), MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE
SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
Prospectus Subject to Completion, Dated October 18, 1999
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[LOGO]
</TABLE>
MSC.SOFTWARE CORPORATION
WARRANTS TO PURCHASE
1,400,000 SHARES OF COMMON STOCK
OFFERED BY SELLING HOLDERS
----------------------------------------------------------------------
THE COMPANY:
- We engage in computer-aided engineering, including the development and
marketing of software for use principally by engineers and designers in
industry, research laboratories and universities.
- MSC.Software Corporation
815 Colorado Boulevard
Los Angeles, California 90041
(323) 258-9111
- Our common stock is currently listed on the New York Stock Exchange under
the symbol "MNS."
THE OFFERING:
- The warrants to purchase 1,400,000 shares of common stock are being
offered by selling holders (the "Selling Holders"). We will not receive
any proceeds from the sale of the warrants by the Selling Holders, but
will receive proceeds if the warrants are exercised. See "Selling
Holders."
WARRANTS:
- Exercise Price: $10.00 per share, subject to adjustment as described in
this prospectus.
- Expiration Date: June 18, 2004
- Adjustments: The number of shares purchasable upon exercise of the
warrants and the exercise price per share are subject to adjustment from
time to time as set forth in the warrant agreement and described in this
prospectus.
- In addition to cash, notes of two series issued by us under an Indenture
dated as of June 17, 1999 with Chase Manhattan Bank & Trust Company,
National Association, as trustee, may be tendered to us by the holder of a
warrant in payment of the exercise price (the notes will be valued at par
for this purpose).
- --------------------------------------------------------------------------------
The warrants offered by this prospectus may be sold directly by the Selling
Holders, or through one or more agents, underwriters or dealers. If any agents,
underwriters or dealers are used to sell the warrants, their names, any
applicable commission or discounts and the nature of any underwriting
arrangements will be set forth in supplements to this prospectus.
------------------------
INVESTING IN THE WARRANTS INVOLVES VERY HIGH RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 6.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
---------------------
THE DATE OF THIS PROSPECTUS IS OCTOBER 19, 1999.
<PAGE>
TABLE OF CONTENTS
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PAGE
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<S> <C>
About This Prospectus....................................... 2
Where You Can Find More Information......................... 2
Prospectus Summary.......................................... 4
Risk Factors................................................ 6
Use Of Proceeds............................................. 9
Description of Warrants..................................... 10
Description of Common Stock................................. 13
Material Federal Income Tax Consequences.................... 13
Plan of Distribution........................................ 16
Selling Holders............................................. 17
Legal Matters............................................... 17
Experts..................................................... 17
</TABLE>
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement on Form S-3 using a
"shelf" registration process. Under this shelf process, the warrants described
in this prospectus may be sold in one or more offerings. This prospectus
provides you with a general description of the warrants. Each time warrants are
sold, a prospectus supplement containing specific information about the terms of
the offering will be provided. The prospectus supplement may also add, update,
or change information contained in this prospectus. You should read this
prospectus and the applicable prospectus supplement together with the additional
information about us that can be obtained as described under the heading "Where
You Can Find More Information."
As permitted by the rules and regulations of the Securities and Exchange
Commission, this prospectus omits certain information contained or incorporated
by reference in the registration statement. Statements made in this prospectus
as to the contents of any contract, agreement or other document are not
necessarily complete, and, in each instance, reference is made to the copy of
such document filed as an exhibit to the registration statement or otherwise
filed with the SEC.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934, as amended. In accordance with the Exchange Act, we file reports,
proxy statements and other information with the SEC. Such reports, proxy
statements and other information can be inspected and copied at the public
reference rooms maintained by the SEC at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the SEC's regional offices located at 7 World Trade Center,
Suite 1300, New York, New York 10048 and at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Please call the SEC at
1-800-SEC-0330 for additional information on the public reference rooms. Copies
of such material can also be obtained from the SEC's Internet web site at
http://www.sec.gov. Our common stock and outstanding debentures are listed for
trading on the New York Stock Exchange, and copies of reports, proxy statements
and other information about us can be inspected at the offices of the New York
Stock Exchange, 20 Broad Street, New York, New York 10005.
The SEC allows us to "incorporate by reference" the information contained in
documents that we file with them, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is an important part of this prospectus and any
prospectus supplement, and information that we file later with the SEC will
automatically update and supersede some or all of this information. We
incorporate by reference the documents
2
<PAGE>
listed below and any future filings made with the SEC under Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until the offering is
completed.
- Our Transition Report on Form 10-K for the fiscal year ended December 31,
1998;
- Our Quarterly Reports on Form 10-Q for the periods ended March 31 and
June 30, 1999;
- Our Current Report on Form 8-K, event date June 18, 1999, as amended;
- The description of common stock contained in Item 1 of our Registration
Statement on Form 8-A, filed with the SEC on May 22, 1996; and
- The description of the Rights issuable with respect to each share of
common stock issued upon conversion of the debentures contained in Item 1
of our Registration Statement of Form 8-A filed with the SEC on
October 13, 1998.
We will provide without charge to each person to whom a copy of this
prospectus is delivered, upon the written or oral request of such person, a copy
of any and all of the documents incorporated in this prospectus by reference
(other than exhibits to such documents, unless such exhibits are specifically
incorporated by reference in such documents). Requests for such copies should be
directed to MSC.Software Corporation, 815 Colorado Boulevard, Los Angeles,
California 90041 (telephone: (323) 258-9111). You can find additional
information by visiting our website at http://www.mscsoftware.com.
3
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THE PROSPECTUS.
THIS SUMMARY IS NOT COMPLETE AND MAY NOT CONTAIN ALL OF THE INFORMATION THAT YOU
SHOULD CONSIDER BEFORE INVESTING IN THE WARRANTS. YOU SHOULD READ THE ENTIRE
PROSPECTUS CAREFULLY.
THE COMPANY
We develop, market and sell computer-aided engineering software and provide
related consulting services, principally for engineers and designers in
industry, research laboratories and universities. Our principal executive office
is at 815 Colorado Boulevard, Los Angeles, California 90041, and our telephone
number is (323) 258-9111. We are a Delaware corporation.
THE SELLING HOLDERS
The Selling Holders are Dendron Technology B.V., a Dutch corporation, and
Fronos Technology B.V., a Dutch corporation. The Selling Holders received their
warrants from us as partial consideration under a stock purchase agreement
executed in connection with our acquisition of MARC Analysis Research
Corporation in June 1999.
THE OFFERING
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Warrants..................................... To purchase 1,400,000 shares of common stock.
Expiration Date.............................. June 18, 2004.
Use of Proceeds.............................. We will not receive any proceeds from the
sale of the warrants by the Selling Holders,
but will receive proceeds upon any exercise
of the warrants.
Federal Income Tax Consequences.............. The sale of a warrant by a U.S. holder
generally will result in the recognition of
gain or loss to the seller. As a general
rule, however, no gain or loss will be
recognized by a warrant holder upon the
exercise of a warrant and the purchase of
shares of common stock for cash. See
"Material Federal Income Tax Consequences."
Risk Factors................................. Your investment in the warrants involves a
very high degree of risk. Therefore, you
should carefully consider the matters set
forth under "Risk Factors" which begins on
page 6.
</TABLE>
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements, including statements
concerning our future results, operating profits and earnings, that are based on
current expectations and are subject to risks and uncertainties that could cause
actual results to differ materially from those expressed or implied by those
statements. The risks and uncertainties include but are not limited to:
- The timely development and market acceptance of new versions of our
software products;
- Our dependence on certain industries;
- The successful integration of our recent acquisitions of Knowledge
Revolution, MARC Analysis Research Corporation ("MARC") and Universal
Analytics, Inc.;
4
<PAGE>
- Timely development of computer-aided engineering technologies which, among
other things, must accommodate industry trends such as increasing
computing power and increased usage of workstations;
- Fluctuations of the U.S. dollar versus foreign currencies;
- Economic conditions in Asia-Pacific, Europe and the U.S.;
- Our ability to reduce costs without adversely impacting revenues;
- Successful involvement of international and domestic business partners in
creating mechanical engineering solutions;
- Our adoption of some anti-takeover provisions;
- Our ability to attract, motivate and retain salespeople, programmers and
other key personnel;
- The allocation of the purchase price for the MARC acquisition is based on
a preliminary valuation, which is subject to change, although management
does not believe the final valuation will be materially different;
- Continued demand for our products, including MSC.NASTRAN, MSC.PATRAN,
MSC.DYTRAN, MSC.MVISION, MSC.NASTRAN for Windows, MSC.InCheck, MSC.Working
Model, and MARC's products; and
- Year 2000 issues.
Our risks are more specifically described in "Risk Factors" and in our
Transition Report on Form 10-K for the year ended December 31, 1998 incorporated
by reference in this prospectus. If one or more of these risks or uncertainties
materializes, or if underlying assumptions prove incorrect, our actual results
may vary materially from those expected, estimated or projected.
5
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RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS AND OTHER INFORMATION IN
THIS PROSPECTUS BEFORE INVESTING IN THE WARRANTS.
HISTORICAL RESULTS OF OUR OPERATIONS AND FINANCIAL POSITION ARE NOT NECESSARILY
INDICATIVE OF FUTURE FINANCIAL PERFORMANCE.
We derive most of our revenue from selling software products and services to
high end users of the product design markets. Our revenue growth and our ability
to match spending levels with revenue growth rates will directly impact our
future operating results. Historically, a significant portion of our revenue has
been generated from shipments in the last month of a quarter. In addition,
higher volumes of orders have been experienced in the month of January. The
concentration of orders makes projections of quarterly financial results
difficult. In addition, over 50% of our revenues are derived from international
markets and are denominated in foreign currencies. As a result, our financial
results and cash flow could be impacted by weakened general economic conditions
in various parts of the world, differing technological advances or preferences,
volatile foreign exchange rates, and government trade restrictions in any
country in which we do business.
RISK ASSOCIATED WITH EXPENSE MANAGEMENT.
We plan our operating expense levels, in part, on expected revenue levels.
Our expense levels, however, are generally committed in advance and, in the near
term, we are able to change only a relatively small portion of our expenses. As
a result, our ability to convert operating outlays into expected revenue growth
at profitable margins will impact our future operating results. If our future
revenues are less than expected, our net income may be disproportionately
affected since expenses are relatively fixed.
RISKS OF COMPETITION.
The computer-aided engineering software industry is highly competitive. The
entire industry may experience pricing and margin pressure which could adversely
affect our operating results, cash flow and financial position. Our success
depends on our ability to continue to develop, enhance and market new products
to meet our customers' sophisticated needs within competitive pricing structures
and in a timely manner. Shortened product development cycles may impact product
quality, performance, reliability, ease of use, functionality, breadth and
integration. Our success also depends, in part, on our ability to (1) attract
and retain technical and other key employees who are in great demand,
(2) protect the intellectual property rights of our products, and (3) continue
key relationships with product development partners.
Some of our current and possible future competitors have greater financial,
technical, marketing and other resources than we do, and some have
well-established relationships with our current and potential customers. It is
also possible that alliances among competitors may emerge and rapidly acquire
significant market share or that competition will increase as a result of
software industry consolidation. Increased competition may result in price
reductions, reduced profitability and loss of market share, any of which could
have a material adverse effect on our business, financial condition and results
of operations.
AN ACTIVE TRADING MARKET MAY NOT DEVELOP FOR THESE WARRANTS.
There is no established trading market for the warrants, and we cannot
assure you that a market for the warrants will develop in the future. If such a
market were to develop, the warrants could trade at prices that are higher or
lower than the initial offering price depending on many factors, including the
number of holders of the warrants, the overall market for similar securities,
our financial
6
<PAGE>
performance and prospects, and prospects for companies in our industry
generally. In addition, we do not intend to apply (and are not obligated to
apply) for listing of the warrants on any securities exchange or any automated
quotation system.
OUR STOCK PRICE MAY NOT EXCEED THE EXERCISE PRICE OF THE WARRANTS.
The warrants have an exercise price of $10.00 per share, subject to
adjustment. As of October 11, 1999, the closing price for our common stock on
the New York Stock Exchange was $6.50 per share. Thus, our common stock is
trading at a substantial discount to the exercise price of the warrants.
OUR SUBSTANTIAL LEVERAGE COULD ADVERSELY AFFECT OUR FINANCIAL HEALTH.
We are highly leveraged (which means that the amount of our outstanding debt
will be large compared to the net book value of our assets) and we will have
substantial repayment obligations and interest expense. As of June 30, 1999, we
had:
- Total consolidated debt of $70.0 million; and
- Shareholders' equity of $16.4 million.
Based upon our current level of operations, we believe that our cash flow
from operations and amounts we are able to borrow under our credit facilities
will be adequate to meet our anticipated requirements for working capital,
capital expenditures, research and development expenditures, discretionary
investments, interest payments and scheduled principal payments. Our ability to
make scheduled payments of principal and interest on our indebtedness and to
refinance our indebtedness depends on our future performance. We do not have
complete control over our future performance because it is subject to economic,
financial, competitive, regulatory, and other factors beyond our control. It is
possible that in the future our business may not generate sufficient cash flow
from operations to allow us to service our debt and make necessary capital
expenditures. If this situation occurs, we may have to sell assets, restructure
debt, obtain additional equity capital, or reduce capital expenditures or
research and development expenses. We cannot be sure that we would be able to do
so or do so without incurring additional expense.
