<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
<TABLE>
<S> <C>
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
MSC.SOFTWARE CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
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<S> <C> <C>
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction
applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<S> <C>
MSC.Software Corporation
[LOGO] 815 Colorado Boulevard
Los Angeles, CA 90041
</TABLE>
NOTICE OF ANNUAL MEETING
Dear Stockholder:
On Wednesday, May 10, 2000, MSC.Software Corporation (the "Company") will
hold its 2000 Annual Meeting of Stockholders at the Hilton Hotel, 150 S. Los
Robles Avenue, Pasadena, California 91101. The meeting will begin at 10:00 a.m.
Only stockholders who owned stock at the close of business on March 27, 2000
can vote at this meeting or any adjournments that may take place. At the meeting
we will:
1. Elect two Directors to the Board of Directors;
2. Vote on the Company's 2000 Executive Cash or Stock Bonus Plan;
3. Vote on an amendment to the Company's 1998 Stock Option Plan that
increases the number of shares authorized to be issued under the Plan by
1,000,000 shares and increases the number of options that can be granted
to any individual during any calendar year from 200,000 to 500,000;
4. Ratify the appointment of Ernst & Young LLP as independent auditors for
2000; and
5. Attend to other business properly presented at the meeting.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF THE FOUR
PROPOSALS OUTLINED IN THIS PROXY STATEMENT.
At the meeting we will also report on the Company's 1999 business results
and other matters of interest to stockholders.
The approximate date of mailing for this proxy statement and card(s) is
March 31, 2000.
By Order of the Board of Directors,
Louis A. Greco
SECRETARY AND CHIEF FINANCIAL OFFICER
March 29, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
QUESTIONS AND ANSWERS....................................... 1
PROPOSALS YOU MAY VOTE ON................................... 3
1. Election of Directors................................. 3
2. Bonus Plan............................................ 3
3. Amendment to the 1998 Plan............................ 3
4. Ratification of the Appointment of Ernst & Young LLP
as Independent Auditors............................... 3
THE BOARD OF DIRECTORS...................................... 4
Nominees for Directors.................................... 4
Continuing Directors...................................... 4
Statement on Corporate Governance......................... 5
Directors' Compensation................................... 7
Security Ownership of Certain Beneficial Owners and
Management.............................................. 8
Compensation Committee Interlocks and Insider
Participation........................................... 9
EXECUTIVE COMPENSATION...................................... 10
Report of the Compensation Committee...................... 10
Summary Compensation Table................................ 12
Option Grant Table........................................ 13
Aggregated Option Exercises and Year-End Option Values.... 14
Severance Plans and Other Information..................... 15
Performance Graph......................................... 16
APPROVAL OF THE 2000 EXECUTIVE CASH OR STOCK BONUS PLAN..... 17
AMENDMENT TO 1998 STOCK OPTION PLAN, AS AMENDED............. 20
Summary Description of the 1998 Plan...................... 20
Federal Income Tax Treatment of Options under the 1998
Plan.................................................... 22
Specific Benefits......................................... 22
OTHER MATTERS............................................... 23
Section 16(a) Beneficial Ownership Reporting Compliance... 23
Exhibits to Annual Report on Form 10-K.................... 23
EXHIBIT A................................................... A-1
EXHIBIT B................................................... B-1
</TABLE>
<PAGE>
QUESTIONS AND ANSWERS
<TABLE>
<C> <S> <C>
1. Q: WHAT MAY I VOTE ON BY PROXY?
A: (1) The election of nominees to serve on the Board of
Directors;
(2) The proposed MSC.Software Corporation 2000 Executive
Cash or Stock Bonus Plan (the "Bonus Plan");
(3) The proposed amendment to the Company's 1998 Stock
Option Plan, as amended ("1998 Plan") to increase the number
of shares authorized to be issued under the 1998 Plan by
1,000,000 shares and to increase the number of options
that can be granted to any individual in any calendar
year from 200,000 to 500,000; and
(4) The ratification of the appointment of Ernst & Young LLP
as independent auditors for 2000.
2. Q: HOW DOES THE BOARD RECOMMEND I VOTE ON THE PROPOSALS?
A: The Board recommends a vote FOR each of the nominees, FOR
the Bonus Plan, FOR the amendment to the 1998 Plan and FOR
the ratification of Ernst & Young LLP as independent
auditors for 2000.
3. Q: WHO IS ENTITLED TO VOTE?
A: Stockholders as of the close of business on March 27, 2000
(the "Record Date") are entitled to vote at the Annual
Meeting.
4. Q: HOW DO I VOTE?
A: Complete, sign and date each proxy card you receive and
return it in the prepaid envelope. You have the right to
revoke your proxy at any time before the meeting by:
(1) notifying the Secretary of the Company in writing;
(2) voting in person; OR
(3) returning a later-dated proxy card.
5. Q: WHO WILL COUNT THE VOTES?
A: Representatives of Chase Mellon Shareholder Services L.L.C.
will count the votes and act as the inspector of election.
6. Q: IS MY VOTE CONFIDENTIAL?
A: Proxy cards, ballots and voting tabulations that identify
individual stockholders are mailed or returned directly to
Chase Mellon Shareholder Services L.L.C. and are handled in
a manner that protects your voting privacy. Your vote will
not be disclosed except: (1) as needed to permit Chase
Mellon Shareholder Services L.L.C. to tabulate and certify
the vote; (2) as required by law; or (3) in limited
circumstances such as a proxy contest in opposition to the
Board. Additionally, all comments written on the proxy card
or elsewhere will be forwarded to management, but your
identity will be kept confidential unless you ask that your
name be disclosed.
7. Q: WHAT SHARES ARE INCLUDED ON THE PROXY CARD(S)?
A: The shares on your proxy card(s) represent ALL of your
shares. If you do not return your proxy card(s), your shares
will not be voted.
8. Q: WHAT DOES IT MEAN IF I GET MORE THAN ONE PROXY CARD?
A: If your shares are registered differently and are in more
than one account, you will receive more than one proxy card.
Sign and return all proxy cards to ensure that all your
shares are voted. We encourage you to have all accounts
registered in the same name and address (whenever possible).
You can accomplish this by contacting our transfer agent,
Chase Mellon Shareholder Services L.L.C.
9. Q: HOW MANY SHARES CAN VOTE?
A: As of the Record Date, March 27, 2000, 14,042,053 shares of
common stock, the only voting securities of the Company,
were issued and outstanding. Every stockholder of common
stock is entitled to one vote for each share held.
</TABLE>
1
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<TABLE>
<C> <S> <C>
10. Q: WHAT IS A "QUORUM"?
A: A "quorum" is a majority of the outstanding shares entitled
to vote. They may be present or represented by proxy. For
the purposes of determining a quorum, shares held by brokers
or nominees will be treated as present even if the broker or
nominee does not have discretionary power to vote on a
particular matter or if instructions were never received
from the beneficial owner. These shares are called "broker
non-votes." Abstentions will be counted as present for
quorum purposes and for the purpose of determining the
outcome of any matter submitted to the stockholders for a
vote. However, abstentions do not constitute a vote "for" or
"against" any matter and will be disregarded in the
calculation of a plurality.
11. Q: WHAT IS REQUIRED TO APPROVE EACH PROPOSAL?
A: A quorum must have been established in order to consider any
matter. To elect directors, the two candidates for director
who receive the most votes will become directors of the
Company. To approve the Bonus Plan and the amendment to the
1998 Plan, a majority of the shares represented at the
meeting, either in person or by proxy, must be voted in
favor of the Bonus Plan and the amendment respectively, with
at least 50% of the total outstanding shares of common stock
of the Company voting (either "for" or "against") on the
Bonus Plan and the amendment, as the case may be (an
abstention will count as a vote against the Bonus Plan or
the amendment to the 1998 Plan, as the case may be). To
ratify the appointment of auditors, a majority of the shares
represented at the meeting, either in person or by proxy,
must be voted in favor of the auditors.
Any shares that are considered broker non-votes with respect
to a particular matter will be treated as not present and
not entitled to vote with respect to that matter, even
though the same shares may be considered present for quorum
purposes and may be entitled to vote on other matters.
12. Q: HOW WILL VOTING ON ANY OTHER BUSINESS BE CONDUCTED?
A: Although we do not know of any business to be considered at
the 2000 Annual Meeting other than the proposals described
in this proxy statement, if any other business is presented
at the Annual Meeting, your signed proxy card will give
authority to each of Frank Perna and Louis A. Greco to vote
on such matters at their discretion.
13. Q: WHEN ARE THE STOCKHOLDER PROPOSALS FOR THE 2001 ANNUAL
MEETING DUE?
