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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 8, 1999
REGISTRATION NO. 333-89319
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
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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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. / /
--------------------------
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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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 November 8, 1999
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MSC.SOFTWARE CORPORATION
WARRANTS TO PURCHASE
1,400,000 SHARES OF COMMON STOCK
OFFERED BY SELLING HOLDERS
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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 NOVEMBER 8, 1999.
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TABLE OF CONTENTS
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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
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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
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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.
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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.
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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
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- 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.
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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
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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.
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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.
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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
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<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.
The audited financial statements of MARC Analysis Research Corporation
incorporated in this prospectus and the registration statement by reference to
our Current Report on Form 8-K/A dated July 1, 1999 for event date June 18, 1999
with respect to the acquisition of MARC Analysis Research Corporation have been
so included in reliance on the report (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) of PricewaterhouseCoopers LLP, independent
accountants, given as the authority of said firm as experts in auditing and
accounting.
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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.
4.5 Amendment to Warrant Agreement dated as of November 5, 1999.
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>
- ------------------------
* Previously filed.
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;
II-2
<PAGE>
(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 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 November 5,
1999.
<TABLE>
<S> <C> <C>
MSC.SOFTWARE CORPORATION
By: /s/ LOUIS A. GRECO
-----------------------------------------
Louis A. Greco
CHIEF FINANCIAL OFFICER
AND SECRETARY
</TABLE>
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>
*
- ------------------------------ Chairman of the Board and November 5, 1999
Frank Perna, Jr. Chief Executive Officer
/s/ LOUIS A. GRECO Chief Financial Officer
- ------------------------------ (Principal Financial and November 5, 1999
Louis A. Greco Accounting Officer)
*
- ------------------------------ Director November 5, 1999
Larry S. Barels
*
- ------------------------------ Director November 5, 1999
Donald Glickman
*
- ------------------------------ Director November 5, 1999
William F. Grun
*
- ------------------------------ Director November 5, 1999
George N. Riordan
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By: /s/ LOUIS A. GRECO
-------------------------
Louis A. Greco
ATTORNEY-IN-FACT
</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.
4.5 Amendment to Warrant Agreement, dated as of November 5, 1999.
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>
- ------------------------
* Previously filed.
<PAGE>
AMENDMENT TO
WARRANT AGREEMENT
This AMENDMENT TO WARRANT AGREEMENT (this "AMENDMENT") is
dated as of November 5, 1999 and entered into by and among MSC.Software
Corporation, a Delaware corporation (the "COMPANY") and ChaseMellon Shareholder
Services, L.L.C., as warrant agent ("WARRANT AGENT"), and is made with reference
to that certain Warrant Agreement dated as of June 18, 1999 by and among
MSC.Software Corporation (formerly The MacNeal-Schwendler Corporation) and
ChaseMellon Shareholder Services, L.L.C. (as successor to MSC.Software
Corporation, the initial warrant agent) (the "WARRANT AGREEMENT"). Capitalized
terms used herein without definition shall have the same meanings herein as set
forth in the Warrant Agreement.
WITNESSETH:
WHEREAS, pursuant to a letter agreement dated October 18,
1999, MSC.Software Corporation resigned as warrant agent under the Warrant
Agreement and appointed ChaseMellon Shareholder Services, L.L.C. as its
successor;
WHEREAS, Company and Warrant Agent desire to amend certain
provisions contained in Sections 17 and 20 of the Warrant Agreeement; and
WHEREAS, pursuant to Section 21 of the Warrant Agreement,
Dendron Technology B.V. and Fronos Technology B.V., the Holders of all of the
issued and outstanding Warrants under the Warrant Agreement, have consented to
the amendments contained herein, as noted on the signature pages hereto.