Our level of debt and the limitations imposed on us by our debt agreements
could have other important consequences to you, including the following:
- We may not be able to obtain additional debt financing for future working
capital, capital expenditures, research and development costs and other
general corporate purposes;
- We could be less able to take advantage of significant business
opportunities, such as acquisition opportunities or research and
development efforts, and react to changes in market or industry
conditions;
- We will be more vulnerable to general adverse economic and industry
conditions; and
- We will be disadvantaged compared to competitors with less leverage.
RISKS RELATED TO STOCK MARKET VOLATILITY.
The trading price of our stock, like other software and technology stocks,
is subject to significant volatility. If our revenues or earnings fail to meet
securities analysts' expectations, there could be an immediate and significant
adverse impact on the trading price of our stock and, as a result, the warrants.
In addition, broader market factors unrelated to our performance may affect our
stock price.
7
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RISKS RELATED TO DEPENDENCE ON CORE PRODUCTS.
We currently earn a significant portion of our revenues from sales and
maintenance of a core group of analysis and design software derived primarily
from our MSC.NASTRAN and MSC.PATRAN products. As a result, any factor adversely
affecting sales of these core products could have a material adverse effect on
our business. Our future performance will depend upon successful development,
introduction and customer acceptance of new products or enhanced versions of our
existing products. We can give no assurance that we will continue to be
successful in marketing our current products or any new or enhanced products
that we may develop in the future. In addition, competitive pressures or other
factors may result in price erosion that could have a material adverse effect on
our business, financial condition, results of operations and cash flow.
RISKS RELATED TO DEPENDENCE ON CERTAIN INDUSTRIES.
We primarily market our products to aerospace, automotive and other
industrial customers. For the year ended December 31, 1998, aerospace clients
accounted for 39% and automotive clients accounted for 24% of our revenues,
respectively. Changes in capital spending by, and cyclical trends affecting,
these customers may adversely affect our offerings to these industries. In
addition, these types of customers tend to adhere to a technology choice for
long periods (i.e., an entire development cycle). As a result, a lost
opportunity with a given customer may not again become a new opportunity for
several years.
RISKS RELATED TO INTERNATIONAL ACTIVITIES.
Revenues from foreign export sales represented approximately 57% of our
gross revenue in 1998. Risks inherent in our international business activities
include the following:
- imposition of government controls;
- foreign exchange fluctuations, as many of our agreements originating with
our German and Japanese subsidiaries are stated in foreign currencies;
- export license requirements;
- restrictions on the export of critical technology or other trade
restrictions;
- foreign political and economic instability;
- ineffective copyright and trade secret protection under foreign law;
- changes in regulatory practices, tariffs and taxes;
- difficulties in staffing and managing international operations;
- longer accounts receivable payment cycles; and
- burdens of complying with a wide variety of foreign laws and regulations.
Unfavorable economic and political conditions in the Asian markets have
recently impacted our international results. The decrease in reported revenues
from our Asia-Pacific region is due primarily to the economic turmoil the region
experienced during the past year. 16% of our total revenue for 1998 is directly
related to the Japanese market, while 6% is from the Asia-Pacific region outside
of Japan. In light of the continued economic turmoil in the region, we remain
cautious about our Asia-Pacific prospects. We can give no assurance that the
economic crisis and currency issues currently being experienced in the Asian
markets will not have a material adverse effect on our future international
sales and, consequently, on our business, financial condition and results of
operations.
8
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RISKS RELATED TO CERTAIN ANTI-TAKEOVER PROVISIONS.
Certain provisions of our Certificate of Incorporation and Restated Bylaws
could make it more difficult for a third party to acquire control of us, even if
the change in control would be beneficial to stockholders. These provisions
include the following:
- division of our board of directors into three classes, with each class
serving a staggered three-year term;
- vesting of exclusive authority in the board, the Chairman of the Board and
the president (except as otherwise required by law) to call special
meetings of stockholders;
- elimination of stockholder voting by consent;
- removal of directors for cause only;
- ability of the board to authorize the issuance of preferred stock in
series;
- vesting of exclusive authority in the board to determine the size of the
board (subject to certain limited exceptions) and to fill vacancies
thereon; and
- advance notice requirements for stockholder proposals and nominations for
election to the board.
In addition to the above provisions, we have recently adopted a new
stockholder rights plan. The plan entitles our stockholders, if an entity
acquires more than 20% of our stock or in the event of a squeeze-out merger,(1)
to purchase either our common stock or the common stock of the merged entity at
one-half of the stock's market value. Until ten days after the announcement of
the acquisition of a 20% interest, we may redeem the rights for a nominal
amount.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the warrants by the
Selling Holders. We will, however, receive proceeds from any exercise of the
warrants.
- ------------------------
(1) A "squeeze-out" merger is a merger transaction in which a minority inteest
in a corporation is intentionally eliminated or reduced. This is often
accomplished by setting up the merger transaction to provide the holders of
minority interests with effectively no choice but to accept cash (as opposed to
interests in the continuing entity) in exchange for their shares.
9
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DESCRIPTION OF WARRANTS
The warrants were issued pursuant to a warrant agreement dated as of
June 18, 1999, between us and ChaseMellon Shareholder Services, L.L.C. as
warrant agent (as successor to MSC.Software Corporation, the initial warrant
agent). This prospectus briefly outlines the material provisions of the warrant
agreement. The warrant agreement has been incorporated by reference as an
exhibit to the registration statement. Although this prospectus and the
applicable prospectus supplement provide all the information that we believe is
material with respect to the warrants, you should read the warrant agreement for
provisions that may be important to you. In the summary below, we have included
references to section numbers of the warrant agreement (italicized) so that you
can easily locate these provisions.
GENERAL
We issued warrants to purchase 1,400,000 shares of our common stock for an
exercise price of $10.00 per share. Subject to the terms of the warrant
agreement, each holder will have the right until 5:00 p.m. Los Angeles time on
June 18, 2004, to purchase from us the number of fully paid and nonassessable
shares of our common stock which the holder may at the time be entitled to
purchase on exercise of the warrants. The Selling Holders hold all of the
warrants offered by this prospectus and accompanying prospectus supplements.
We have reserved, and will keep reserved out of our authorized common stock,
a number of shares of common stock sufficient to provide for the exercise of the
outstanding warrants. (SECTION 9.1).
The warrant certificates are and will be numbered and registered in a
warrant register maintained by the warrant agent. The registered holders of
warrants will be treated as the owner thereof for all purposes. (SECTION 2.3).
The warrants are transferable at the offices of the warrant agent, without
charge. Upon any registration of transfer, the warrant agent shall countersign
and deliver a new warrant certificate to the person entitled thereto.
(SECTION 3.1). Warrant certificates may be exchanged for another certificate or
certificates upon written request to the warrant agent. (SECTION 3.2).
We will pay any documentary stamp taxes attributable to the issuance of any
warrant certificates or certificates for shares issuable upon exercise of the
warrants; but the holder will pay any taxes that may be payable in respect of
any transfer involved in the issue or delivery of any warrant certificates or
certificates for shares unless that holder has paid us the amount of the tax or
has established to our satisfaction that the tax has been paid. (SECTION 8).
We will not merge or consolidate with or into any other corporation unless
the corporation resulting from the merger or consolidation will expressly
assume, by supplemental agreement satisfactory in form to the warrant agent,
every covenant and condition of the warrant agreement. (SECTION 23).
EXERCISE OF WARRANTS
Each warrant certificate entitles its holder to purchase the number of
common shares indicated on the certificate at the exercise price of $10.00 per
share, subject to any adjustments made pursuant to the warrant agreement.
(SECTION 10). See "--Adjustments." After the close of business on the expiration
date, unexercised warrants will become void.
Warrants may be exercised by the surrender of the certificate(s) evidencing
the warrants, together with the form of election to purchase on the reverse of
the warrant certificate to the warrant agent's office and payment to the warrant
agent of the aggregate exercise price required to purchase the underlying common
stock. Upon surrender of the certificate(s) and payment of the exercise price,
we will issue to holder, in the name or names the holder designates,
certificates for the number of shares purchased upon the exercise of these
warrants. Shares will be deemed to have been issued and any person designated as
a holder shall be deemed to have become a holder of record of the shares on the
date the warrants were surrendered and the exercise price was paid; provided,
however, that if the
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warrants are surrendered, and the exercise price is paid on a Saturday, Sunday
or other day when banking institutions in the City of Los Angeles are authorized
or obligated by law to close, the shares will be issued on the next day our
common stock transfer books are open. (SECTION 6.2).
Payment of the exercise price must be made by
- certified or cashier's check;
- by presentment of any of the notes described below; or
- by any combination thereof.
Holders may present, as payment of the aggregate exercise price, any note
from those series of notes we issued pursuant to the indenture dated as of
June 17, 1999 between us and Chase Manhattan Bank & Trust Company N.A., as
trustee, designated as 8% subordinated promissory notes due 2001 and 8%
subordinated promissory notes due 2009. Holders surrendering these notes in
payment of the exercise price will be fully credited for the unpaid principal
value and accrued but unpaid interest on the notes toward the exercise price of
the warrants, or portion thereof, as the case may be. (SECTION 6.3).
MODIFICATIONS OF THE WARRANTS
The warrant agreement and the terms of the warrants may be modified or
amended by us and the warrant agent, without the consent of any holder, for the
purpose of curing any ambiguity, or to correct or supplement any defective or
inconsistent provision contained therein, or in any other manner that we deem
necessary or desirable and that will not adversely affect the interests of the
holders of the warrants.
We and the warrant agent may also modify the warrant agreement and the terms
of the warrants with the consent of the holders of at least a majority in number
of the unexercised warrants then outstanding affected thereby; provided that no
such modification or amendment that changes the terms upon which the warrants
are exercisable, reduces the percentage required for consent to modification of
the warrant agreement, accelerates the expiration date, or increases the
exercise price may be made without the consent of each holder affected thereby.
The warrant agent may, but is not required to, entered into a supplement or
amendment that affects the warrant agent's duties, obligations or immunities
under the warrant agreement. (SECTION 21).
ADJUSTMENTS
Adjustments to the number of warrant shares purchasable upon exercise of
each warrant will be made if we do any of the following:
- pay a dividend or make a distribution on our common stock which is paid or
made in common stock or other shares of our capital stock, or in rights or
warrants to purchase common stock or other shares of our capital stock if
such rights or warrants are not exercisable or separable from the common
stock except upon the occurrence of a contingency;
- subdivide our outstanding common stock into a greater number of shares of
common stock;
- combine our outstanding shares into a smaller number of shares of common
stock; or
- issue other securities by reclassification of our common stock.
If any of these events occur, the number of warrant shares purchasable upon
exercise of each warrant will be adjusted so that the holder of each warrant
will be entitled to receive upon exercise of the warrant the kind and number of
our shares that he, she or it would have owned or been entitled to receive after
the happening of any of the events described above had the warrant been
exercised immediately prior to the happening of that event. (SECTION 11.1).
If we make a distribution to all holders of common stock (other than a cash
dividend or distribution made on a quarterly or other periodic basis), then the
exercise price will be adjusted to a
11
<PAGE>
price determined by multiplying the exercise price in effect immediately prior
to the distribution by a fraction, of which the numerator will be the then
current Market Price per share of common stock on the record date for
determination of shareholders entitled to receive the distribution, less the
then fair value of the portion of the assets or evidences of indebtedness so
distributed or of the subscription rights or warrants which are applicable of
one share of common stock, and of which the denominator will be the Market Price
per share of Common Stock. The Market Price is defined as the average of the
daily closing price per share for our common stock on the New York Stock
Exchange for the 15 consecutive trading days commencing 30 trading days before
the date in question. (SECTION 11.1).
After an adjustment of the exercise price as described above, each warrant
outstanding immediately prior to the making of the adjustment will evidence the
right to purchase, at the adjusted exercise price, the number of shares obtained
by multiplying the number of shares covered by the warrant immediately prior to
the adjustment of the exercise price by the exercise price in effect immediately
prior to such adjustment of the exercise price and dividing the product by the
exercise price in effect immediately after the adjustment of the exercise price.
(SECTION 11.1).
No adjustment to the number of shares purchasable upon the exercise of each
warrant or the exercise price is required to be made unless the adjustment would
require an increase or decrease of at least 1% in the number of warrant shares
purchasable upon the exercise of each warrant, or the exercise price. However,
any adjustments which are not required to be made will be carried forward and
taken into account in any subsequent adjustments. We many, at our option, reduce
the then current exercise price, or increase the number of common shares
purchasable upon exercise of each warrant, to any amount deemed appropriate by
our Board of Directors. (SECTION 11.1).