A: All stockholder proposals to be considered for inclusion in
next year's proxy statement must be submitted in writing to
Louis A. Greco, Secretary and Chief Financial Officer,
MSC.Software Corporation, 815 Colorado Boulevard, Los
Angeles, California 90041 by November 29, 2000. Any proposal
received after this date will be considered untimely. Each
proposal must comply with applicable law and the Company's
Bylaws. A stockholder proposal (other than in respect of a
nominee for election to the Board of Directors) to be
presented at the next annual meeting of stockholders but not
submitted for inclusion in the proxy statement will be
considered untimely under the SEC's proxy rules if received
after April 9, 2001.
14. Q: CAN A STOCKHOLDER NOMINATE SOMEONE TO BE A DIRECTOR OF THE
COMPANY?
A: No. The Nominating Committee of the Board will not consider
nominees recommended by the stockholders.
15. Q: HOW MUCH DID THIS PROXY SOLICITATION COST?
A: The Company hired Chase Mellon Shareholder Services, L.L.C.
to assist in the distribution of proxy materials and
solicitation of votes for $9,500 plus estimated
out-of-pocket expenses of $2,500. The Company also
reimburses brokerage houses and other custodians, nominees
and fiduciaries for their reasonable out-of-pocket expenses
for forwarding proxy and solicitation materials to
stockholders.
</TABLE>
2
<PAGE>
PROPOSALS YOU MAY VOTE ON
1. ELECTION OF DIRECTORS
There are two nominees for election this year. Detailed information on each
nominee, along with information on the other continuing directors, is
provided at pages 4 and 5. Two directors are elected annually. All directors
serve for a term of three years. The Company does not expect any of the
nominees to become unavailable to stand for election, but should this
happen, the Board will designate a substitute. Proxies voting on the
original nominee will be cast for the substitute.
YOUR BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THESE DIRECTORS.
2. BONUS PLAN
The Board has approved the MSC.Software Corporation 2000 Executive Cash or
Stock Bonus Plan. The Board believes that the Bonus Plan will help promote
the interests of the Company by attracting, retaining and rewarding key
executives that contribute to the Company's success and will provide
incentives based on objectives that increase stockholder value.
YOUR BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE BONUS PLAN.
3. AMENDMENT TO THE 1998 PLAN
The Board has approved an amendment to the Company's 1998 Stock Option Plan
to increase the number of authorized shares under the 1998 Plan by 1,000,000
for a total of 3,500,000 authorized shares of common stock of the Company
and to increase the total number of options that can be granted to any
individual during any calendar year from 200,000 to 500,000. The Board has
recommended that the amendment to the Plan be approved by the stockholders.
The amendment to the Plan that was approved by the Board would amend and
restate subsection "1.4.2 SHARE LIMITS" to read as follows:
"1.4.2 SHARE LIMITS. The maximum number of Shares that may be delivered
pursuant to Options granted under this Plan is 3,500,000 Shares (the
"Share Limit"). The maximum number of Shares that may be delivered
pursuant to Options granted to Non-Employee Directors is 60,000 Shares.
The maximum number of Shares subject to those Options that are granted
during any calendar year to any one individual is 500,000 Shares. Each of
the foregoing numerical limits will be subject to adjustment as
contemplated by this Section 1.4 and Section 4.2."
In all other respects, the 1998 Plan will remain unchanged. The 1998 Plan
unambiguously provides only for options granted at prices at or above fair
market value on the date of grant, does not authorize reload options or
option repricing, and limits options to a term of 10 years after the date of
grant.
YOUR BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE AMENDMENT TO THE 1998 PLAN.
4. RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS
The Audit Committee has recommended, and the Board has approved, the
appointment of Ernst & Young LLP ("Ernst & Young") as our independent
auditors for 2000. Ernst & Young has served as our independent auditors
since 1983. They have unrestricted access to the Audit Committee to discuss
audit findings and other financial matters. Representatives of Ernst & Young
will attend the Annual Meeting to answer appropriate questions. They also
may make a statement if they so desire.
Audit services provided by Ernst & Young during 1999 included an audit of
the Company's consolidated financial statements, an audit of the Company's
Profit Sharing Plan and consultation on various tax and accounting matters.
YOUR BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE RATIFICATION OF ERNST &
YOUNG'S APPOINTMENT AS INDEPENDENT AUDITORS FOR 2000.
3
<PAGE>
THE BOARD OF DIRECTORS
NOMINEES FOR DIRECTORS
The following table sets forth certain information regarding the directors
in Class III who are nominees for election to the Board of Directors for a
three-year term.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE LAST FIVE YEARS SINCE
---- -------- --------------- --------
<S> <C> <C> <C>
George N. 66 Former Chairman of the Board of the Company (February 1, 1983
Riordan 1997 to December 14, 1998). Mr. Riordan is also Managing
Director, George Riordan & Co., investment bankers
(February 1991 to present) and is a director of Pancho's
Mexican Buffet, Inc. (1993 to present). Mr. Riordan was
previously a director of Lewis Galoob Toys, Inc. (1994 to
1996).
William F. Grun 53 Mr. Grun is a private investor and consultant. From 1996 to 1997
1999, he was the President and Chief Operating Officer of
Optum Software, a privately held supply chain software
company. From 1989 to 1996, he was an executive with
AlliedSignal (now Honeywell International) where he held
several positions including President of Aerospace Systems
and Equipment.
</TABLE>
CONTINUING DIRECTORS
The following table sets forth certain information, furnished to the Company
by the respective persons named below, about the directors who comprise Class I
and Class II of the Company's Board of Directors.
The following Class I director is currently serving until the 2001 Annual
Meeting and until his successor is elected and qualified:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE LAST FIVE YEARS SINCE
---- -------- --------------- --------
<S> <C> <C> <C>
Frank Perna 62 Chairman and Chief Executive Officer (December 14, 1998 to 1994
present) of the Company. Chairman and Chief Executive
Officer, EOS, a privately held provider of power supplies
for electrical equipment and notebook computers (1994 to
1998). Mr. Perna also serves as a director of
Software.com, Inc., a privately held company that develops
internet and intranet-based messaging server software, and
Intellisys, a privately held electronics distributor.
Mr. Perna previously served as director of PDA Engineering
(1990 to 1994) and was a member of the Board of Directors
of PDA Engineering at the time it was acquired by the
Company.
</TABLE>
The Nominating Committee is currently searching for candidates to fill the
vacancy created by Thomas Curry's resignation from the Board in April 1999. The
Company intends to maintain the size of the Board at six directors. Once a
suitable candidate has been qualified and appointed, he or she will serve the
remainder of Mr. Curry's term as a Class I director and until a successor is
elected and qualified.
4
<PAGE>
The following Class II directors are currently serving until the 2002 Annual
Meeting and until their respective successors are elected and qualified:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE LAST FIVE YEARS SINCE
---- -------- --------------- --------
<S> <C> <C> <C>
Donald Glickman 67 General Partner, J.F. Lehman and Company, a private equity 1998
investment firm (1993 to present). Mr. Glickman currently
serves as Chairman of Elgar Electronics (1998 to present),
and a director of Burke Industries (1997 to present),
Monroe Muffler Brake Inc. (1984 to present), General
Aluminum (1988 to present) and Massachusetts Mutual
Corporate Investors (1992 to present).
Larry S. Barels 51 Principal, Pacific Capital Resources, Mr. Barels' private 1998
consulting practice (1996 to present). Chairman, Driveway
Corp., a provider of Internet file storage solutions.
Chairman, Software.com, Inc., a privately held company that
develops Internet and intranet-based messaging server
software (1995 to 1997). Chairman and CEO, Wavefront
Technologies, a company involved in digital image
manipulation and computer animation (1985 to 1995).
Mr. Barels is currently a director of Miramar Systems
(1990 to present).
</TABLE>
STATEMENT ON CORPORATE GOVERNANCE
The Board held eight meetings during 1999, and all of the directors attended
at least 75% of the Board meetings and committee meetings of which they were
members.
Although the full Board considers all major decisions of the Company, the
Board has established several standing committees to more fully address certain
areas of importance to the Company. The three committees of the Board are the:
- Audit Committee;
- Nominating Committee; and
- Compensation Committee
The Committees are currently composed of:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
<CAPTION>
NAME AUDIT(1) COMPENSATION(1) NOMINATING
<S> <C> <C> <C>
Donald Glickman X X(2)
- -----------------------------------------------------------------------------------
Larry S. Barels X X(2)
George N. Riordan X X
- -----------------------------------------------------------------------------------
William F. Grun X(2) X
Frank Perna X
</TABLE>
- ------------------------
NOTES TO MEMBERSHIP ROSTER:
(1) The Audit and Compensation Committees are composed entirely of outside
directors.
(2) Indicates Committee Chairman.