NOW, THEREFORE, in consideration of the foregoing recitals
which are made a part of this Amendment and for the purpose of defining the
terms and provisions of the Warrant Agreement, the Company and Warrant Agent
hereby agree as follows:
SECTION 1. AMENDMENTS TO THE WARRANT AGREEMENT
1.1 AMENDMENT TO SUBSECTION 17.5: OFFICER'S CERTIFICATE. Subsection 17.5 of
the Warrant Agreement is hereby amended by deleting it in its entirety and
inserting the following in lieu thereof:
"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
<PAGE>
delivered to the Warrant Agent; and such certificate shall be full
authorization and protection 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."
1.2 AMENDMENT TO SUBSECTION 17.6: COMPENSATION, REIMBURSEMENT AND
INDEMNIFICATION. Subsection 17.6 of the Warrant Agreement is hereby amended by
deleting it in its entirety and inserting the following in lieu thereof:
"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 and 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, as determined by a
final, non-appealable order, judgment, decree or ruling of a court of
competent jurisdiction. 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, as
determined by a final, non-appealable order, judgment, decree or ruling
of a court of competent jurisdiction, will be limited to the amount of
fees paid by the Company to the Warrant Agent."
1.3 AMENDMENT TO SUBSECTION 17.9: SOLEY AS AGENT. Subsection 17.9 of the
Warrant Agreement is hereby amended by deleting it in its entirety and inserting
the following in lieu thereof:
"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, as determined by a final, non-appealable order,
judgment, decree or ruling of a court of competent jurisdiction."
1.4 AMENDMENT TO SECTION 20: NOTICES. Section 20 of the Warrant Agreement
is hereby amended by deleting it in its entirety and inserting the following in
lieu thereof:
<PAGE>
"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 MSC.Software
Corporation, 815 Colorado Boulevard, Los Angeles, California 90041,
Attention: Chief Financial Officer and, (b) if to the Warrant Agent, to
ChaseMellon Shareholder Services, L.L.C., 400 South Hope Street, Fourth
Floor, Los Angeles, California 90071, Attention: Mary Ann McElroy. Each
party hereto may 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 2. COUNTERPARTS
This Amendment 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 3. RATIFICATIONS; REFERENCES
Except as expressly amended by this Amendment, the Warrant Agreement
shall continue to be, and shall remain, unaltered and in full force and effect
in accordance with its terms. All references in the Warrant Agreement to the
"Agreement" shall be to the Warrant Agreement, as amended by this Amendment.
SECTION 4. SUCCESSORS AND ASSIGNS
The terms and provisions of this Amendment shall be binding upon and
inure to the benefits of the Company and the Warrant Agent and there respective
successors and assigns.
SECTION 5. APPLICABLE LAW
Each Warrant issued under the Agreement, as amended by this
Amendment, 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.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the day and year first above written.
MSC.SOFTWARE CORPORATION
By: /s/ Louis A. Greco
-------------------------------
Title: Chief Financial Officer
and Secretary
Attest:
/s/ Dan Bryce
- ---------------------------
Title: Vice President and General
Manager of Engineering-e.com
Division
CHASEMELLON SHAREHOLDER
SERVICES, L.L.C., as Warrant Agent
By: /s/ Mary Ann McElroy
--------------------------------
Title: Relationship Manager
Attest:
/s/ [ILLEGIBLE]
- ----------------------------
Title: Assistant Vice President
The terms of this Amendment are consented to by the Holders of the Warrants.
DENDRON TECHNOLOGY, B.V.
By: /s/ Nearchos Irinarchos
-----------------------
Title: Director
FRONOS TECHNOLOGY, B.V.
By: /s/ Nearchos Irinarchos
-----------------------
Title: Director
<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, as amended on Form S-3 (No. 333-89319) 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
November 2, 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, as amended, on Form S-3 dated November 8, 1999 and the
related prospectus of MSC.Software Corporation for the registration of warrants
to purchase 1,400,000 shares MSC.Software Corporations common stock, 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
- -------------------------------------------
PricewaterhouseCoopers LLP
San Jose, California
November 5, 1999