If we consolidate or merge with or into any other corporation (other than a
consolidation or merger where we are the surviving corporation and each share of
common stock outstanding immediately prior to the consolidation or merger
remains outstanding immediately after such consolidation or merger and no cash,
securities or other property is distributed with respect to the shares), or sell
or transfer all or substantially all of our assets to any person or entity, we,
or our successor will execute an agreement with the warrant agent providing that
each holder of a warrant will have the right upon payment of the exercise price
in effect immediately prior to the event, to purchase the kind and amount of
shares and other securities, cash and other property that he, she or it would
have owned or have been entitled to receive after the happening of the
consolidation, merger or sale, had the warrant been exercised immediately prior
to the event. (SECTION 11.3).
NO RIGHTS AS STOCKHOLDERS
Holders of the warrants are not entitled to vote, to consent, to receive
dividends or to receive notice as shareholders with respect to any meeting of
shareholders, or to exercise any rights whatsoever as shareholders of
MSC.Software Corporation. (SECTION 12).
THE WARRANT AGENT
ChaseMellon Shareholder Services, L.L.C., is the warrant agent under the
warrant agreement. The warrant agent and any stockholder, director, officer or
employee of the warrant agent may buy, sell or deal in any of the warrants or
our other securities or become pecuniarily interested in any transaction in
which we may be interested, or contract with or lend money to us or otherwise
act as fully and freely as though it were not warrant agent under this
agreement. (SECTION 17.8)
The warrant agent may resign and be discharged from its duties by giving us
60 days' notice in writing. The warrant agent may be removed by like notice from
us. If the warrant agent resigns, is removed, or otherwise becomes incapable of
acting, we will appoint a successor warrant agent. Any successor warrant agent
shall be an entity in good standing, organized and doing business under the laws
of the United States or any state thereof and have a combined capital and
surplus of at least $50,000,000, or be an affiliate of such an entity.
(SECTION 18).
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DESCRIPTION OF COMMON STOCK
If you choose to exercise the warrants, you will receive shares of our
common stock. This prospectus briefly describes the common stock issuable upon
exercise of the warrants.
Holders of common stock are entitled to receive, subject to the rights of
any preferred stock issued and then outstanding, dividends when and as declared
by the Board of Directors out of funds legally available therefor. Holders of
common stock have no preemptive right to purchase additional shares. Holders of
common stock are entitled to share on a pro rata basis, subject to the rights of
any preferred stock then outstanding, in the assets legally available for
distribution to stockholders in the event of our liquidation, dissolution or
winding up.
Holders of common stock are entitled to one vote per share for all matters
voted upon by stockholders, including the election of members of the Board of
Directors. Holders of common stock do not have cumulative voting rights. The
outstanding shares of common stock are validly issued, fully paid and
nonassessable. All authorized, unissued shares of common stock are issuable by
the Board of Directors without stockholder approval, including issuance to
acquire another business.
Our Board of Directors presently consists of three classes elected for
staggered three-year terms.
Our Certificate of Incorporation also authorizes the issuance of 10,000,000
shares of preferred stock, par value $0.01 per share, and authorizes the Board
of Directors to fix the rights, preferences, privileges and restrictions of one
or more series out of such authorized shares of preferred stock, including
dividend rights, conversion rights, voting rights, terms of redemption and
liquidation preferences, without further vote or action by the stockholders.
Although the Board of Directors has no present intention of doing so, issuance
of the authorized preferred stock within terms giving it substantial power,
conversion or other rights could have the effect of (i) delaying, deferring or
preventing a change in control of the Company or (ii) otherwise affecting the
rights of holders of the common stock.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING DISCUSSION SUMMARIZES CERTAIN MATERIAL UNITED STATES FEDERAL
INCOME TAX CONSIDERATIONS WITH RESPECT TO THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE WARRANTS, AND DOES NOT PURPORT TO ADDRESS ANY STATE, LOCAL OR
FOREIGN TAX CONSEQUENCES TO A HOLDER OF THE WARRANTS. THE DISCUSSION IS BASED ON
THE LAW AS IT CURRENTLY EXISTS IN THE INTERNAL REVENUE CODE OF 1986, CURRENTLY
APPLICABLE TREASURY REGULATIONS PROMULGATED THEREUNDER, AND JUDICIAL AND
ADMINISTRATIVE INTERPRETATIONS THEREOF, ALL OF WHICH ARE SUBJECT TO CHANGE, AND
POSSIBLY RETROACTIVELY. THE PARTIES DO NOT INTEND TO SEEK A RULING FROM THE
INTERNAL REVENUE SERVICE ON ANY OF THE ISSUES DISCUSSED BELOW, AND NO ASSURANCE
CAN BE MADE THAT THE INTERNAL REVENUE SERVICE WILL NOT TAKE A CONTRARY VIEW. IN
ADDITION, THE DISCUSSION DOES NOT PURPORT TO DEAL WITH ALL ASPECTS OF TAXATION
THAT MAY BE RELEVANT TO HOLDERS OF THE WARRANTS IN LIGHT OF THEIR PARTICULAR
INVESTMENT OR TAX CIRCUMSTANCES, SUCH AS INSURANCE COMPANIES, BANKS, INVESTORS
SUBJECT TO THE ALTERNATIVE MINIMUM TAX, TAX-EXEMPT ORGANIZATIONS, OR INVESTORS
HOLDING THE WARRANTS AS OTHER THAN CAPITAL ASSETS. WE WILL DISCUSS ANY FURTHER
MATERIAL TAX CONSEQUENCES IN A RELATED PROSPECTUS SUPPLEMENT.
YOU SHOULD CONSULT YOUR OWN TAX ADVISOR REGARDING THE SPECIFIC TAX
CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE WARRANTS,
INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF THE
PURCHASE, OWNERSHIP AND DISPOSITION AND OF POTENTIAL CHANGES IN APPLICABLE TAX
LAWS.
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UNITED STATES TAXATION OF DOMESTIC HOLDERS OF WARRANTS
SALE OF WARRANTS. The sale of a warrant, other than a sale to us, will
result in the recognition of gain or loss to the seller in an amount equal to
the difference between the amount realized and the seller's adjusted basis in
the warrant. If the seller is not a dealer in the warrants, and the shares of
common stock issuable upon exercise of the warrant are or would be a capital
asset to the seller if acquired by the seller, gain or loss upon the sale of the
warrant will be long-term or short-term capital gain or loss, depending upon
whether the warrant has been held for more than one year.
If the repurchase of a warrant by us is treated as a "sale or exchange" of a
capital asset, any gain or loss recognized by the selling warrant holder on the
transaction will be capital gain or loss. However, it is unclear whether such a
repurchase would be so treated. If the repurchase is not treated as a sale or
exchange, the selling warrant holder will recognize ordinary income or loss upon
the repurchase.
EFFECT ON HOLDERS OF EXERCISE OF WARRANTS BY PAYMENT OF CASH. As a general
rule, no gain or loss will be recognized by a warrant holder upon the exercise
of a warrant and the purchase of shares of common stock for cash. The adjusted
basis of the shares of common stock thus purchased will be equal to the sum of
the holder's adjusted basis in the exercised warrant and the exercise price of
the warrant, but the holding period of the shares will not include the holding
period of the warrant exercised.
EFFECT ON HOLDERS OF EXERCISE OF WARRANTS BY EXCHANGE OF NOTES. The federal
income tax treatment of the use of notes to pay all or part of the exercise
price of the warrants is unclear. Most likely, the use of notes in such manner
would be treated as a taxable exchange of the notes. In this event, the
exercising holder would recognize gain or loss on the exchange in an amount
equal to the difference between the amount realized and the holder's adjusted
basis in the notes surrendered. Although unclear, it appears that the value of
the consideration received for purposes of computing the gain or loss should be
the exercise price of the warrants. However, there is some possibility that the
Internal Revenue Service may assert that the consideration received is either
the fair market value of the shares of common stock received on the date of the
exchange, the fair market value of the notes on the date of the exchange, or
some other amount. The shares of common stock received upon exercise of the
warrants would have a basis equal to the sum of the basis of the notes
exchanged, the gain recognized on the exchange, the basis of the warrants
exercised and any cash paid at the time of exercise, reduced by any loss
recognized on the exchange. The holding period of the shares of common stock
received would not include the holding period of the notes or the warrants.
Alternatively, it is possible that the use of notes to pay all or part of
the exercise price of the warrants may be treated as the nontaxable exercise of
rights similar to conversion rights under convertible debt obligations. In
addition, in the case of the notes maturing in 2009, the exchange might be
treated as a nontaxable exchange of a "security" for stock. Under either
characterization, no gain or loss would be recognized by a holder of notes upon
the exchange. The basis of the shares of common stock received in the exchange
would equal the sum of the bases of the notes and the warrants surrendered, and
if the notes constituted a capital asset in the hands of the exercising holder,
the holding period for the shares of common stock received would include the
period during which the surrendered notes were held.
It appears that a holder will be required to recognize ordinary interest
income to the extent accrued but unpaid interest is applied to the exercise
price of a warrant. The amount so recognized will be added to the basis of the
stock received upon such exercise.
A holder may recognize gain or loss to the extent the holder receives cash
in lieu of fractional shares of common stock, even if the exchange is otherwise
treated as a nontaxable exchange. If a holder exercises a warrant in part by
payment of cash and in part by the exchange of notes, the transaction should be
divided into two parts with each part separately treated as described above.
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PROSPECTIVE INVESTORS CONTEMPLATING AN EXCHANGE OF NOTES IN CONNECTION WITH THE
EXERCISE OF WARRANTS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS.
CONSTRUCTIVE DIVIDEND. The anti-dilution section in the warrant agreement
provides that the number of shares purchasable on exercise of a warrant may be
adjusted in the event we distribute our own obligations or certain property
(other than cash) to the holders of our common stock. We do not now contemplate
making such a distribution. However, should we make a distribution requiring
such an adjustment, holders of the warrants may be deemed to have received a
constructive distribution which may be taxable as a dividend.
UNITED STATES TAXATION OF FOREIGN HOLDERS OF WARRANTS
SALE OF WARRANTS. Subject to the discussion below concerning information
reporting and backup withholding, a holder of a warrant who is not a United
States Person will not be subject to United States federal income tax on any
gain realized on the sale of a warrant unless (1) the gain is effectively
connected with the conduct by the holder of a trade or business in the United
States, or (2) in the case of gain realized by an individual holder of a
warrant, the holder is present in the United States for 183 days or more in the
year of the sale, and certain other conditions are met.
EFFECT ON FOREIGN HOLDERS OF EXERCISE OF WARRANTS BY PAYMENT OF CASH. As a
general rule, no gain or loss will be recognized by a warrant holder who is not
a United States Person upon the exercise of a warrant and the purchase of shares
of common stock for cash.
BACKUP WITHHOLDING AND INFORMATION REPORTING. Under current United States
federal income tax law, information reporting and backup withholding imposed at
a rate of 31% will apply to the proceeds of a disposition of warrants by a
non-corporate holder through a U.S. office of a broker unless the disposing
holder certifies as to its non-U.S. status or otherwise established an
exemption. Generally, U.S. information reporting and backup withholding will not
apply to a payment of disposition proceeds where the transaction is effected
outside the United States through a non-U.S. office of a non-U.S. broker.
However, unless the broker has documentary evidence that the holder is a
non-U.S. holder, U.S. information reporting requirements, but not backup
withholding, will apply to a payment of disposition proceeds where the
transaction is effected outside the United States by or through an office
outside the United States of a broker that is either:
- a United States Person;
- a foreign person which derives 50% or more of its gross income for certain
periods from the conduct of a trade or business in the United States;
- a controlled foreign corporation for U.S. federal income tax purposes; or
- in the case of payments made after December 31, 2000, a foreign
partnership with connections to the United States, unless such broker has
documentary evidence in its files of the holder's non-U.S. status and has
no actual knowledge to the contrary or unless the holder establishes an
exemption.
Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained, provided that the required information is furnished to the U.S.
Internal Revenue Service.
As used in this section, "United States" means the United States of America
(including the States and the District of Columbia), its territories, its
possessions and other areas subject to its jurisdiction, and "United States
Person" means any citizen or resident of the United States, a corporation,
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partnership or other entity organized in or under the laws of the United States
or any State, any estate the income of which is subject to United States federal
income taxation regardless of its source, and any trust with respect to which
(1) a United States court is able to exercise primary supervision over its
administration, and (2) one or more United States Persons have the authority to
control all substantial decisions of the trust.
PLAN OF DISTRIBUTION
We are registering the warrants to purchase 1,400,000 shares of common stock
on behalf of the Selling Holders. As used in this prospectus, "Selling Holders"
includes donees, pledgees, transferees or other successors-in-interest selling
warrants received from a Selling Holder as a gift, pledge, partnership
distribution or other non-sale related transfer. We will bear all costs,
expenses and fees in connection with the registration of these warrants. The
Selling Holders will pay any brokerage commissions and similar selling expenses
attributable to the sale of these warrants. Sales of warrants may be effected by
Selling Holders from time to time in one or more types of transactions in the
over-the-counter market, in negotiated transactions, through put or call options
transactions relating to the warrants, through short sales, or a combination of
these methods, at market prices prevailing at the time of sale, or at negotiated
prices. These transactions may or may not involve brokers or dealers. The
Selling Holders have advised us that they have not entered into any agreements,
understandings or arrangements with any underwriters or broker-dealers regarding
the sale of their warrants, nor is there an underwriter or coordinating broker
acting in connection with the proposed sale of warrants by the Selling Holders.