5
<PAGE>
AUDIT COMMITTEE: The Audit Committee examines accounting processes and
reporting systems, assesses the adequacy of internal controls and risk
management, reviews and approves the Company's financial disclosures, and
communicates with the Company's independent auditors. The Audit Committee met
four times in 1999.
NOMINATING COMMITTEE: The Nominating Committee is responsible for
nominating directors to serve on the Board. The Nominating Committee does not
consider nominees recommended by the stockholders. The Nominating Committee met
once in 1999.
COMPENSATION COMMITTEE: The Compensation Committee reviews the compensation
paid to corporate officers and makes recommendations regarding changes in
salary, profit sharing, and yearly bonuses awarded to employees. This committee
also administers the 1991 Stock Plan and the 1998 Stock Plan. The Compensation
Committee met twice in 1999.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS: On June 18, 1999, MSC
acquired all of the outstanding stock of MARC Analysis Research Corporation
("MARC") pursuant to an Agreement and Plan of Merger dated as of May 26, 1999
among MSC, MSC Holdings Co. II, a wholly-owned subsidiary of MSC (the "Merger
Sub"), MARC and the following significant shareholders: Dendron Technology B.V.,
a Dutch corporation ("Dendron"), Fronos Technology B.V., a Dutch corporation
("Fronos") and Nearchos Irinarchos, a person known to MSC to beneficially own
more than five percent of MSC's voting securities (the "Merger Agreement").
Dendron and Fronos are each owned by Mr. Irinarchos. The transaction had a
two-step structure whereby MSC purchased approximately 42% of MARC's outstanding
common stock from Dendron and Fronos pursuant to a Stock Purchase Agreement
dated as of May 26, 1999 among Dendron, Fronos and MSC (the "Stock Purchase
Agreement"), and immediately thereafter, pursuant to the Merger Agreement, the
Merger Sub merged with and into MARC, with MARC being the surviving corporation
and a wholly-owned subsidiary of MSC.
The aggregate purchase price for the acquisition paid to shareholders and
holders of options of MARC was valued at approximately $36 million. The Merger
Agreement provided for a cash purchase price of approximately $20.3 million and
the Stock Purchase Agreement provided for MSC to issue a package of securities
to Dendron and Fronos, including $11 million principal amount of subordinated
notes due in 10 years, approximately $3.2 million principal amount of
subordinated notes due in two years, $2 million principal amount of MSC's 7 7/8%
convertible subordinated debentures due August 18, 2004 and five year warrants
to purchase 1,400,000 shares of MSC common stock at an exercise price of $10.00
per share. Mr. Irinarchos beneficially owns approximately 9.9% of MSC's voting
securities as a result of his ownership of these securities.
The purchase price was determined through arms-length negotiations between
members of the Board of MSC and representatives of MARC. MSC considered the
revenues and results of operations of MARC in recent periods, estimates of the
business potential of MARC, MARC's software offerings in the non-linear finite
element analysis market segment and other synergies of the two companies (such
as the ability to offer a full suite of finite element analysis products and
leveraging and distribution channels).
BOARD EVALUATION. In 1997, the Board implemented a process to evaluate
Board performance and effectiveness. In 1999, the directors completed a Board
evaluation questionnaire addressing twelve performance standards relating to the
Board as a whole. In addition to the evaluation questionnaire, each Board member
also completed a director evaluation form rating each of the other directors
excluding themselves. The Board evaluation questionnaire and the director
evaluation form were both modeled on samples provided in the Blue Ribbon
Commission Report of the National Association of Corporate Directors. The
completed questionnaires and evaluation forms were mailed confidentially to the
Company's outside auditors who tabulated the results as to the Board's overall
performance. Upon
6
<PAGE>
receiving the tabulated results from the auditors, the Nominating Committee
reviewed the process and analyzed the results. In March 2000, the Nominating
Committee presented a synthesis of the assessments and its recommendations to
the full Board. The composite ratings in the categories surveyed were all
"average" or higher. The Board intends to conduct a self-evaluation process
similar to that conducted this year and last year on an annual basis. In
addition, the Board will devote time at least twice a year to review and discuss
industry trends and issues and the relative performance of the Company in
comparison to its competitors and other companies in the industry.
CHIEF EXECUTIVE OFFICER EVALUATION. The other members of the Board
evaluated Mr. Perna in his capacity as Chief Executive Officer on a series of
factors including leadership, strategic planning, financial results and
succession planning. In each category, Mr. Perna met or exceeded expectations.
DIRECTORS' COMPENSATION
Directors who are also employees or officers of the Company do not receive
any additional compensation for their service on the Board. Currently,
non-employee directors receive a $15,000 annual retainer plus $5,000 per year
for each committee chair. Directors also receive $2,500 for each Board meeting
they attend and $1,500 for each committee meeting they attend. In addition, non-
employee directors are reimbursed for all expenses incurred in connection with
attendance at meetings of the Board and the performance of Board duties.
Directors who are not officers or employees of the Company are eligible to
participate in the Non-Employee Director Program. Under this program, directors
receive a grant of options to purchase 10,000 shares of common stock of the
Company upon election to the Board. In addition, directors receive an annual
grant of options to purchase 3,000 shares of common stock on the first business
day of each calendar year. On January 4, 1999, Larry Barels, Donald Glickman,
George Riordan and William Grun each received 3,000 options to purchase common
stock of the Company at an exercise price of $7.25. All of the options granted
under the program become exercisable 12 months after the date of grant and
expire on the fifth anniversary of the grant date.
7
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of March 1, 2000 the names, addresses, and
holdings of those persons known to the Company to be beneficial owners of more
than 5% of its common stock, the names and holdings of each director and each
nominee for director, the names and holdings of each executive officer named in
the Summary Compensation Table ("named executive officers") and the holdings of
all executive officers and directors as a group.
<TABLE>
<CAPTION>
<S> <C> <C>
- ------------------------------------------------------------------------------------------
<CAPTION>
AMOUNT BENEFICIALLY
NAME AND ADDRESS OF OWNED AND NATURE OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) PERCENT OF CLASS(2)
<S> <C> <C>
Nearchos Irinarchos 1,532,012(3) 9.9%
Vikavagen 9
5-167 71 Bromma, Sweden
- -----------------------------------------------------------------------------------------------------
Royce & Associates, Inc. 944,500(4) 6.8%
1414 Avenue of the Americas
New York, NY 10019
Brinson Partners, Inc. 864,938(5) 6.2%
209 South LaSalle Street
Chicago, IL 60604
- -----------------------------------------------------------------------------------------------------
David L. Babson and Company Incorporated 732,650(6) 5.3%
One Memorial Drive
Cambridge, MA 02142
Larry S. Barels 13,000 *
- -----------------------------------------------------------------------------------------------------
Donald Glickman 20,000 *
William F. Grun 26,000 *
- -----------------------------------------------------------------------------------------------------
Frank Perna, Jr. 161,027 1.1%
Dan Bryce 36,635 *
- -----------------------------------------------------------------------------------------------------
Louis A. Greco 215,223 1.5%
David B. Baszucki 15,265 *
- -----------------------------------------------------------------------------------------------------
Kenneth D. Blakely 107,448 *
George N. Riordan 91,600 *
- -----------------------------------------------------------------------------------------------------
All directors and executive officers as a group
(12 persons) 686,198(7) 4.7%
</TABLE>
- ------------------------
NOTES TO STOCK OWNERSHIP TABLE:
* Holdings represent less than 1% of all shares outstanding.
(1) Except as provided with respect to certain shares held in trust with the
person's spouse and as otherwise provided under state community property
laws, beneficial ownership is direct (and includes shares held pursuant to
the Company's Profit Sharing Plan, 1994 Supplemental Retirement and Deferred
Compensation Plan and Employee Stock Purchase Plan), and the person
indicated has sole voting and investment power over the shares of Common
Stock indicated. The amounts shown in this column include shares issuable
upon (i) conversion of the Company's 7 7/8%
8
<PAGE>
Convertible Subordinated Debentures due 2004 (the "Debentures") or
(ii) exercise of options which are exercisable on or within 60 days of
March 1, 2000, in the following amounts: Dan Bryce 30,875; Frank Perna,
125,250; George N. Riordan 81,500; Kenneth D. Blakely, 100,000; Louis A.
Greco, 180,000; David B Baszucki, 12,500; Larry S. Barels, 13,000; Donald
Glickman, 13,000; and William F. Grun, 16,000.
(2) All expressions of percent of class held assume that the Debentures and
options, if any, of the particular person or group in question, and no
others, have been exercised.