We are required to register the warrants offered by the Selling Holders under
the terms of the registration rights agreement dated June 18, 1999 between us
and the Selling Holders. The registration of the warrants offered by the Selling
Holders does not necessarily mean that the Selling Holders will offer or sell
any of these warrants.
The Selling Holders may effect these transactions by selling warrants
directly to purchasers or to or through broker-dealers, who may act as agents or
principals. The broker-dealers may receive compensation in the form of
discounts, concessions, or commissions from the Selling Holders and/or the
purchasers of warrants for whom such broker-dealers may act as agents or to whom
they sell as principal, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions).
The Selling Holders and any broker-dealers that act in connection with the
sale of the warrants might be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act, and any commissions received by such
broker-dealers and any profit on the resale of the warrants sold by them while
acting as principals might be deemed to be underwriting discounts or commissions
under the Securities Act. We have agreed to indemnify each Selling Holder
against certain liabilities, including liabilities arising under the Securities
Act. The Selling Holders may agree to indemnify any agent, dealer or
broker-dealer that participates in transactions involving sales of the warrants
against certain liabilities, including liabilities arising under the Securities
Act.
Because Selling Holders may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act, the Selling Holders will be
subject to the prospectus delivery requirements of the Securities Act, which may
include delivery through the facilities of the NYSE pursuant to Rule 153 under
the Securities Act. We have informed the Selling Holders that the
anti-manipulative provisions of Regulation M promulgated under the Exchange Act
may apply to their sales in the market.
Selling Holders also may resell all or a portion of the warrants in open
market transactions in reliance upon Rule 144 under the Securities Act, provided
they meet the criteria and conform to the requirements of such Rule.
When a Selling Holder notifies us that any material arrangement has been
entered into with a broker-dealer for the sale of warrants through a block
trade, special offering, exchange distribution or
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secondary distribution or a purchase by a broker or dealer, a supplement to this
prospectus will be filed, if required, pursuant to Rule 424(b) under the Act,
disclosing:
- the name of each Selling Holder and of the participating broker-dealer(s),
- the amount of warrants involved,
- the price at which the warrants were sold,
- the commissions paid or discounts or concessions allowed to the
broker-dealer(s), where applicable,
- that the broker-dealer(s) did not conduct any investigation to verify the
information set out or incorporated by reference in this prospectus, and
- other facts material to the transaction.
SELLING HOLDERS
On the date of this prospectus, Dendron Technology B.V., a Dutch
corporation, and Fronos Technology B.V., a Dutch corporation, each owned
warrants to purchase 700,000 shares of common stock. Each of the Selling Holders
received their warrants from us as partial consideration under a stock purchase
agreement executed in connection with our acquisition of MARC Analysis Research
Corporation in June 1999. The Selling Holders also each received subordinated
debt securities. The warrants were sold to the Selling Holders in a private
transaction, exempt from the registration requirements under the Securities Act.
We agreed with the Selling Holders to file a registration statement to register
the warrants. Because each Selling Holder may offer all, some or none of the
warrants they own, and because the offering contemplated by this offering may
not be underwritten, no estimate can be given as to the amount of warrants that
will be held by each Selling Holder upon or prior to termination of this
offering. The sole relationship that each Selling Holder has had with us within
the past three years is through its ownership of the warrants and other
subordinated debt securities.
LEGAL MATTERS
O'Melveny & Myers LLP will pass on legal matters relating to this offering
for us. Any underwriters will be advised about other issues relating to any
offering of the warrants by their own legal counsel.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedule included in our transition report of Form 10-K
for the transition period from January 1, 1998 to December 31, 1998, as set
forth in their report, which is incorporated by reference in this prospectus and
elsewhere in the registration statement. Our financial statements and schedule
are incorporated by reference in reliance on Ernst & Young LLP's report, given
on their authority as experts in accounting and auditing.
PricewaterhouseCoopers LLP, independent auditors, have audited the financial
statements included in our Current Report on Form 8-K, event date June 18, 1999,
as amended, with respect to the acquisition of MARC Analysis Research
Corporation, as set forth in their report, which is incorporated by reference in
this prospectus. These financial statements are incorporated by reference in
reliance on PricewaterhouseCoopers, LLP's report, given on their authority as
experts in accounting and auditing.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is a statement of estimated expenses in connection with the
offering described in this Registration Statement:
<TABLE>
<S> <C>
SEC registration fee....................................... $ 3,892
Printing expenses.......................................... $ 5,000
Accounting fees and expenses............................... $ 5,000
Legal fees and expenses.................................... $20,000
Blue Sky fees and expenses (including legal fees).......... $ 3,000
Transfer Agent's fees and expenses......................... --
Miscellaneous expenses..................................... $ 3,108
Total...................................................... $40,000
-------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law provides that a Delaware
corporation may indemnify any persons who are, or are threatened to be made,
parties to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation), by reason of the fact that the person
was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation or enterprise. The indemnity may include expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by the person in connection with the action,
suit or proceeding, provided the person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the corporation's best interests
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe that his conduct was illegal. A Delaware corporation may indemnify
any persons who are, or are threatened to be made, parties to any threatened,
pending or completed action or suit by or in the right of the corporation by
reason of the fact that the person was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees) actually and
reasonably incurred by the person in connection with the defense or settlement
of the action or suit, provided the person acted in good faith and in a manner
he reasonably believed to be in or not opposed to the corporation's best
interests except that no indemnification is permitted without judicial approval
if the director or officer is adjudged to be liable to the corporation. Where a
director or officer is successful on the merits or otherwise in the defense of
any action referred to above, the corporation must indemnify him against the
expenses which he has actually and reasonably incurred.
Our Bylaws provide for the indemnification of our directors and officers to
the fullest extent permitted by Delaware law.
In that regard, our Bylaws provide that we shall indemnify any person who is
or was a party or is threatened to be made a party or is involved in any action,
suit or proceeding, whether civil, criminal, administrative or investigative (a
"proceeding"), by reason of the fact that he or she, or a person of whom he or
she is the legal representative, is or was our director or officer or is or was
serving at our request as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
against all costs, charges, expenses, liabilities and losses (including
II-1
<PAGE>
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid or to be paid in settlement and amounts expended in seeking indemnification
granted to the person under applicable law, the Bylaws or any agreement with us)
reasonably incurred or suffered by the person in connection with the proceeding.
The right to indemnification includes the right that we pay the expenses
incurred in defending any proceeding in advance of its final disposition;
PROVIDED, HOWEVER, that if the Delaware General Corporation Law so requires, the
payment of the expenses incurred by a director or officer (in his or her
capacity as a director or officer) in advance of the final disposition of a
proceeding shall be made only upon delivery to us of an undertaking, by or on
behalf of the director or officer, to repay all amounts so advanced if it shall
ultimately be determined that the director or officer is not entitled to be
indemnified. We may, by action of the Board, provide indemnification to our
employees and agents with the same scope and effect as the indemnification of
directors and officers.
We have in effect insurance policies covering all of our directors and
officers in certain instances where by law we may not indemnify them.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
<C> <S>
3.1 Certificate of Incorporation, as amended (filed as Exhibit
3.1 to our report on Form 10-Q filed on August 16, 1999, and
incorporated herein by reference).
3.2 Restated Bylaws (filed as Exhibit 3.2 to our report on Form
10-K filed for the fiscal year ended January 31, 1996, and
incorporated herein by reference).
4.1 Warrant Agreement, dated as of June 18, 1999.
4.2 Appointment of ChaseMellon Shareholder Services, L.L.C. as
warrant agent.
4.3 Form of Warrant.
4.4 Rights Agreement dated as of October 5, 1998 between us and
ChaseMellon Shareholder Services, L.L.C., as Rights Agent
(filed as Exhibit 2.1 to our Registration Statement on
Form 8-A filed October 13, 1998 and incorporated herein by
reference.
5.1 Opinion of O'Melveny & Myers LLP regarding legality of the
warrants.
8.1 Opinion of O'Melveny & Myers LLP regarding certain tax
matters.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of O'Melveny & Myers LLP (included in Exhibits 5.1
and 8.1).
24.1 Power of Attorney (included on page II-5).
</TABLE>
ITEM 17. UNDERTAKINGS
A. UNDERTAKING PURSUANT TO RULE 415.
We hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(a) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities
II-2
<PAGE>
offered therein, and the offering of such securities at that time shall be
deemed to be the initial BONA FIDE offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered that remain unsold at the termination of the
offering.
B. UNDERTAKINGS REGARDING FILINGS INCORPORATING SUBSEQUENT EXCHANGE ACT
DOCUMENTS BY REFERENCE.
We hereby undertake that, for purposes of determining any liability under
the Securities Act, each filing of our annual report pursuant to Section
13(a) or 15(d) of the Exchange Act (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial BONA FIDE offering thereof.
C. UNDERTAKING IN RESPECT OF INDEMNIFICATION.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to our directors, officers and controlling persons pursuant to
the foregoing provisions, or otherwise, we have been advised that in the opinion
of the SEC such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, we will, unless in the opinion
of our counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
us is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
D. UNDERTAKING REGARDING RULE 430A UNDER THE SECURITIES ACT.
We hereby undertake that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by us pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this registration statement as of
the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Los Angeles, State of California, on October 15,
1999.
<TABLE>
<S> <C> <C>
MSC.SOFTWARE CORPORATION
By: /s/ FRANK PERNA, JR.
-----------------------------------------
Frank Perna, Jr.
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE
OFFICER
</TABLE>
POWER OF ATTORNEY
We, the undersigned directors and officers of MSC.Software Corporation, and
each of us, constitute and appoint Frank Perna, Jr. and Louis A. Greco and each
or either of them, as our true and lawful attorney-in-fact and agent, with full
power of substitution, to do any and all acts and things in our name and on our
behalf in our capacities, to sign any or all amendments or post-effective
amendments to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agent, or his or her substitute, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ FRANK PERNA, JR.
- ------------------------------------------- Chairman of the Board and October 15, 1999
Frank Perna, Jr. Chief Executive Officer
/s/ LOUIS A. GRECO Chief Financial Officer
- ------------------------------------------- (Principal Financial and October 15, 1999
Louis A. Greco Accounting Officer)
- ------------------------------------------- Director
Larry S. Barels
/s/ DONALD GLICKMAN
- ------------------------------------------- Director October 15, 1999
Donald Glickman
/s/ WILLIAM F. GRUN
- ------------------------------------------- Director October 15, 1999
William F. Grun
/s/ GEORGE N. RIORDAN
- ------------------------------------------- Director October 15, 1999
George N. Riordan
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
<C> <S>
3.1 Certificate of Incorporation, as amended (filed as Exhibit
3.1 to our report on Form 10-Q filed on August 16, 1999, and
incorporated herein by reference).
3.2 Restated Bylaws (filed as Exhibit 3.2 to our report on Form
10-K filed for the fiscal year ended January 31, 1996, and
incorporated herein by reference).
4.1 Warrant Agreement, dated as of June 18, 1999.
4.2 Appointment of ChaseMellon Shareholder Services, L.L.C. as
warrant agent.
4.3 Form of Warrant.
4.4 Rights Agreement dated as of October 5, 1998 between us and
ChaseMellon Shareholder Services, L.L.C., as Rights Agent
(filed as Exhibit 2.1 to our Registration Statement on
Form 8-A filed October 13, 1998 and incorporated herein by
reference.
5.1 Opinion of O'Melveny & Myers LLP regarding legality of the
warrants.
8.1 Opinion of O'Melveny & Myers LLP regarding certain tax
matters.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of O'Melveny & Myers LLP (included in Exhibits 5.1
and 8.1).
24.1 Power of Attorney (included on page II-5).
</TABLE>
<PAGE>
WARRANT AGREEMENT dated as of June 18, 1999, between THE
MACNEAL-SCHWENDLER CORPORATION, a Delaware corporation (the "Company"), and
THE MACNEAL-SCHWENDLER CORPORATION, in its capacity as Warrant Agent (the
"Warrant Agent").
WITNESSETH:
-----------
WHEREAS, the Company proposes to issue up to 1,400,000
Common Stock Purchase Warrants (the "WARRANTS") to purchase Common Stock, par
value $0.01 per share (the "COMMON STOCK"), as part of the purchase price for
certain stock of the MARC Analysis Research Corporation to be acquired by the
Company, each Warrant entitling the registered owner thereof to purchase one
share of Common Stock (each share of Common Stock purchasable upon the
exercise of a Warrant being referred to herein as a "WARRANT SHARE"); and
WHEREAS, the Company wishes the Warrant Agent to act on
behalf of the Company, and the Warrant Agent is willing to act, in connection
with the issuance, transfer, exchange and exercise of the Warrants.
NOW, THEREFORE, in consideration of the foregoing and for
the purpose of defining the terms and provisions of the Warrants and the
respective rights and obligations thereunder of the Company and the
registered owners of the Warrants (the "HOLDERS"), the Company and the
Warrant Agent hereby agree as follows:
SECTION 1. APPOINTMENT OF WARRANT AGENT.