(3) Based upon information set forth in a Schedule 13G filed under the
Securities and Exchange Act of 1934 by Nearchos Irinarchos, Dendron
Technology B.V. and Fronos Technology B.V. in June 1999. Nearchos Irinarchos
is the sole shareholder and general manager of each of Dendron and Fronos
and shares the power to vote and the power to dispose or direct the
disposition of an aggregate of 1,400,000 shares of Common Stock issuable
upon the exercise of warrants of the Company and 152,012 shares of Common
Stock issuable upon the conversion of Debentures.
(4) Based upon information set forth in a Schedule 13G/A filed under the
Securities Exchange Act of 1934 by Royce & Associates, Inc. and Charles M.
Royce in February 2000. These entities are filing as a group. Royce &
Associates, Inc. has sole voting and investment power with respect to
944,500 shares of Common Stock. Charles Royce may be deemed to be a
controlling person of Royce & Associates, Inc. Mr. Royce does not own any
shares outside of these entities, and disclaims beneficial ownership of the
shares held by Royce & Associates, Inc.
(5) Based upon information set forth in a Schedule 13G filed under the
Securities Exchange Act of 1934 by Brinson Partners, Inc. ("Brinson") and
UBS AG ("UBSAG") in February 2000. Brinson, in its capacity as a registered
investment advisor, and UBSAG, in its capacity as the parent of Brinson,
manage accounts that have, on a discretionary basis, the right to receive or
the power to direct the receipt of dividends from, or the proceeds from the
sale of, 864,938 shares of Common Stock. Each of Brinson and UBSAG disclaim
any beneficial ownership of such shares of Common Stock.
(6) Based upon information set forth in a Schedule 13G filed under the
Securities Exchange Act of 1934 by David L. Babson and Company Incorporated
("DLB") in February 2000. DLB, in its capacity as investment adviser, may be
deemed the beneficial owner of 732,650 shares of Common Stock that are owned
by numerous investment advisory clients.
(7) Includes 695,375 shares issuable upon exercise of options granted the
directors and executive officers of the Company which are exercisable on or
within 60 days of March 1, 2000. See footnote 1 above.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
William Grun, Donald Glickman and Larry Barels each served as members of the
Compensation Committee during 1999. None of the members of the Compensation
Committee are officers or employees, or former officers or employees, of the
Company or any of its subsidiaries. No interlocking relationship exists between
the members of the Board or Compensation Committee and the board of directors or
compensation committee of any other company, nor has any such interlocking
relationship existed in the past.
9
<PAGE>
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE
THE COMPENSATION COMMITTEE OF THE BOARD HAS FURNISHED THE FOLLOWING REPORT
ON EMPLOYEE COMPENSATION. THIS REPORT WILL NOT BE DEEMED TO BE INCORPORATED BY
REFERENCE BY ANY GENERAL STATEMENT INCORPORATING THIS PROXY STATEMENT INTO ANY
FILING OF THE COMPANY UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES
EXCHANGE ACT OF 1934, EXCEPT TO THE EXTENT THE COMPANY SPECIFICALLY INCORPORATES
THIS INFORMATION BY REFERENCE AND WILL NOT BE DEEMED SOLICITING MATERIAL OR
DEEMED FILED UNDER THOSE ACTS.
The Compensation Committee of the Board is composed entirely of independent
outside directors. We are responsible for the general compensation policies of
the Company, and administer the Company's various compensation plans, including
its stock option plans and annual salary and bonus plans.
Each year, we comprehensively review the compensation of the Company's Chief
Executive Officer and the other senior executive officers to assure that
compensation is appropriately tied to performance and that salary and potential
bonus compensation levels are appropriate. To focus and facilitate such review,
we developed the following compensation philosophy for the Company:
- executive compensation should be at or above the 50th percentile of
high-tech industry market levels to allow the Company to attract and
retain talented management;
- annual variable compensation should reward the executives for achieving
specific results which should lead to increased stockholder value;
- the majority of variable compensation should be directly related to
sustained increases in stockholder value;
- supplemental benefits and perquisites which reward executives without
regard to performance should be minimal; and
- all employees of the Company should be encouraged to think like
stockholders.
The compensation of the Chief Executive Officer and of the Company's other
senior executive officers is comprised of three primary components:
- Salary
- Bonus
- Stock options
SALARY is fixed at a competitive level to attract and retain qualified
candidates. BONUSES are tied specifically to performance of the Company,
components or specific business units of the Company and/or individual
contributions. STOCK OPTIONS are awarded in amounts we believe necessary to
provide incentives for future performance, taking into account individual
performance and length of service with the Company. This mix of compensation
elements places a significant portion of compensation at risk and emphasizes
performance.
SALARY. Mr. Perna's base salary was set at $300,000, effective
December 14, 1998 and was determined by us in accordance with the general
principles described above. The base salaries for the period from January 1,
1999 to December 31, 1999 for the remaining senior executive officers were
similarly reviewed and set, with consideration also given to the relationship of
those salaries to the salary of Mr. Perna. Mr. Perna's base salary was confirmed
in a letter to Mr. Perna dated June 23, 1999.
BONUS. For 1999, we established an expected target bonus for Mr. Perna of
50% of his annual base salary that was dependent upon Company performance. Under
the 1999 program, the target bonus of other senior executive officers was set
40% of their annual base salary and was also dependent on both (1) specific
performance factors established in advance by the Chief Executive Officer and
(2) Company performance.
10
<PAGE>
For 1999, Mr. Perna's bonus was separated into two components, each based on
a measure of Company performance: revenue and earnings per share. The bonus will
be paid 50% in stock and 50% in cash. Mr. Perna earned a bonus of $250,000 based
on the revenue and earnings per share performance of the Company for fiscal
1999. This bonus will be payable in March 2000.
STOCK OPTIONS. We believe that the Company should provide greater equity
incentives to the Chief Executive Officer and other executive officers to
encourage them to think like stockholders and enhance retention and continuity
of management. Equity incentives for management at the Company have historically
been below the median level at peer companies. We assigned option awards to
Mr. Perna and other executive officers in part based on our desire to increase
equity incentives at the Company and on their respective compensation levels,
individual performance, and their length of service with the Company.
In December 1995, the United States Internal Revenue Service issued final
regulations affecting all publicly held United States corporations (the
"Regulations") interpreting the statutory limitation on the tax deductibility of
compensation in excess of $1 million for certain executive officers. In general,
we consider the anticipated tax treatment to the Company and to its executives
of various payments and benefits. However, we will not necessarily limit
executive compensation to that which is deductible under the Regulations. We
will consider various alternatives for preserving the deductibility of
compensation payments and benefits to the extent reasonably practicable and to
the extent consistent with its other compensation objectives.
No member of the Committee is a former or current officer or employee of the
Company or any of its subsidiaries, or is employed by a company whose board of
directors includes a member of the management of the Company.
Compensation Committee:
Donald Glickman, Chairman
Larry S. Barels
William F. Grun
11
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS(1)
OTHER ANNUAL SECURITIES ALL OTHER
COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($)(2) ($)(3) OPTIONS (#)(4) ($)(5)
<S> <C> <C> <C> <C> <C> <C>
Frank Perna 1999 306,731 0 0 150,000 37,267
Chairman and Chief 1998 14,808 0 87,930 278,000 0
Executive Officer 1997 0 0 48,925 3,000 0
- ------------------------------------------------------------------------------------------------------------------
Kenneth D. Blakely 1999 193,542 27,181 0 100,000 25,776
Senior Vice President 1998 191,000 65,000 0 115,000 22,047
1997 146,667 0 0 0 25,605
Louis A. Greco 1999 210,417 28,363 0 75,000 24,425
Chief Financial Officer 1998 203,750 73,100 0 105,000 23,747
1997 195,000 0 0 0 35,272
- ------------------------------------------------------------------------------------------------------------------
Dan Bryce, 1999 154,792 30,988 0 105,000 17,009
Vice President 1998 139,340 5,000 0 34,000 10,018
1997 134,375 5,000 0 0 15,679
David B. Baszucki 1999 151,875 0 0 125,000 0
Vice President 1998 0 0 0 0 0
1997 0 0 0 0 0
</TABLE>
- ------------------------
NOTES TO SUMMARY COMPENSATION TABLE:
(1) The Company did not make any payments or awards that would be classifiable
under the Restricted Stock Award and LTIP Payout columns otherwise required
to be included in the Table by the applicable Securities and Exchange
Commission ("SEC") disclosure rules.
(2) Annual bonus amounts were paid in the fiscal years indicated, but were
accrued and earned in relation to performance during the previous fiscal
year. For example, bonuses shown for 1999 were paid in March 1999 but relate
to performance for the 1998 fiscal year.
(3) The amounts included in this column for each of the named executive officers
do not include the value of certain perquisites which in the aggregate did
not exceed the lower of $50,000 or 10% of each named executive's aggregate
fiscal 1997, 1998 or 1999 salary and bonus compensation.