The Company hereby appoints the Warrant Agent to act as agent
for the Company in accordance with the terms and conditions hereinafter set
forth, and the Warrant Agent hereby accepts such appointment.
SECTION 2. FORM OF WARRANTS.
2.1 FORM OF WARRANT CERTIFICATES. The text of the Warrant
certificate and of the form of election to purchase Warrant Shares shall be
substantially as set forth in Exhibit A attached hereto. The Warrant
certificates shall be appropriately printed, lithographed or engraved and may
have such letters, numbers, other marks of identification, or legends as the
Company may deem appropriate and as are not inconsistent with the provisions
of this Agreement, or as may be required to comply with any rule or
regulation of any stock exchange on which the Warrants may be listed, or to
conform to usage. The price per Warrant Share and the number of Warrant
Shares issuable upon exercise of each Warrant are subject to adjustment upon
the occurrence of certain events, all as hereinafter provided. The Warrant
certificates shall be executed on behalf of the Company by its Chairman of
the Board, its President or one of its Vice Presidents under its corporate
seal reproduced thereon and attested by its Secretary or an Assistant
Secretary. The signature of any of such officers on the Warrant certificates
may be manual or facsimile.
Warrant certificates bearing the manual or facsimile
signatures of individuals who were at any time the proper officers of the
Company shall bind the Company, notwithstanding
<PAGE>
that such individuals or any one of them shall have ceased to hold such
offices prior to the delivery of such Warrant certificates or did not hold
such office on the date of this Agreement.
Warrant certificates shall be dated as of the date of
countersignature thereof by the Warrant Agent either upon initial issuance or
upon exchange, substitution or transfer.
2.2 COUNTERSIGNATURE OF WARRANT CERTIFICATES. The Warrant
certificates shall be manually countersigned by the Warrant Agent (or any
successor to the Warrant Agent then acting as warrant agent under this
Agreement) and shall not be valid for any purpose unless so countersigned.
Warrant certificates may be countersigned by the Warrant Agent (or by its
successor as warrant agent hereunder) and may be delivered by the Warrant
Agent notwithstanding that the persons whose manual or facsimile signatures
appear thereon as proper officers of the Company shall have ceased to be such
officers at the time of such countersignature, issuance or delivery. The
Warrant Agent shall, upon written instructions of the Chairman of the Board,
the President, any Vice President or the Secretary of the Company,
countersign, issue and deliver Warrant certificates entitling the Holders
thereof to purchase in the aggregate Warrant Shares (subject to adjustment
pursuant to Section 11 hereof) and shall countersign and deliver Warrant
certificates as otherwise provided in this Agreement.
2.3 REGISTRATION. The Warrant certificates shall be
numbered and shall be registered in a register (the "WARRANT REGISTER") as
they are issued. The Company and the Warrant Agent shall be entitled to treat
the registered holder of any Warrant as the owner in fact thereof for all
purposes and shall not be bound to recognize any equitable or other claim to,
or interest in, such Warrant on the part of any other person, notwithstanding
any notice to the Company or the Warrant Agent to the contrary.
SECTION 3. TRANSFER OR EXCHANGE OF WARRANTS.
3.1 TRANSFER. The Warrants shall be transferable only in
the books of the Company maintained at the office or agency of the Warrant
Agent designated for such purpose in the City of Los Angeles upon delivery
thereof duly endorsed by the Holder or by his or her duly authorized attorney
or legal representative, or accompanied by proper evidence of succession,
assignment or authority to transfer, which endorsement shall be guaranteed by
a bank or trust company located in the United States or a broker or dealer
that is a member of a national securities exchange. In all cases of transfer
by an attorney, the original power of attorney, duly approved, or an official
copy thereof, duly certified, shall be deposited and remain with the Warrant
Agent. In case of transfer by executors, administrators, guardians or other
legal representatives, duly authenticated evidence of their authority shall
be produced, and required to be deposited and remain with the Warrant Agent.
Upon any registration of transfer, the Warrant Agent shall countersign and
deliver a new Warrant certificate to the person entitled thereto.
3.2 EXCHANGE OF WARRANT CERTIFICATES. Warrant certificates
may be exchanged for another certificate or certificates entitling the Holder
thereof to purchase a like aggregate number of Warrant Shares as the
certificate or certificates surrendered then entitle such Holder to purchase.
Any Holder desiring to exchange a Warrant certificate shall make such request
in writing delivered to the Warrant Agent, and shall surrender, properly
endorsed in the manner
2
<PAGE>
described in subsection 3.1 hereof, the Warrant certificate or certificates
to be so exchanged. Thereupon, the Warrant Agent shall countersign and
deliver to the person entitled thereto a new Warrant certificate or
certificates, as the case may be, as so requested.
SECTION 4. [SECTION 4 INTENTIONALLY LEFT BLANK].
SECTION 5. MUTILATED OR MISSING WARRANTS.
In case any of the certificates evidencing the Warrants
shall be mutilated, lost, stolen or destroyed, the Company may, in its
discretion, issue and the Warrant Agent shall countersign and deliver in
exchange and substitution for and upon cancellation of the mutilated Warrant
certificate, or in lieu of and substitution for the Warrant certificate lost,
stolen or destroyed, a new Warrant certificate of like tenor and representing
an equivalent right or interest, but only, in case of any such loss, theft or
destruction, upon receipt of evidence satisfactory to the Company and the
Warrant Agent thereof and an indemnity also satisfactory to them. An
applicant for such substitute Warrant certificate shall also comply with such
other reasonable regulations and pay such other reasonable charges as the
Company or the Warrant Agent may prescribe.
SECTION 6. TERM OF WARRANTS; EXERCISE OF WARRANTS.
6.1 TERM OF WARRANTS. Subject to the terms of this
Agreement, each Holder shall have the right until 5:00 P.M., Los Angeles
time, on June 18, 2004 (the "Expiration Date"), to purchase from the Company
the number of fully paid and nonassessable Warrant Shares which the Holder
may at the time be entitled to purchase on exercise of such Warrants.
6.2 EXERCISE OF WARRANTS. Warrant Shares may be purchased
upon surrender to the Company at the office or agency of the Warrant Agent
designated for such purpose in the City of Los Angeles, of the certificate or
certificates evidencing the Warrants to be exercised, together with the form
of election to purchase on the reverse thereof duly filled in and signed,
which signature shall, if the Warrant Shares are to be issued in the name of
a person other than the Holder of the Warrant, be guaranteed by a bank or
trust company located in the United States or a broker or dealer that is a
member of a national securities exchange, and upon payment to the Warrant
Agent for the account of the Company of the Exercise Price (as defined in and
determined in accordance with the provisions of Sections 10 and 11 hereof)
for the number of Warrant Shares in respect of which such Warrants are then
being exercised.
Subject to Section 8 hereof, upon such surrender of
Warrants and payment of the Exercise Price as aforesaid, the Company shall
issue and cause to be delivered, with all reasonable dispatch, to or upon the
written order of the Holder and in such name or names as the Holder may
designate, a certificate or certificates for the number of full Warrant
Shares so purchased upon the exercise of such Warrants. Such certificate or
certificates shall be deemed to have been issued and any person so designated
to be named therein shall be deemed to have become a holder of record of such
Warrant Shares as of the date of the surrender of such Warrants and payment
of the Exercise Price, as aforesaid; PROVIDED, HOWEVER, that if such Warrants
are surrendered, and the Exercise Price is paid, on a Saturday, Sunday or
other day on
3
<PAGE>
which banking institutions in the City of Los Angeles are authorized or
obligated by law or executive order to close, or on a day when the Common
Stock transfer books of the Company are closed, the certificates for the
Warrant Shares in respect of which such Warrants are then exercised shall be
issuable as of the next succeeding Monday, Tuesday, Wednesday, Thursday or
Friday on which such banking institutions are not so authorized or obligated
to close (whether before or after the Expiration Date) and which is a day on
which the Common Stock transfer books of the Company are open. The rights of
purchase represented by the Warrants shall be exercisable, at the election of
the Holders thereof, either in full or from time to time in part and, in the
event that a certificate evidencing Warrants is exercised in respect of less
than all of the Warrant Shares specified therein at any time prior to the
expiration of such Warrants, a new certificate evidencing the remaining
Warrant or Warrants will be issued, and the Warrant Agent is hereby
irrevocably authorized to countersign and to deliver the required new Warrant
certificates pursuant to the provisions of this subsection and of subsection
2.2 hereof and the Company, whenever required by the Warrant Agent, will
supply the Warrant Agent with Warrant certificates duly executed on behalf of
the Company for such purpose.
6.3 PAYMENT OF EXERCISE PRICE. Payment of the aggregate
Exercise Price shall be made by certified or cashier's check, by presentment
of any of the notes described below, or by any combination thereof. Holders
may present, as payment of the aggregate Exercise Price, any note from those
series of notes issued by the Company pursuant to the Indenture dated as of
June 17, 1999 among the Company and Chase Manhattan Bank & Trust Company
N.A., as trustee, known as 8% Subordinated Promissory Notes due 2001 and 8%
Subordinated Promissory Notes due 2009. Holders surrendering such notes in
payment of the Exercise Price shall be fully credited for the unpaid
principal value and accrued but unpaid interest thereon toward the subject
Exercise Price, or portion thereof, as the case may be.
SECTION 7. DISPOSITION OF PROCEEDS ON EXERCISE OF
WARRANTS.
The Warrant Agent will promptly provide information to the
Company with respect to the Warrants exercised including the name of the
holder of Warrants exercised, the number of Warrants exercised and the date
of exercise, and concurrently pay to the Company all moneys (or notes
referred to in Section 6.3) received by the Warrant Agent for the purchase of
the Warrant Shares through the exercise of such Warrants. Any such notes
shall be promptly delivered to the Company by the Warrant Agent.
SECTION 8. PAYMENT OF TAXES.
The Company will pay all documentary stamp taxes, if any,
attributable to the issuance of any Warrant certificates or certificates for
Warrant Shares issuable upon the exercise of Warrants; PROVIDED, HOWEVER,
that the Company shall not be required to pay, and the Holder shall pay, any
tax or taxes that may be payable in respect of any transfer involved in the
issue or delivery of any Warrant certificates or certificates for Warrant
Shares in a name other than that of the registered Holder of the Warrants
that were surrendered and the Company shall not be required to issue or
deliver such Warrant certificates or certificates for Warrant Shares unless
or until the persons requesting the issuance thereof shall have paid to the
Company the amount of such tax or shall have established to the satisfaction
of the Company that such tax has been paid.
4
<PAGE>
SECTION 9. RESERVATION OF WARRANT SHARES; PURCHASE
AND CANCELLATION OF WARRANTS.
9.1 RESERVATION OF WARRANT SHARES. There have been
reserved, and the Company shall at all times keep reserved out of its
authorized Common Stock, a number of shares of Common Stock sufficient to
provide for the exercise of the right of purchase represented by the
outstanding Warrants. The Company covenants that all Warrant Shares will,
upon issuance, be duly authorized, validly issued, fully paid and
nonassessable. The transfer agent for the Company's Common Stock (the
"Transfer Agent") and every subsequent transfer agent for any shares of the
Company's capital stock issuable upon the exercise of any of the rights of
purchase aforesaid will be irrevocably authorized and directed at all times
to reserve such number of authorized shares required for such purpose. The
Company will keep a copy of this Agreement on file with the Transfer Agent
for the Common Stock and with every subsequent transfer agent for any shares
of the Company's capital stock issuable upon the exercise of the rights of
purchase represented by the Warrants. The Warrant Agent is hereby irrevocably
authorized to requisition from time to time from such Transfer Agent stock
certificates required to honor outstanding Warrants upon exercise thereof in
accordance with the terms of this Agreement. The Company will supply such
Transfer Agent with duly executed stock certificates for such purpose.
Promptly after the Expiration Date, the Warrant Agent shall, upon the written
request of the Company, certify to the Company the aggregate number of
Warrants then outstanding and thereafter no shares shall be subject to
reservation in respect of such Warrants.
9.2 GOVERNMENTAL APPROVALS AND LISTINGS. The Company will
as promptly as practicable take all action which may be necessary to obtain
and keep effective any and all permits, consents and approvals of
governmental agencies and authorities, and will make any and all filings
under federal and state securities laws, necessary in connection with the
issuance, distribution and transfer of Warrant certificates, the exercise of
the Warrants, and the issuance, sale, transfer and delivery of Warrant Shares.
9.3 PURCHASE OF WARRANTS BY THE COMPANY. The Company shall
have the right, except as limited by law, other agreement or herein, to
purchase or otherwise acquire Warrants at such times, in such manner and for
such consideration as it may deem appropriate.
9.4 CANCELLATION OF WARRANTS. In the event the Company
shall purchase or otherwise acquire Warrants, the related Warrant
certificates shall thereupon be delivered by the Company to the Warrant Agent
together with instructions that such certificates be cancelled by it and
retired. The Warrant Agent shall cancel any Warrant certificate surrendered
for exchange, substitution, transfer or exercise in whole or in part. Warrant
certificates cancelled by the Warrant Agent pursuant to any provision of this
Agreement shall be delivered to the Company or, upon the request of the
Warrant Agent and with the consent of the Company, destroyed by the Warrant
Agent. Upon the Company's request, the Warrant Agent shall furnish to the
Company written confirmation of the destruction of the Warrant certificates
so cancelled.