(4) Unless otherwise noted, represents shares of stock underlying options
granted under the Company's 1991 Stock Option Plan, as amended (the "1991
Plan") and the 1998 Plan. There were no individual grants of stock options
in tandem with stock appreciation rights ("SAR's") or freestanding SAR's
made during the years ended December 31, 1997, 1998 or 1999 to the above-
named executive officers.
(5) Unless otherwise noted, the amounts shown constitute Company contributions
on behalf of the named individuals to (a) the Company's Profit Sharing Plan
("PSP") and (b) the Company's Supplemental Retirement and Deferred
Compensation Plan ("SERP") in the following amounts: Frank Perna: 1999:
$12,370 to PSP, $24,897 to SERP; Louis A. Greco: 1999: $12,370 to PSP,
$12,055 to SERP; 1998: $12,580 to PSP, $11,167 to SERP; 1997: $18,772 to
PSP, $16,500 to SERP; Kenneth D. Blakely: 1999: $12,370 to PSP, $13,406 to
SERP; 1998: $12,580 to PSP, $9,467 to SERP; 1997: $14,972 to PSP, $10,633 to
SERP; Dan Bryce: 1999: $11,849 to PSP, $5,160 to SERP;
12
<PAGE>
1998: $10,018 to PSP; 1997: $15,679 to PSP; David B. Baszucki: 1999: $11,558
to PSP, $5,063 to SERP.
OPTION GRANT TABLE
The following table presents additional information concerning the stock
options shown in the Summary Compensation Table and granted to the named
executive officers for fiscal year 1999:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
<CAPTION>
INDIVIDUAL GRANTS
NUMBER OF
SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS GRANTED
OPTIONS TO EMPLOYEES IN EXERCISE PRICE EXPIRATION GRANT DATE
NAME GRANTED(#)(1)(2) FISCAL YEAR 1999 ($/SH)(3) DATE PRESENT VALUE($)
<S> <C> <C> <C> <C> <C>
Frank Perna 150,000(4) 9.3% 5.500 12/14/08 420,000(5)
- --------------------------------------------------------------------------------------------------------------
Kenneth D. Blakely 100,000(6) 6.2% 5.938 6/23/09 302,000(5)
Louis A. Greco 75,000(6) 4.6% 5.938 6/23/09 226,500(5)
- --------------------------------------------------------------------------------------------------------------
Dan Bryce 30,000(7) 1.9% 5.500 4/26/09 84,000(5)
75,000(6) 4.6% 5.938 6/23/09 226,500(5)
David B. Baszucki 50,000(8) 3.1% 6.938 1/12/09 176,500(5)
75,000(6) 4.6% 5.938 6/23/09 226,500(5)
</TABLE>
- ------------------------
NOTES TO OPTION GRANT TABLE:
(1) During 1999, options were granted pursuant to the 1991 Plan and the 1998
Plan. Options under the 1991 Plan and the 1998 Plan are nontransferable
other than by will or the laws of descent and distribution or, in the case
of the 1991 Plan, certain exceptions under Rule 16b-3 of the Securities
Exchange Act of 1934. Options under the 1991 Plan are exercisable only
during an optionee's term of employment, and for three months after
termination of employment if as a result of permanent disability or
retirement or resignation approved by the Board. Options under the 1998 Plan
are generally exercisable for three months after resignation, twelve months
after death or disability and either three or twelve months (depending on
the nature of the option) after retirement. Both plans provide that vesting
may be accelerated in certain events related to changes in control of the
Company, unless the Compensation Committee, prior to such change in control,
determines otherwise. The 1991 Plan provides that the Compensation Committee
has discretion, subject to certain limits, to modify the terms of
outstanding options and to regrant and reprice options. Both plans are
administered by the Compensation Committee of the Board.
(2) The 1991 Plan provides, under certain circumstances, for the grant of
"reload options" if an optionee uses already-owned shares of Common Stock to
pay for the exercise of any options. The reload provision permits the
grantee the right to purchase the same number of shares of the Company's
Common Stock as the grantee used to exercise any options at an exercise
price equal to the fair market value of a share of Common Stock on the date
of exercise of the initial option to which the reload relates. The 1998 Plan
does not provide for "reload options."
(3) Options were granted at an exercise price equal to the fair market value on
the date of grant.
(4) Represents grant to employee of non-qualified stock options to purchase
shares of Common Stock granted on April 26, 1999 under the 1998 Plan that
are exercisable in installments, with 25% of the options becoming
exercisable one year after the date of grant and with an additional 25% of
the options becoming exercisable on each successive anniversary date. Full
vesting will occur on the fourth anniversary date.
13
<PAGE>
(5) Grant Date Present Value determined under Black-Scholes Valuation Method.
The estimated values under the Black-Scholes model are based on the
following assumptions: the risk-free rate of return is 6.25%, the expected
dividend yield is 0, the expected volatility is 0.497 and the expected term
is five years. The actual value, if any, an executive may realize will
depend on the excess of the stock price over the exercise price on the date
the option is exercised. Therefore, there is no assurance that the value
realized by an executive will be at or near the value estimated by the
Black-Scholes model.
(6) Represents grant to the employee of non-qualified stock options to purchase
shares of Common Stock granted on June 23, 1999 under the 1998 Plan that are
exercisable in installments, with 25% of the options becoming exercisable
one year after the date of grant and with an additional 25% of the options
becoming exercisable on each successive anniversary date. Full vesting will
occur on the fourth anniversary date.
(7) Represents grant to employee of non-qualified stock options to purchase
shares of Common Stock granted on April 26, 1999 under the 1991 Plan that
are exercisable in installments, with 25% of the options becoming
exercisable one year after the date of grant and with an additional 25% of
the options becoming exercisable on each successive anniversary date. Full
vesting will occur on the fourth anniversary date.
(8) Represents grant to employee of non-qualified stock options to purchase
Common Stock granted on January 12, 1999 under the 1998 Plan that are
exercisable in installments, with 25% of the options becoming exercisable
one year after the date of grant and with an additional 25% of the options
becoming exercisable on each successive anniversary date. Full vesting will
occur on the fourth anniversary date.
AGGREGATED OPTION EXERCISES AND YEAR-END OPTION VALUES
The following table shows information for the named executive officers,
concerning:
(1) exercises of stock options during 1999; and
(2) the amount and values of unexercised stock options as of December 31,
1999.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES VALUE UNDERLYING OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED ON REALIZED FY-END (#) FY-END ($)(1)
NAME EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
Frank Perna 0 0 89,750 356,250 303,563 1,579,688
- ---------------------------------------------------------------------------------------------------------------
Kenneth D. Blakely 0 0 90,000 190,000 80,938 496,563
Louis A. Greco 0 0 172,500 157,500 80,313 390,000
- ---------------------------------------------------------------------------------------------------------------
Dan Bryce 0 0 21,125 132,375 18,141 479,109
Dave Baszucki 0 0 0 125,000 0 473,478
</TABLE>
- ------------------------
NOTES TO OPTION EXERCISE TABLE:
(1) Based on the closing price of the Company's common stock on December 31,
1999 ($10.125 per share) minus the exercise price of in-the-money options.
14
<PAGE>
SEVERANCE PLANS AND OTHER INFORMATION
The Company has entered into severance agreements with certain of the named
executive officers and other key employees. These severance agreements provide
that, if the Company or the employee terminates the employee's employment with
the Company (other than as a result of death or disability) for any reason
within two years after a change of control(1) of the Company, the employee will
receive a severance payment. The severance payments will be reduced to the
extent any payment is not deductible by the Company for federal income tax
purposes. The severance agreements are automatically renewed annually unless the
Company gives written notice that it does not wish to extend them. In addition,
the agreements will continue in effect for three years after a change in control
of the Company.
- PERNA, GRECO, BLAKELY & BRYCE. The severance payment for Frank Perna,
Louis Greco, Kenneth Blakely and Dan Bryce will be a cash payment of two
and one-half times the average of the cash compensation received by the
employee over the last five years. David Baszucki does not have a
severance agreement with the Company.
- OTHER KEY EMPLOYEES. Some key employees with severance agreements who have
been employed by the Company for at least five years will receive a
severance payment at least equal to the average of the employee's total
cash compensation over the last five years, increasing ratably to a
maximum of two times the average of the last five years of such employee's
total cash compensation if the employee was employed for ten years or
more. Others will receive two and one half times the average of the cash
compensation received by the employee over the last five years regardless
of the length of service. A total of 128 employees have severance
agreements with the Company.