5
<PAGE>
SECTION 10. EXERCISE PRICE.
The price per share at which Warrant Shares shall be
purchasable upon exercise of each Warrant (the "EXERCISE PRICE") shall be
$10.00, subject to adjustment pursuant to Section 11 hereof.
SECTION 11. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF
WARRANT SHARES.
11.1 ADJUSTMENTS. The number and kind of securities
purchasable upon the exercise of each Warrant and the Exercise Price shall be
subject to adjustment as follows:
(a) STOCK DIVIDENDS, SPLITS, ETC. In case the Company shall at
any time after the date of this Agreement (w) pay a dividend or make a
distribution on its Common Stock which is paid or made (A) in Common
Stock or other shares of the Company's capital stock or (B) in rights
or warrants to purchase Common Stock or other capital stock of the
Company if such rights or warrants are not exercisable or separable
from the Common Stock except upon the occurrence of a contingency, (x)
subdivide its outstanding Common Stock into a greater number of shares
of Common Stock, (y) combine its outstanding shares into a smaller
number of shares of Common Stock or (z) issue by reclassification of
its Common Stock other securities of the Company, then, in any such
event the number of Warrant Shares purchasable upon exercise of each
Warrant immediately prior thereto shall be adjusted so that the Holder
of each Warrant shall be entitled to receive upon exercise of such
Warrant the kind and number of shares of the Company and rights to
purchase Common Stock or other securities of the Company (or, in the
event of the redemption of any such rights, any cash paid in respect of
such redemption) that he, she or it would have owned or been entitled
to receive after the happening of any of the events described above had
such Warrant been exercised immediately prior to the happening of such
event or any record date with respect thereto. An adjustment made
pursuant to this paragraph (a) shall become effective immediately after
the opening of business on the next business day following the record
date in the case of dividends or other distributions and shall become
effective immediately after the opening of business on the next
business day following the effective date in the case of a subdivision
or combination.
(b) DISTRIBUTIONS OF ASSETS. In case the Company shall at any
time after the date of this Agreement distribute to all holders of its
Common Stock evidences of indebtedness of the Company or assets of the
Company (including cash dividends or distributions out of retained
earnings other than cash dividends or distributions made on a quarterly
or other periodic basis) or warrants to subscribe for securities of the
Company (excluding those referred to in paragraph (a) above), then in
each case the Exercise Price shall be adjusted to a price determined by
multiplying the Exercise Price in effect immediately prior to such
distribution by a fraction, of which the numerator shall be the then
current Market Price (as defined in paragraph (c) below) per share of
Common Stock on the record date for determination of shareholders
entitled to receive such distribution, less the then fair value (as
determined in good faith by the Board of
6
<PAGE>
Directors of the Company, whose determination shall be conclusive
and notice of which shall be provided to Warrant Agent) of the
portion of the assets or evidences of indebtedness so distributed or
of such subscription rights or warrants which are applicable to one
share of Common Stock, and of which the denominator shall be such
Market Price per share of Common Stock; PROVIDED, HOWEVER, that if
the then current Market Price per share of Common Stock on the
record date for determination of shareholders entitled to receive
such distribution is less than the then fair value of the portion of
the assets or evidences of indebtedness so distributed or of such
subscription rights or warrants which are applicable to one share of
Common Stock, the foregoing adjustment of the Exercise Price shall
not be made and in lieu thereof the Holder of each Warrant shall be
entitled to receive upon exercise of such Warrant in addition to the
Common Stock the kind and number of assets, evidences of
indebtedness, subscription rights and warrants (or, in the event of
the redemption of any such evidences of indebtedness, subscription
rights and warrants, any cash paid in respect of such redemption)
that he or she would have owned or have been entitled to receive
after the happening of such distribution had such Warrant been
exercised immediately prior to the record date for such
distribution. Such adjustment shall be made successively whenever
such a record date is fixed, and in the event that such distribution
is not so made, the Exercise Price shall again be adjusted to be the
Exercise Price which would then be in effect if such record date had
not been fixed.
(c) COMPUTATION OF MARKET PRICE. For the purpose of any
computation under this Agreement, the current Market Price per share of
Common Stock at any date shall be deemed to be the average of the daily
closing price per share for the 15 consecutive Trading Days (as defined
below) commencing 30 Trading Days before the date in question. "MARKET
PRICE" is defined as the closing price for the Common Stock on the New
York Stock Exchange. If Market Price cannot be established as described
above, Market Price shall be the fair market value of the Common Stock
as determined in good faith by the Board of Directors. "TRADING DAY"
shall mean a day on which the principal national securities exchange on
which the Common Stock is listed or admitted to trading is open for the
transaction of business.
(d) MINIMUM ADJUSTMENT. No adjustment in the number of Warrant
Shares purchasable hereunder or the Exercise Price shall be required
unless such adjustment would require an increase or decrease of at
least 1.0% in the number of Warrant Shares purchasable upon the
exercise of each Warrant, or the Exercise Price, as the case may be;
PROVIDED, HOWEVER, that any adjustments which by reason of this
paragraph (d) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under
this Section 11 shall be made to the nearest cent or the nearest
ten-thousandth of a share, as the case may be.
(e) WARRANT SHARE ADJUSTMENT. Upon each adjustment of the
Exercise Price as a result of the calculations made in paragraph (a) or
(b) above, each Warrant outstanding immediately prior to the making of
such adjustment shall thereafter evidence the right to purchase, at the
adjusted Exercise Price, that number of shares (calculated to the
nearest ten-thousandth) obtained by (A) multiplying (x) the number of
shares covered
7
<PAGE>
by a Warrant immediately prior to such adjustment of the Exercise
Price by (y) the Exercise Price in effect immediately prior to such
adjustment of the Exercise Price and (ii) dividing the product so
obtained by the Exercise Price in effect immediately after such
adjustment of the Exercise Price.
(f) NOTICE OF ADJUSTMENT. Whenever the number of Warrant
Shares purchasable upon the exercise of Warrants or the Exercise Price
of such Warrant Shares is adjusted, as herein provided, the Company
shall cause the Warrant Agent promptly to mail by first class mail,
postage prepaid, to each Holder of a Warrant or Warrants notice of such
adjustment or adjustments and shall deliver to the Warrant Agent a
certificate of a firm of independent public accountants selected by the
Board of Directors of the Company (who may be the regular accountants
employed by the Company) setting forth (A) the number of Warrant Shares
purchasable upon the exercise of each Warrant and the Exercise Price of
such Warrant Shares after such adjustment, (B) a brief statement of the
facts requiring such adjustment and (C) the computation by which such
adjustment was made. Such certificate shall be conclusive evidence of
the correctness of such adjustment. The Warrant Agent shall be entitled
to rely on such certificate and shall be under no duty or
responsibility with respect to any such certificate, except to exhibit
the same, from time to time, to any Holder desiring an inspection
thereof during reasonable business hours. The Warrant Agent shall not
at any time be under any duty or responsibility to any Holders to
determine whether any facts exist that may require any adjustment of
the Exercise Price or the number of Warrant Shares or other stock or
property purchasable upon exercise thereof or with respect to the
nature or extent of any such adjustment when made, or with respect to
the method employed in making such adjustment.
(g) DEFINITION OF COMMON STOCK. For the purpose of this
subsection 11.1, the term "Common Stock" shall mean (A) the class of
stock designated as the Common Stock of the Company at the date of this
Agreement or (B) any other class of stock resulting from successive
changes or reclassifications of such shares consisting solely of
changes in par value, or from par value to no par value or from no par
value to par value. In the event that at any time, as a result of an
adjustment made pursuant to paragraph (a) above, the Holders of a
Warrant or Warrants shall become entitled to purchase any securities of
the Company other than Common Stock, thereafter the number of such
other securities so purchasable upon exercise of each Warrant and the
Exercise Price of such securities shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Warrant Shares
contained in this subsection 11.1 and the provisions of Section 6 and
subsections 11.2 and 11.3, inclusive, with respect to the Warrant
Shares, shall apply on like terms to any such other securities.
(h) COMPANY MAY REDUCE EXERCISE PRICE OR INCREASE NUMBER OF
WARRANT SHARES PURCHASABLE. The Company may, at its option, at any time
during the term of the Warrants, reduce the then current Exercise
Price, or increase the number of Common Shares purchasable upon
exercise of each Warrant, to any amount deemed appropriate by the Board
of Directors of the Company.
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(i) SUBSEQUENTLY ISSUED WARRANTS. All Warrants originally
issued by the Company subsequent to any adjustment made to the Exercise
Price hereunder shall evidence the right to purchase, at the adjusted
Exercise Price, the number of shares of Common Stock purchasable from
time to time hereunder upon exercise of the Warrants, all subject to
further adjustment as provided herein.
(j) NUMBER OF WARRANT SHARES ON WARRANT CERTIFICATES.
Irrespective of any adjustment or change in the Exercise Price or the
number of shares of Common Stock issuable upon the exercise of the
Warrants, the Warrant certificates theretofore and thereafter issued
may continue to express the Exercise Price per share and the number of
shares which were expressed upon the initial Warrant certificates
issued hereunder.
11.2 NO ADJUSTMENT FOR DIVIDENDS. Except as provided in
subsection 11.1, no adjustment in respect of any dividends made on a quarterly
or other periodic basis out of retained earnings shall be made during the term
of a Warrant or upon the exercise of a Warrant.
11.3 PRESERVATION OF PURCHASE RIGHTS AND ADJUSTMENT OF
EXERCISE PRICE UPON MERGER, CONSOLIDATION, ETC. In case the Company shall
consolidate or merge with or into any other corporation (other than a
consolidation or merger in which the Company is the surviving corporation and
each share of Common Stock outstanding immediately prior to such consolidation
or merger is to remain outstanding immediately after such consolidation or
merger and no cash, securities or other property is distributed with respect to
such shares) or shall sell or transfer all or substantially all of its assets to
any person or entity, the Company or such successor or purchasing person or
entity, as the case may be (collectively, the "ACQUIRING PERSON"), shall execute
with the Warrant Agent an agreement (so long as such agreement does not affect
the Warrant Agent's duties, rights and responsibilities set forth in this
Agreement) that each Holder of a Warrant shall have the right thereafter upon
payment of the Exercise Price in effect immediately prior to such action to
purchase upon exercise of each Warrant the kind and amount of shares and other
securities, cash and other property that he or she or it would have owned or
have been entitled to receive after the happening of such consolidation, merger
or sale had such Warrant been exercised immediately prior to such action
(assuming that such Holder, as a holder of Common Stock prior to such action,
would not have exercised any rights of election as a holder of Common Stock as
to the kind or amount of securities, cash or other property receivable upon such
consolidation, merger or sale; provided, that if the kind or amount of
securities, cash or other property receivable upon such consolidation, merger or
sale is not the same for each non-electing share of Common Stock, then the kind
and amount of securities, cash or other property receivable shall be deemed to
be the kind and amount so receivable by a plurality of the non-electing shares).
The Company shall mail by first-class mail, postage prepaid, to each Holder,
notice of the execution of any agreement with an acquiring person as provided in
the first sentence of this subsection 11.3 with a copy thereof to the Warrant
Agent. In addition to any adjustments required by this subsection 11.3, such
agreement shall provide for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 11. The
Company shall not effect any such consolidation, merger or sale unless prior to
or simultaneously with the consummation thereof the acquiring person (if other
than the Company) resulting from such consolidation or merger or the acquiring
person purchasing such assets or other appropriate corporation or entity shall
assume, by written
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<PAGE>
instrument executed and delivered to the Warrant Agent, the obligation to
deliver to each Holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such Holder may be entitled to
receive and the other obligations of the Company under this Agreement. The
provisions of this subsection 11.3 shall similarly apply to successive
consolidations, mergers, sales or conveyances. The Warrant Agent shall be
under no duty or responsibility to determine the correctness of any
provisions contained in any such agreement relating either to the kind or
amount of shares of stock or other securities, cash or property receivable
upon exercise of Warrants or with respect to the method employed and provided
therein for any adjustments.
SECTION 12. NO RIGHTS AS STOCKHOLDERS.
Nothing contained in this Agreement or in any of the Warrants shall be construed
as conferring upon the Holders or their transferees the right to vote or to
receive dividends or to consent or to receive notice as shareholders in respect
of any meeting of shareholders for the election of directors of the Company or
any other matter, or any rights whatsoever as shareholders of the Company.
SECTION 13. FRACTIONAL SHARES OF COMMON STOCK.
The Company will not issue fractions of Warrants or distribute
Warrant certificates which evidence fractional Warrants. In lieu of such
fractional Warrants, there shall be paid to the Holders to whom Warrant
certificates representing such fractional Warrants would otherwise be issuable
an amount in cash equal to the product of such fraction of a Warrant multiplied
by the current Market Price per share of Common Stock issuable with respect to
such fraction of a Warrant.
SECTION 14. RIGHT OF ACTION.