- ------------------------
(1) Under the severance agreements, a change in control is defined to include
the following transactions UNLESS approved by a majority of the Board of
Directors:
(a) any person or group becomes the beneficial owner of 20% or more of the
combined voting power of the Company's then outstanding securities;
(b) the election in a contest for election of a majority of the Board who
were not directors prior to such contest;
(c) the stockholders approve the dissolution or liquidation of the Company;
(d) the stockholders approve a merger, consolidation or other reorganization
of the Company, as a result of which less than 50% of the outstanding
voting securities of the resulting entity are owned by former
stockholders of the Company, or
(e) the stockholders approve the sale of all or substantially all of the
assets of the Company to a person or entity which is not a subsidiary of
the Company.
15
<PAGE>
PERFORMANCE GRAPH
In 1999 the Company changed its peer group from the Standard & Poor's
Software/Computer Services Index to Media General's Technical/System Software
Index in order to more accurately compare the Company's performance with that of
companies having a stronger focus on technical software.
The following graph provides a five-year comparison of cumulative total
returns for the Company, the Media General Technical/System Software Index, the
New York Stock Exchange (NYSE) Market Value Index and the Company's previous
peer index, the Standard & Poor's Software/Computer Services Index. The
comparison covers the five-year period from December 30, 1994 to December 31,
1999, and assumes that $100 was invested at the beginning of the five-year
period in the Company's common stock and each index. Cumulative total returns
assumes reinvestment of dividends on the date the dividends were declared.
The stock price performance depicted in this graph is not necessarily
indicative of future price performance. This graph will not be deemed to be
incorporated by reference by any general statement incorporating this proxy
statement into any filing by the Company under the Securities Act of 1933 or the
Securities Exchange Act of 1934, except to the extent the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
soliciting material or deemed filed under those Acts.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MSC.SOFTWARE CORPORATION COMPUTERS SOFTWARE/SVCS TECHNICAL/SYSTEM SOFTWARE NYSE MARKET INDEX
<S> <C> <C> <C> <C>
12/30/1994 100.00 100.00 100.00 100.00
12/29/1995 161.41 140.54 176.25 129.66
12/31/1996 82.60 218.49 201.46 156.20
12/31/1997 100.95 304.35 181.64 205.49
12/31/1998 73.42 551.47 201.82 244.52
12/31/1999 106.15 1019.84 268.35 267.75
</TABLE>
16
<PAGE>
APPROVAL OF THE 2000 EXECUTIVE CASH OR STOCK BONUS PLAN
On March 23, 2000, the Board adopted the MSC.Software Corporation 2000
Executive Cash or Stock Bonus Plan (the "Bonus Plan"), subject to the receipt of
stockholder approval of the Bonus Plan at the Annual Meeting.
The Company currently maintains the 1998 Plan as described under the heading
"Amendment to 1998 Stock Option Plan, As Amended" at page 20. The 1998 Plan
provides only for the grant of stock options and does not authorize grants of
shares issuable solely in consideration of services, cash awards or stock units
in lieu of stock awards. The Board believes that in order to strengthen the
Company's ability to attract, motivate, retain and reward executive officers,
additional incentives are needed. The Bonus Plan responds to that need,
authorizing up to 300,000 additional shares for this purpose.
The principal terms of the Bonus Plan are summarized below. The following
summary is qualified in its entirety by the full text of the Bonus Plan, a copy
of which is included as Exhibit A to this Proxy Statement. Capitalized terms
used in the summary are used as defined in the Bonus Plan.
SUMMARY DESCRIPTION OF THE BONUS PLAN
- - AWARDS. The Bonus Plan authorizes the grant of stock bonuses, provides
participants the opportunity to convert these bonus opportunities into Stock
Units and enhances compensation deferral opportunities. The Company currently
contemplates that 50% of annual bonuses would be paid in cash and 50% in
stock (at the opening of the market as of the first business day of either
the year for which the bonus is to be paid or the pay period in which an
individual becomes a participant).
- - ADMINISTRATION. The Bonus Plan will be administered by the Board or by one or
more committees appointed by the Board (the appropriate acting body is
referred to as the "Administrator"). The Administrator is currently the
Company's Compensation Committee.
The Administrator is charged with responsibility for selecting the
applicable business criteria from among those authorized, determining the
weighting of the business criteria used to determine bonuses, establishing
specific "performance targets" for the performance cycles relative to the
criteria for each (or all) participants, and determining the duration of
performance cycles. The Administrator has substantial discretion to make
these and all other determinations related to bonus opportunities under the
Plan.
- - ELIGIBILITY. Persons eligible to receive awards under the Bonus Plan include
employees of the Company who earn an annual base salary of at least $160,000
and who otherwise qualify as a member of a select group of management or
highly compensated employees. Currently, approximately seven employees of the
Company are considered eligible under the Bonus Plan, subject to the power of
the Administrator to determine eligible persons to whom awards will be
granted.
- - LIMITS ON AWARDS; AUTHORIZED SHARES. The Bonus Plan contains the following
limits.
- The maximum number of shares of Common Stock that may be delivered under
the Plan is 300,000 shares.
- The maximum number of shares subject to stock bonuses that are granted
under the Bonus Plan during any calendar year to any one individual is
50,000 shares.
- In no event will grants of awards under the Bonus Plan during any calendar
year to any one individual which are payable only in cash, and not related
to shares, provide for payment of more than $500,000.
17
<PAGE>
As is customary in incentive plans of this nature, the number and kind of
shares available under the Bonus Plan and the then outstanding stock-based
award opportunities, as well as the pricing of the shares, performance
targets, and share limits, are subject to adjustment in the event of certain
reorganizations, mergers, combinations, consolidations, recapitalizations,
reclassifications, stock splits, stock dividends, asset sales or other
similar events, or extraordinary dividends or distributions of property to
the stockholders.
The Bonus Plan will not limit the authority of the Board or the
Administrator to grant awards or authorize any other compensation, with or
without reference to the shares of Common Stock, under any other plan or
authority.
- - ANNUAL BONUSES; BUSINESS CRITERIA. The Administrator may grant to executive
officers annual bonuses based on the performance of the Company and/or the
individual participant.
The Administrator will establish the performance targets on which annual
bonuses will be awarded. The performance targets may be based on one or more
of the following business criteria:
- Cash Flow;
- Total Stockholder Return;
- Earnings Per Share (EPS);
- Operating Margin;
- Revenue Growth;
- Consolidated Net Income (ROE); or
- any combination of these criteria, all of which are further defined in the
Bonus Plan.
The Bonus Plan permits, but does not compel, the Company to structure bonus
awards to comply with Section 162(m) of the Code, preserving the Company's
ability to provide aggregate annual compensation to covered executive
officers in excess of $1,000,000 on a tax deductible basis.
Bonuses may be stock-based (payable in stock only or in cash or stock) or
may be cash-only awards (in either case, subject to the limits described
above under "LIMITS ON AWARDS; AUTHORIZED SHARES"). Before the bonus is
paid, the Administrator must certify that the performance goals have been
satisfied. The Administrator will have discretion to determine the
performance goals and restrictions or other limitations of the individual
awards and may reserve "negative" discretion to reduce payments below
maximum award limits.
- - DEFERRALS; STOCK UNITS. The Bonus Plan permits the Administrator to authorize
for the benefit of any participant the deferral of any payment of a stock
bonus that may become due or payable under the Bonus Plan, by and through
stock units. A stock unit represents a bookkeeping entry which serves as a
unit of measurement relative to a share of common stock for determining the
payment, in common stock, of a stock-related benefit under the Bonus Plan. A
stock unit will be payable only in the equivalent number of shares of common
stock and can accrue rights as to dividend equivalents (if dividends are paid
on shares) payable either in cash or shares or additional stock units under
the Bonus Plan. The Administrator may determine the form and timing of
payment, vesting, and other terms applicable to deferrals.
- - ACCELERATION OF AWARDS; POSSIBLE EARLY TERMINATION OF AWARDS. The Committee
may, but is not required to, accelerate the payment of an award upon a change
in ownership or control or in certain other situations as determined
appropriate by the Committee, for example if an employee is terminated
without cause prior to the vesting or payment of an award.
18
<PAGE>
- - TERMINATION OF OR CHANGES TO THE BONUS PLAN. Although the term of the Bonus
Plan is indefinite, the Board may amend or terminate the Bonus Plan at any
time and in any manner. Stockholder approval for any amendment will generally
not be required unless (a) the amendment materially increases the number of
shares available under the Bonus Plan (except for adjustments referred to
above) or (b) stockholder approval for the amendment is required by law.
Outstanding awards may be amended, within plan limits, subject to the consent
of the holder if the amendment materially and adversely affects the holder's
rights.
- - SECURITIES UNDERLYING AWARDS. The market value of a share of Common Stock as
of March 27, 2000 was $12.6875 per share. Upon receipt of stockholder
approval of the Bonus Plan, the Company plans to register under the
Securities Act of 1933, the shares of Common Stock available under the Bonus
Plan.
FEDERAL INCOME TAX TREATMENT OF AWARDS UNDER THE BONUS PLAN
The U.S. federal income tax consequences of the Bonus Plan are as follows:
Stock bonuses are generally subject to tax at the time of payment;
cash-based awards are generally subject to tax at the time of payment; and
compensation otherwise effectively deferred is taxed when paid. Stock unit
deferrals are taxed on payout of the shares at the then market value of the
shares. In each of the foregoing cases, the Company will generally have a
corresponding deduction at the time the participant recognizes income.
If an award is accelerated under the Bonus Plan in connection with a change
in control (as this term is used under the Code), the Company may not be
permitted to deduct the portion of the compensation attributable to the
acceleration ("parachute payments") if it exceeds certain threshold limits under
the Code, and certain related excise taxes to participants may also then be
triggered. Furthermore, if the compensation attributable to awards to certain
executives is not "performance-based" within the meaning of Section 162(m) of
the Code, the Company may not be permitted to deduct the aggregate non
performance-based compensation for the year in excess of $1,000,000 in certain
circumstances.
SPECIFIC BENEFITS
For information regarding annual bonuses granted to executive officers of
the Company, see the material under the heading "Summary Compensation Table."
The specific benefits to be paid to participants under the new Bonus Plan
are not determinable in advance because it is substantially uncertain whether
even minimum levels of performance necessary to achieve any level of award under
the Bonus Plan will be realized. Moreover, the Administrator has retained
discretion to reduce the awards to any participant in the Bonus Plan. In light
of the bonus programs utilized for the past two years, the Company believes that
the benefits that would have been payable under the Bonus Plan in 1999 had the
Bonus Plan been in effect would likely be substantially similar to the annual
bonuses received by participants in 1999. The Administrator has not yet
considered any awards under the Bonus Plan for years after 1999.
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AMENDMENT TO 1998 STOCK OPTION PLAN, AS AMENDED
The Board has determined that the Company's 1998 Plan should be amended to
increase the number of shares of the Company's common stock authorized to be
issued under the 1998 Plan by 1,000,000 shares to a total of 3,500,000 shares
and to increase the number of options that can be granted to any individual in
any calendar year from 200,000 to 500,000, subject to certain adjustments as
provided in the 1998 Plan and described below.
The Board of Directors approved the amendment to the 1998 Plan based, in
part, on a belief that the 711,750 shares that remained available for additional
awards under the 1998 Plan was insufficient to adequately provide for future
incentives to those individuals upon whose efforts the Company relies for the
continued success, development and growth of its business.
The 1998 Plan currently provides for a limit on the aggregate number of
shares of the Company's common stock that may be issued or delivered pursuant to
options of 2,500,000 shares. At March 1, 2000, 1,788,250 shares of the Company's
common stock remained subject to options then outstanding under the 1998 Plan
and 711,750 shares of common stock were available for grant under the 1998 Plan.
Although additional shares subject to outstanding options may become
available in the future if options expire or terminate prior to exercise, those
shares are not available now.
The Board has approved the amendment to the 1998 Plan. A copy of the 1998
Plan which incorporates the amendment is included as Exhibit B to this Proxy
Statement. The amendment will become effective upon the receipt of stockholder
approval. The following is a summary of the amended 1998 Plan. Please note that
the following description is qualified in its entirety by the full text of the
amended 1998 Plan and that capitalized terms used in the summary are defined in
the amended 1998 Plan.
SUMMARY DESCRIPTION OF THE 1998 PLAN
- - PURPOSE: The purpose of the 1998 Plan is to promote the success of the
Company and the interests of its stockholders by attracting, retaining, and
rewarding officers, employees, and other eligible persons through the grant
of equity incentives. The 1998 Plan also aims to attract, motivate and retain
experienced and knowledgeable independent directors.
- - ADMINISTRATION: The 1998 Plan is administered by the Board or one or more
committees appointed by the Board (the appropriate acting body is referred to
as the "Committee"). Currently, the Company's Compensation Committee
administers the 1998 Plan. The Committee determines the number of shares that
are to be subject to Options, the exercise price of Options, and the other
terms and conditions of the Options. Subject to the other provisions of the
1998 Plan, the Committee has the authority (1) to permit the recipient of any
Option to pay the exercise price of an Option in cash, the delivery of
previously owned shares of Common Stock, or a cashless exercise; (2) to
accelerate the receipt or vesting of benefits pursuant to an Option; and
(3) to make certain adjustments to an outstanding Option and authorize the
acceleration or termination or the assumption, conversion, or substitution of
an Option.
- - ELIGIBILITY: Persons eligible to receive Options under the 1998 Plan include
directors, officers or employees of the Corporation or any of its
Subsidiaries, and certain individual consultants and advisors to the Company.
Each member of the Board who is not an officer or employee of the Company (a
"Non-Employee Director") will receive certain automatic award grants under
the 1998 Plan, as described more fully below. Currently, there are four
Non-Employee Directors. Approximately 850 individuals are eligible to
participate in the 1998 Plan.
- - TRANSFER RESTRICTIONS. Subject to certain limited exceptions contained in
Section 1.8 of the 1998 Plan, Options are nontransferable and the Company
will only issue any amounts payable or shares
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issuable pursuant to an Option to the participant, a legal representative, or
in the case of death, the participant's estate or designated beneficiary.
- - LIMITS ON AUTHORIZED SHARES. Under the proposed amendment to the 1998 Plan, a
maximum of 3,500,000 shares of Common Stock may be delivered pursuant to
Options. The maximum number of these shares that may be issued to
Non-Employee Directors is 60,000. As amended, the maximum number of shares
subject to Options granted to any participant during any calendar year is
500,000.
- As is customary in stock option plans of this nature, the number and kind
of shares available under the 1998 Plan, as well as the exercise or
purchase prices, are subject to adjustment in the case of certain
corporate events. These events include reorganizations, mergers,
combinations, consolidations, recapitalizations, reclassifications, stock
splits, stock dividends, asset sales or other similar unusual or
extraordinary corporate events, or extraordinary dividends or
distributions of property to the stockholders.
- The 1998 Plan does not limit the ability of the Board or the Committee to
grant awards or authorize any other compensation under any other plan or
authority.
- - STOCK OPTIONS. An Option is the right to purchase shares of Common Stock at a
future date at a specified price (the "Option Price"). The Option Price per
share will be determined by the Committee, but it will not be less than the
fair market value of a share of Common Stock on the date of grant. Each
Option granted under the 1998 Plan will expire within 10 years after the date
of grant of the Option. Option recipients must pay the full Option Price
(either in cash or by another approved method) at the time of exercise.
- Options under the 1998 Plan are either Incentive Stock Options or a
Nonqualified Stock Options. Incentive Stock Options are taxed differently
from Nonqualified Stock Options, as described under "Federal Income Tax
Treatment of Options under the 1998 Plan" below. Incentive Stock Options
are also subject to more restrictive terms and are limited in amount by
the Code and the 1998 Plan.
- - AUTOMATIC OPTION GRANTS TO ELIGIBLE DIRECTORS. After the Company's 1991 Stock
Option Plan terminates in 2001, the automatic annual grants of certain
Options to Non-Employee Directors will be made under the 1998 Plan. Under the
1998 Plan, the Company thereafter will grant Nonqualified Stock Options to
purchase 10,000 shares of Common Stock to each Non-Employee Director on the
date he or she is first elected or appointed to the Board. In addition, the
Company will grant Nonqualified Stock Options to purchase 3,000 shares of
Common Stock on the first business day of each calendar year to each
Non-Employee Director who is then in office. Each Option will have a
five-year term and the exercise price will equal 100% of the Fair Market
Value of a share on the date of grant. Each Option will fully vest twelve
months after the date of grant.
- - ACCELERATION OF OPTIONS; POSSIBLE EARLY TERMINATION OF OPTIONS. Unless the
Committee determines otherwise, participants can generally exercise their
Options immediately upon the occurrence of a Change in Control Event. A
Change in Control Event under the 1998 Plan generally includes a dissolution
or liquidation of the Company, a reorganization resulting in a change in
ownership of at least 30% of the Company, certain changes in a majority of
the Board, certain mergers or consolidations approved by the Company's
stockholders, or stockholder approval of a sale of substantially all of the
Company's assets. Options may terminate after a Change in Control Event in
which the Company does not survive.
- - TERMINATION OR CHANGES TO THE 1998 PLAN. The Board may amend or terminate the
1998 Plan at any time and in any manner. Unless required by law or deemed
necessary or advisable by the Board, the Board will not seek stockholder
approval for any amendment to the 1998 Plan. The 1998 Plan
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will terminate at the close of business on the day before the tenth
anniversary of the Effective Date of the 1998 Plan. Outstanding Options may
be amended by the Committee only in accordance with the terms of the 1998
Plan and may not be amended or extended beyond 10 years without stockholder
approval.