All rights of action in respect of this Agreement are vested
in the respective Holders of the Warrant certificates, and any Holder of any
Warrant certificate, without the consent of the Warrant Agent or of the Holder
of any other Warrant certificate, may, on such Holder's own behalf and for such
Holder's own benefit, enforce, and may institute and maintain any suit, action
or proceeding against the Company to enforce, or otherwise act in respect of,
such Holder's right to exercise the Warrants evidenced by such Warrant
certificate in the manner provided in such Warrant certificate and in this
Agreement.
SECTION 15. INSPECTION OF WARRANT AGREEMENT.
The Warrant Agent shall keep copies of this Agreement and any
notices given or received by it hereunder available for inspection by the
Holders during normal business hours at its office in the City of Los Angeles
for that purpose. The Company shall supply the Warrant Agent from time to time
with such numbers of copies of this Agreement as the Warrant Agent may request.
10
<PAGE>
SECTION 16. MERGER OR CONSOLIDATION OR CHANGE OF NAME
OF WARRANT AGENT.
Any corporation or entity into which the Warrant Agent may
be merged or with which it may be consolidated, or any corporation or entity
resulting from any merger or consolidation to which the Warrant Agent shall
be a party, or any corporation or entity succeeding to the shareholder
services business of the Warrant Agent, shall be the successor to the Warrant
Agent hereunder without the execution or filing of any paper or any further
act on the part of any of the parties hereto, provided that such corporation
or entity would be eligible for appointment as successor Warrant Agent under
the provisions of Section 18 hereof. In case at the time such successor to
the Warrant Agent shall succeed to the agency created by this Agreement any
of the Warrants shall have been countersigned but not delivered, any such
successor to the Warrant Agent may adopt the countersignature of the original
Warrant Agent and deliver such Warrants so countersigned; and in case at that
time any of the Warrants shall not have been countersigned, any successor to
the Warrant Agent may countersign such Warrants either in the name of the
predecessor Warrant Agent or in the name of the successor Warrant Agent, and
in all such cases such Warrants shall have the full force provided in the
Warrants and in this Agreement.
In case at any time the name of the Warrant Agent shall be
changed and at such time any of the Warrants shall have been countersigned
but not delivered, the Warrant Agent may adopt the countersignatures under
its prior name and deliver Warrants so countersigned; and in case at that
time any of the Warrants shall not have been countersigned, the Warrant Agent
may countersign such Warrants either in its prior name or in its changed
name; and in all such cases such Warrants shall have the full force provided
in the Warrants and in this Agreement.
SECTION 17. CONCERNING THE WARRANT AGENT.
The Warrant Agent undertakes the duties and obligations
expressly imposed by this Agreement upon the following terms and conditions,
by all of which the Company and the Holders of Warrants, by their acceptance
thereof, shall be bound:
17.1 DISCLAIMER OF REPRESENTATIONS. The statements
contained herein and in the Warrants shall be taken as statements of the
Company, and the Warrant Agent assumes no responsibility for the correctness
of any of the same except such as describe the Warrant Agent or action taken
by it. The Warrant Agent assumes no responsibility with respect to the
distribution of the Warrants except as herein otherwise provided.
17.2 NO RESPONSIBILITY FOR FAILURE OF COMPANY'S COVENANTS.
The Warrant Agent shall not be responsible for any failure of the Company to
comply with any of the covenants or provisions contained in this Agreement or
in the Warrants.
17.3 DELEGATION. The Warrant Agent may execute and exercise
any of the rights or powers hereby vested in it or perform any duty hereunder
either itself or by or through its attorneys or agents, and the Warrant Agent
shall not be answerable or accountable for any act, neglect or misconduct of
any such attorneys or agents or for any loss to the Company resulting
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<PAGE>
from such neglect or misconduct provided reasonable care shall have been
exercised in the selection and continued retention thereof.
17.4 OPINION OF COUNSEL. The Warrant Agent may consult at
any time with legal counsel satisfactory to it, and the Warrant Agent shall
incur no liability or responsibility to the Company or to any Holder in
respect of any action taken, suffered or omitted by it hereunder in good
faith and in accordance with the opinion or the advice of such counsel.
17.5 OFFICER'S CERTIFICATE. Whenever in the performance of
its duties under this Agreement the Warrant Agent shall deem it necessary or
desirable that any fact or matter be proved or established by the Company
prior to taking or suffering any action hereunder, such fact or matter
(unless other evidence in respect thereof be herein specifically prescribed)
may be deemed to be conclusively proved and established by a certificate
signed by the Chairman of the Board, the President, any Vice President, the
Chief Financial Officer or the Secretary of the Company and delivered to the
Warrant Agent; and such certificate shall be full authorization to the
Warrant Agent and the Warrant Agent shall incur no liability for or in
respect of any action taken, suffered or omitted in good faith by it under
the provisions of this Agreement in reliance upon such certificate.
17.6 COMPENSATION, REIMBURSEMENT AND INDEMNIFICATION. The
Company agrees to pay the Warrant Agent reasonable compensation for all
services rendered by the Warrant Agent in the performance of its duties under
this Agreement, to reimburse the Warrant Agent for all expenses, taxes and
governmental charges and other charges of any kind and nature reasonably
incurred by the Warrant Agent in the performance of its duties under this
Agreement including its reasonable expenses and counsel fees. The Company
also agrees to indemnify the Warrant Agent and save it harmless against any
and all losses, liabilities, including judgments, costs and reasonable
counsel fees, for any action taken, suffered or omitted by the Warrant Agent
in the performance of its duties under this Agreement except as a result of
the Warrant Agent's gross negligence or willful misconduct. The indemnity
provided herein shall survive the termination of this Agreement and the
termination and expiration of the Warrants. The costs and expenses incurred
in enforcing this right of indemnification shall be paid by the Company.
Anything to the contrary notwithstanding, in no event shall the Warrant Agent
be liable for special, punitive, indirect, consequential or incidental loss
or damage of any kind whatsoever (including lost profits), even if the
Warrant Agent has been advised of the likelihood of such loss or damage. Any
liability of the Warrant Agent under this Agreement, except in the event of
the Warrant Agent's gross negligence or willful misconduct, will be limited
to the amount of fees paid by the Company to the Warrant Agent.
17.7 NO ACTION WITHOUT ASSURANCE OF REIMBURSEMENT. The
Warrant Agent may, but shall be under no obligation to institute any action,
suit or legal proceeding or to take any other action likely to involve
expense unless the Company or one or more Holders shall furnish the Warrant
Agent with reasonable security and indemnity for any costs and expenses which
may be incurred. All rights or action under this Agreement or under any of
the Warrants may be enforced by the Warrant Agent without the possession of
any of the Warrants or the production thereof at any trial or other
proceeding relative thereto, and any such action, suit or proceeding
instituted by the Warrant Agent shall be brought in its name as Warrant
Agent, and
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any recovery of judgment shall be for the ratable benefit of the Holders, as
their respective rights or interests may appear.
17.8 CONFLICTS OF INTEREST. The Warrant Agent and any
stockholder, director, officer or employee of the Warrant Agent may buy, sell
or deal in any of the Warrants or other securities of the Company or become
pecuniarily interested in any transaction in which the Company may be
interested, or contract with or lend money to the Company or otherwise act as
fully and freely as though it were not Warrant Agent under this Agreement.
Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company or for any other legal entity.
17.9 SOLELY AS AGENT. The Warrant Agent shall act hereunder
solely as agent, and its duties shall be determined solely by the provisions
hereof. The Warrant Agent shall not be liable for anything that it may do or
refrain from doing in connection with this Agreement except for its own gross
negligence or willful misconduct.
17.10 RELIANCE ON DOCUMENTS. The Warrant Agent will not
incur any liability or responsibility to the Company or to any Holder of any
Warrant for any action taken in reliance on any notice, resolution, waiver,
consent, order, certificate, or other paper, document or instrument
reasonably believed by it to be genuine and to have been signed, sent or
presented by the proper party or parties.
17.11 NO REPRESENTATION REGARDING VALIDITY, ETC. The
Warrant Agent shall not be under any responsibility in respect of the
validity of this Agreement or the execution and delivery hereof (except the
due execution and delivery hereof by the Warrant Agent) or in respect of the
validity or execution of any Warrant (except its countersignature thereof);
nor shall the Warrant Agent by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any
Warrant Shares (or other stock) to be issued pursuant to this Agreement or
any Warrant, or as to whether any Warrant Shares (or other stock) will when
issued be validly issued, fully paid and nonassessable, or as to the Exercise
Price or the number or amount of Warrant Shares or other securities or other
property issuable upon exercise of any Warrant.
17.12 INSTRUCTIONS FROM COMPANY. The Warrant Agent is
hereby authorized and directed to accept instructions with respect to the
performance of its duties hereunder from the Chairman of the Board, the
President, any Vice President, the Chief Financial Officer or the Secretary
of the Company, and to apply to such officers for advice or instructions in
connection with its duties, and shall not be liable for any action taken,
suffered or omitted to be taken by it in good faith in accordance with
instructions of any such Officers.
17.13 WARRANT AGENT NOT REQUIRED TO EXPEND FUNDS. No
provision of this Agreement shall require the Warrant Agent to expend or risk
its own funds or otherwise incur any financial liability in the performance
of its duties hereunder or in the exercise of its rights if it believes that
repayment of such funds or adequate indemnification against such risk or
liability is not reasonably assured to it.
13
<PAGE>
SECTION 18. CHANGE OF WARRANT AGENT.
The Warrant Agent may resign and be discharged from its
duties under this Agreement by giving to the Company 60 days' notice in
writing. The Warrant Agent may be removed by like notice to the Warrant Agent
from the Company. If the Warrant Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor
to the Warrant Agent. If the Company shall fail to make such appointment
within a period of 50 days after such notice of removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Warrant Agent or by any Holder (who shall with such notice
submit his Warrant for inspection by the Company), then the resigning,
discharged or removed Warrant Agent or any Holder may apply to any court of
competent jurisdiction for the appointment of a successor to the Warrant
Agent. Any successor warrant agent, whether appointed by the Company or such
court, shall be (a) an entity, in good standing, organized and doing business
under the laws of the United States of America or any state thereof and
having at the time of its appointment as warrant agent a combined capital and
surplus of at least $50,000,000, as set forth in its most recent published
annual report of condition or (b) an affiliate of an entity described in
clause (a) above. After appointment, the successor warrant agent shall be
vested with the same powers, rights, duties and responsibilities as if it had
been originally named as Warrant Agent hereunder without further act or deed;
but the former Warrant Agent shall deliver and transfer to the successor
warrant agent any property at the time held by it hereunder, and shall
execute and deliver any further assurance, conveyance, act or deed reasonably
requested and necessary for such purpose. In the event of such resignation or
removal, the successor warrant agent shall mail, by first-class mail, postage
prepaid, to each Holder, written notice of such removal or resignation and
the name and address of such successor warrant agent. Failure to file any
notice provided for in this Section 18, however, or any defect therein, shall
not affect the legality or validity of the resignation or removal of the
Warrant Agent or the appointment of the successor warrant agent, as the case
may be.
SECTION 19. IDENTITY OF TRANSFER AGENT.
Forthwith upon the appointment of any subsequent Transfer
Agent for the Company's shares of Common Stock, or any other shares of the
Company's capital stock issuable upon the exercise of the rights of purchase
represented by the Warrants, the Company will file with the Warrant Agent a
statement setting forth the name and address of such Transfer Agent.
SECTION 20. NOTICES.
Any notice pursuant to this Agreement by the Company or by
the Holder of any Warrant to the Warrant Agent, or by the Warrant Agent or by
the Holder of any Warrant to the Company, shall be in writing and shall be
deemed to have been duly given if delivered or mailed by certified mail,
return receipt requested, (a) if to the Company, to The MacNeal-Schwendler
Corporation, 815 Colorado Boulevard, Los Angeles, California 90041,
Attention: Louis A. Greco and, (b) if to the Warrant Agent, for so long as
The MacNeal-Schwendler Corporation is acting as Warrant Agent, to the address
provided above for the Company. Each party hereto may
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<PAGE>
from time to time change the address to which notices to it are to be
delivered or mailed hereunder by notice in writing to the other party.
Any notice mailed pursuant to this Agreement by the Company
or the Warrant Agent to the Holders of Warrants shall be in writing and shall
be deemed to have been duly given if mailed by first-class mail, postage
prepaid, to such Holders at their respective addresses on the Warrant
Register of the Warrant Agent.
SECTION 21. SUPPLEMENTS AND AMENDMENTS.
The Company and the Warrant Agent may from time to time
supplement or amend this Agreement, without the approval of any Holder in
order to cure any ambiguity or to correct or supplement any provision
contained herein that may be defective or inconsistent with any other
provisions herein, or to make any other provisions with regard to matters or
questions arising hereunder that the Company and the Warrant Agent may deem
necessary or desirable and that shall not adversely affect the interests of
the Holders of Warrants.
In addition to the foregoing, with the consent of Holders
of Warrants entitled, upon exercise thereof, to receive not less than a
majority of the Warrant Shares issuable thereunder, the Company and the
Warrant Agent may modify this Agreement for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions
of this Agreement or modifying in any manner the rights of the Holders of the
Warrants; provided, however, that (a) no modification of the terms
(including, but not limited to the adjustments described in Section 11) upon
which the Warrants are exercisable or reducing the percentage required for
consent to modification of this Agreement, no acceleration of the Expiration
Date and no increase in the Exercise Price may, in each case, be made without
the consent of the Holder of each outstanding Warrant affected thereby, and
(b) notwithstanding anything to the contrary contained herein, the Warrant
Agent may, but shall not be required to, enter into a supplement or amendment
that affects the Warrant Agent's duties, obligations or immunities under this
Agreement.
SECTION 22. SUCCESSORS.
All the covenants and provisions of this Agreement by or
for the benefit of the Company or the Warrant Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.
SECTION 23. MERGER OR CONSOLIDATION OF THE COMPANY.
The Company will not merge or consolidate with or into any
other corporation unless the corporation resulting from such merger or
consolidation (if not the Company) shall expressly assume, by supplemental
agreement satisfactory in form to the Warrant Agent in the exercise of its
reasonable judgment and executed and delivered to the Warrant Agent, the due
and punctual performance and observance of each and every covenant and
condition of this Agreement to be performed and observed by the Company.
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SECTION 24. APPLICABLE LAW.
This Agreement and each Warrant issued hereunder shall be
deemed to be a contract made under the internal laws of the State of
California (without preference to conflicts of law principles) and for all
purposes shall be construed in accordance with the laws of said State; except
that all provisions regarding the rights, duties and obligations of the
Warrant Agent shall be governed and construed in accordance with the laws of
the State of New York applicable to contracts made and to be performed
entirely within such State.
SECTION 25. BENEFITS OF THIS AGREEMENT.
Nothing in this Agreement shall be construed to give to any
person or corporation other than the Company, the Warrant Agent and the
Holders of the Warrants any legal or equitable right, remedy or claim under
this Agreement; and this Agreement shall be for the sole and exclusive
benefit of the Company, the Warrant Agent, and their respective successors
and assigns hereunder, and the holders from time to time of the Warrants.
SECTION 26. COUNTERPARTS.
This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but
one and the same instrument.
SECTION 27. CAPTIONS.
The captions of the Sections and subsections of this
Agreement have been inserted for convenience only and shall have no
substantive effect.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
THE MACNEAL-SCHWENDLER CORPORATION
By /s/ Frank Perna, Jr.
--------------------------------
Attest:
/s/ Louis A. Greco
- -----------------------------
THE MACNEAL-SCHWENDLER
CORPORATION, as Warrant Agent
By /s/ Frank Perna, Jr.
--------------------------------
Attest:
/s/ Louis A. Greco
- -----------------------------
<PAGE>
EXHIBIT 4.2
[MSC.SOFTWARE CORPORATION LETTERHEAD]
Date: October 18, 1999
To Whom It May Concern:
MSC.Software Corporation (formerly The MacNeal-Schwendler
Corporation), in its capacity as Warrant Agent, hereby resigns as Warrant
Agent under that certain Warrant Agreement dated as of June 18, 1999 relating
to the issuance of the common stock purchase warrants by MSC.Software
Corporation, and appoints Chasemellon Shareholder Services, L.L.C. as the
successor Warrant Agent under the Warrant Agreement.
MSC.SOFTWARE CORPORATION,
as Warrant Agent
/s/ Louis A. Greco
-------------------------------------
Louis A. Greco
Chief Financial Officer and Secretary
MSC.SOFTWARE CORPORATION
/s/ Louis A. Greco
-------------------------------------
Louis A. Greco
Chief Financial Officer and Secretary
We hereby consent to our appointment as Warrant Agent, under the Warrant
Agreement dated as of June 18, 1999, relating to the issuance of the common
stock purchase warrants by MSC.Software Corporation, a copy of which is
attached hereto as Exhibit A.
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
By: /s/ Mary Ann McElroy
--------------------------------------
Name: Mary Ann McElroy
Its: Relationship Manager
DATED: October 18, 1999
<PAGE>
WARRANT TO PURCHASE COMMON STOCK VOID
AFTER 5:00 P.M., LOS ANGELES TIME, ON JUNE 18, 2004
THE MacNEAL-SCHWENDLER CORPORATION
This certifies that, for value received, ______________. or
registered assigns (the "Holder"), is entitled to purchase from The
MacNeal-Schwendler Corporation, a Delaware corporation (the "Company"), until
5:00 P.M., Los Angeles time, on June 18, 2004, or such earlier date as may be
provided for pursuant to the Warrant Agreement referred to below (the
"Expiration Date"), at the purchase price of $10.00 per share (the "Exercise
Price"), 700,000 shares of Common Stock, par value $0.01 per share, of the
Company (the "Common Stock"). The number of shares purchasable upon exercise of
this Warrant and the Exercise Price per share are subject to adjustment from
time to time as set forth in the Warrant Agreement referred to below.
The Warrants evidenced hereby may be exercised in whole or in
part by presentation of this Warrant Certificate with the Purchase Form on the
reverse side hereof duly executed (with a signature guarantee if required by the
Warrant Agreement) and simultaneous payment of the Exercise Price (subject to
adjustment) at the office or agency of the Company maintained for that purpose
in the City of Los Angeles. Initially, The MacNeal-Schwendler Corporation will
act as Warrant Agent (the "Warrant Agent"). Payment of such price shall be made
at the option of the holder hereof by certified or cashier's check or surrender
of the subordinated promissory notes identified in the Warrant Agreement. No
fractional shares will be issued upon the exercise of rights to purchase
hereunder, but the Company shall pay the cash value of any such fraction upon
the exercise of one or more Warrants, all as provided in the Warrant Agreement.
Upon any partial exercise of this Warrant Certificate, there
shall be countersigned and issued to the Holder hereof a new Warrant Certificate
in respect of the shares as to which this Warrant shall not have been exercised.
This Warrant Certificate may be exchanged at the office of the Warrant Agent
maintained for that purpose in the City of Los Angeles by surrender of this
Warrant Certificate properly endorsed (with a signature guarantee if required by
the Warrant Agreement), either separately or in combination with one or more
other Warrant Certificates, for one or more new Warrant Certificates for the
same aggregate number of shares as were evidenced by the Warrant Certificate or
Warrant Certificates exchanged.
This Warrant Certificate is transferable at the office of the
Warrant Agent maintained for that purpose in the City of Los Angeles in the
manner and subject to the limitations set forth in the Warrant Agreement.
The Warrants evidenced hereby are part of a duly authorized
issue of Common Stock Purchase Warrants with rights to purchase an aggregate of
up to 1,400,000 shares of Common Stock (subject to adjustment) and are issued
under and in accordance with a Warrant Agreement dated as of June 18, 1999,
between the Company and the Warrant Agent and are
<PAGE>
subject to the terms and provisions contained in the Warrant Agreement, to all
of which the Holder of this Warrant Certificate by acceptance hereof consents.
Copies of the Warrant Agreement are on file at the above mentioned office of the
Warrant Agent and may be obtained for inspection by the Holder hereof upon
written request to the Warrant Agent.
The Holder hereof may be treated by the Company, the Warrant
Agent, and all other persons dealing with this Warrant Certificate as the
absolute owner hereof for any purpose and as the person entitled to exercise the
rights represented hereby, or to the transfer hereof on the books of the
Company, any notice to the contrary notwithstanding, and until such transfer on
such books, the Company, the Warrant Agent and all such other persons may treat
the registered holder hereof as the owner for all purposes.
The Warrants evidenced hereby do not entitle any Holder hereof
to any of the rights of a shareholder of the Company.
This Warrant Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by the Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be executed by its duly authorized officers and the corporate
seal hereunto affixed.
Dated: THE MacNEAL-SCHWENDLER CORPORATION
By:
----------------------------------
Title: Chief Executive Officer
ATTEST:
------------------------------
Title: Secretary
COUNTERSIGNED:
THE MacNEAL-SCHWENDLER CORPORATION
WARRANT AGENT
By:
-------------------------
Title: Secretary
<PAGE>
EXHIBIT 5.1
OPINION REGARDING LEGALITY
October 18, 1999
MSC.Software Corporation
815 Colorado Boulevard
Los Angeles, California 90041
Re: REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
We have acted as special counsel to MSC.Software Corporation,
formerly The MacNeal-Schwendler Corporation (the "Company"), a Delaware
corporation, in connection with the preparation of the Registration Statement
on Form S-3 (the "Registration Statement") to be filed with the Securities
and Exchange Commission by Company in connection with the proposed offering
and sale by certain selling holders of warrants to purchase 1,400,000 shares
of common stock of Company (the "Warrants"). We are familiar with the
proceedings heretofore taken by the Company in connection with the
authorization, issuance and registration of the Warrants.
Based upon the foregoing, we are of the opinion that:
1. The Warrants are valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally (including, without
limitation, fraudulent conveyance laws), and general principles of equity,
including without limitation, concepts of materiality, reasonableness, good
faith and fair dealing and the possible unavailability of specific
performance or injunction relief, regardless of whether such enforceability
is considered in a proceeding in equity or at law.
2. Upon payment of the exercise price for the shares of common stock
to be issued upon exercise of the Warrants and the issuance and delivery
thereof in accordance with the Warrants and the Warrant Agreement, and the
countersigning of the certificate or certificates representing such shares by
a duly authorized signatory of the registrar for the Company's common stock,
such shares will be validly issued, fully paid and non-assessable.
We consent to the filing of this letter opinion as an exhibit to the
Registration Statement, without admitting that we are "experts" within the
meaning of the 1933 Act or the rules and regulations of the Securities and
Exchange Commission thereunder, with respect to any part of the Registration
Statement, including this exhibit.
Respectfully submitted,
/s/ O'Melveny & Myers LLP
<PAGE>
EXHIBIT 8.1
OPINION REGARDING TAX MATTERS
October 18, 1999
MSC.Software Corporation
815 Colorado Boulevard
Los Angeles, CA 90041
RE: REGISTRATION STATEMENT OF MSC.SOFTWARE CORPORATION
Dear Sir or Madam:
This opinion is delivered to you in connection with the
preparation of the Registration Statement on Form S-3 (the "Registration
Statement") to be filed with the Securities and Exchange Commission by
MSC.Software Corporation, a Delaware corporation ("MSC"), in connection with
the proposed offering and sale by certain selling holders of warrants to
purchase 1,400,000 shares of common stock of Company (the "Warrants"). In
connection therewith, we have reviewed the Registration Statement and
examined such additional documents and matters of law and fact as we deemed
necessary and appropriate.
Based on the foregoing, and subject to the qualifications
and assumptions contained therein, we are of the opinion that the description
of the material federal income tax considerations contained in the
Registration Statement under the heading "Material Federal Income Tax
Consequences" is accurate.
This opinion is based on our review of the Internal Revenue
Code of 1986, as amended, legislative history with respect thereto, rules and
regulations (including proposed regulations) promulgated thereunder,
published rulings and court decisions, all as in effect as of the date of
this opinion. There can be no assurance that legislative or administrative
changes or court decisions will not be forthcoming that would significantly
modify the authority upon which this opinion is based. Any such changes may
or may not be retroactive with respect to transactions prior to the date of
such changes. This opinion has no binding effect or official status, so that
no assurance can be given that the position set forth herein will be
sustained by a court, if contested. No ruling will be obtained from the
Internal Revenue Service with respect to the Warrants.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the use of our name under the caption
"Material Federal Income Tax Consequences" in the Registration Statement.
Respectfully submitted,
/S/ O'MELVENY & MYERS LLP
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on Form S-3 dated October 19, 1999 and related Prospectus
of MSC.Software Corporation for the registration of warrants to purchase
1,400,000 shares of MSC.Software Corporation's common stock, and to the
incorporation by reference therein of our report dated March 18, 1999, with
respect to the consolidated financial statements of MSC.Software Corporation
(formerly The MacNeal-Schwendler Corporation) included in its Transition Report
on Form 10-K for the transition period from January 1, 1998 to December 31,
1998, filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Los Angeles, California
October 14, 1999
<PAGE>
EXHIBIT 23.2
CONSENT OF PRICEWATERHOUSECOOPERS LLP, INDEPENDENT ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on Form S-3 dated October 19, 1999 and the related
prospectus of MSC.Software Corporation for the registration of $3,236,012
aggregate principal amount of subordinated promissory notes due 2001, and
$11,000,000 aggregate principal amount of subordinated promissory notes due
2009, and the incorporation by reference in the Registration Statement on Form
S-3 of our report dated April 2, 1999, except for Note 13, for which the date is
June 18, 1999 (which report has an explanatory paragraph relating to the
company's adoption of Statement of Position 91-1 "Software Revenue Recognition"
(SOP 91-1), Statement of Position 97-2, "Software Revenue Recognition" (SOP
97-2) and for Statement of Position 98-4 "Deferral of Effective Date of Certain
Provision" of SOP 97-2 (SOP 98-4) as described in Note 2 to the financial
statements), relating to the consolidated financial statements of MARC Analysis
Research Corporation which appears in the Current Report on Form 8-K of
MSC.Software Corporation dated July 1, 1999, as amended and filed with the
Securities and Exchange Commission.
/s/ PRICEWATERHOUSECOOPERS LLP
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PricewaterhouseCoopers LLP
San Jose, California
October 19, 1999