- - SECURITIES UNDERLYING OPTIONS. The market value of a share of Common Stock as
of March 27, 2000 was $12.6875 per share. Upon receipt of stockholder
approval of the amendment to the 1998 Plan, the Company plans to register the
additional 1,000,000 shares of common stock authorized by the amendment to
the 1998 Plan pursuant to the Securities Act of 1933.
- - NO REPRICING. As noted above, the Company will not amend, or cancel and
regrant, any Option granted under the 1998 Plan in order to reduce the per
share exercise price of the Option to a price less than 100% of the fair
market value of the Common Stock on the date of grant of the initial Option.
The Board or Committee may, however, adjust the Option price consistent with
customary anti-dilution provisions of the 1998 Plan.
- - NO "RELOAD OPTIONS." The 1998 Plan does not provide for the grant of "reload
options," whereby an Option (the "Original Option") is enhanced by granting a
new option to the extent the Original Option is enhanced or to the extent it
is exercised with shares of already-held stock.
FEDERAL INCOME TAX TREATMENT OF OPTIONS UNDER THE 1998 PLAN
The current federal income tax consequences of the 1998 Plan are summarized
in the following general discussion of the general tax principles applicable to
the 1998 Plan. This summary is not intended to be exhaustive and does not
describe state, local, or international tax consequences.
With respect to nonqualified stock options, the participant recognizes
ordinary income of, and the Company is generally entitled to deduct, an amount
equal to the difference between the option exercise price and the fair market
value of the shares at the time of exercise. With respect to Incentive Stock
Options, the Company is generally not entitled to a similar deduction either
upon grant of the option or at the time the option is exercised. If Incentive
Stock Option shares are not held for specified qualifying periods, however, the
difference between the fair market value of the shares at the date of exercise
(or, if lower, the sale price) and the cost of such shares is taxed as ordinary
income (and the Company will receive a corresponding deduction) in the year the
shares are sold.
If an Option is accelerated under the 1998 Plan in connection with a change
in control (as this term is used in the Code), the Company may not be able to
deduct the portion of the compensation attributable to the acceleration if it,
together with other compensation received in connection with the event, exceeds
certain threshold limits under the Code. These excess payments are called
"parachute payments" and can also trigger certain related excise taxes.
Furthermore, if the compensation attributable to awards is not
"performance-based" within the meaning of Section 162(m) of the Code, the
Company may not be permitted to deduct the aggregate non performance-based
compensation in excess of $1,000,000 in certain circumstances.
SPECIFIC BENEFITS
For information regarding options granted to executive officers of the
Company, see the material under the heading "Option Grant Table" at page 13.
The number, amount, and type of awards to be received by or allocated to
eligible persons in the future under the 1998 Plan cannot be determined at this
time because benefits or amounts, eligibility, price and certain terms are
wholly within the discretion of the Committee. Similarly, the dollar value of
the benefits that will be received by or allocated to eligible persons in the
future under the 1998 Plan are not determinable because the value of such
benefits depends on the number, exercise price and other terms of the Options to
be granted and, among other variables, the fair market value of the
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Company's common stock in the future. The Company does not expect to grant
Options to non-employee directors under the 1998 Plan until fiscal year 2001.
OTHER MATTERS
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on a review of forms filed, Frank Perna filed four late reports on
Form 4 with respect to six transactions and George Riordan filed one late report
on Form 4 with respect to one transaction. The Company believes that other SEC
filings of its officers, directors and ten percent stockholders complied with
the requirements of Section 16 of the Securities and Exchange Act during 1999.
EXHIBITS TO ANNUAL REPORT ON FORM 10-K
If any person who was a beneficial owner of common stock of the Company on
the record date for the 2000 Annual Meeting desires additional information, a
copy of the exhibits to the Company's Report on Form 10-K will be furnished upon
written request and payment of copying charges. The request should identify the
person requesting the exhibits as a stockholder of the Company as of March 27,
2000 and should be directed to Mr. Louis A. Greco, Secretary, MSC.Software
Corporation, 815 Colorado Boulevard, Los Angeles, CA 90041.
By Order of the Board of Directors,
Louis A. Greco
SECRETARY AND CHIEF FINANCIAL OFFICER
March 29, 2000
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EXHIBIT A
MSC.SOFTWARE CORPORATION
2000 EXECUTIVE CASH OR STOCK BONUS PLAN
ARTICLE I
TITLE, PURPOSE AND AUTHORIZED SHARES
1.1 TITLE
This Plan shall be known as the MSC.Software Corporation 2000 Executive
Bonus Plan.
1.2 PURPOSE
The purpose of this Plan is to promote the success of the Company and the
interest of its stockholders by providing an additional means to attract,
motivate, retain and reward executive officers, by providing Participants annual
bonus incentives by further linking their interests with stockholders and by
offering a means through stock unit awards to enhance compensation deferral
opportunities.
1.3 AUTHORIZED SHARES
An aggregate number not to exceed 300,000 shares of Common Stock (subject to
adjustments contemplated by Section 8.2) shall be reserved under the Plan.
ARTICLE II
DEFINITIONS
2.1 DEFINED TERMS
Whenever the following terms are used in this Plan they shall have the
meaning specified below, subject to the other terms and conditions of this Plan,
unless the context clearly indicates to the contrary.
ANNUAL BONUS means an Award granted by the Committee, under the terms of the
Plan, payable in shares of Common Stock or in cash, or any combination
thereof pursuant to Committee authorization and participant elections
authorized by the Committee.
APPLICABLE PERCENTAGE means the percentage of an Annual Bonus to be paid as
a Stock Bonus. Unless the Committee, at or prior to the elections described
in Article V for a particular year, designates a different amount, the
Applicable Percentage shall be fifty percent (50%).
AWARD means the grant of the opportunity to earn a payment or bonus under
the Plan.
BASE SALARY means the base salary paid by the Company to a Participant
during the Year, exclusive of any bonuses, commissions or other actual or
imputed income from any Company-provided benefits or perquisites, but prior
to any reductions for salary deferred pursuant to any deferred compensation
plan or for contributions to a plan qualifying under Section 401(k) of the
Code or contributions to a cafeteria plan under Section 125 of the Code.
BOARD means the Board of Directors of the Company.
BUSINESS CRITERIA means EPS, Revenue Growth or ROE or Net Cash Flow,
Operating Margins or Total Stockholder Return, or any combination thereof.
CASH BONUS means the percentage of an Annual Bonus payable solely in cash.
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COMMITTEE means the Board or any one or more committees of director(s)
appointed by the Board to administer the Plan within the scope of authority
delegated to the acting Committee by the Board.
COMMON STOCK means the Common Stock, $0.01 par value per shares, of the
Company, subject to adjustment pursuant to Section 8.2.
COMPANY means MSC.Software Corporation, a Delaware corporation, and its
successors.
CONVERSION AMOUNT means the percentage of the Stock Bonus elected by the
Participant to be converted to a Stock Unit Award under this Plan.
DEFERRAL ELECTION AGREEMENT means an agreement substantially in the form of
Exhibit A (as from time to time revised by the Committee).
DIVIDEND EQUIVALENT RIGHT means the amount of cash dividends or other cash
distributions paid by the Company on that number of shares of Common Stock
equal to the number of Stock Units credited to a Participant's Stock Unit
Account as of the applicable record date for the dividend or other
distribution, which amount shall, at the discretion of the Committee, either
be paid on the applicable dividend payment date directly to the Participant
in cash or credited on that date in the form of cash or additional Stock
Units to the Stock Unit Account of the Participant, as provided in the
applicable Stock Unit Award Agreement.
EBT means for any fiscal year the consolidated earnings of the Company for
such year before income taxes.
EFFECTIVE DATE means March 23, 2000.
ELIGIBLE EMPLOYEE means any officer of the Company or a Subsidiary who earns
an annual base salary of at least $160,000 and who otherwise qualifies as a
member of a select group of management or highly compensated employees, as
described in Sections 201, 301 and 401 of the Employee Retirement Income
Security Act of 1974, as amended, as determined by the Committee for
purposes of this Plan.
EPS means net earnings per common share of the Company, calculated on either
a "basic" or "diluted" basis under FAS 128, as determined by the Committee
at the time an Annual Bonus is granted.
FAIR MARKET VALUE means on any date (i) if the Common Stock is listed or
admitted to trade on a national securities exchange, the opening price of
the Common Stock on the Composite Tape, as published in the Western Edition
of The Wall Street Journal, of the principal national securities exchange on
which the Common Stock is so listed or admitted to trade, on such date, or,
if there is no trading of the Common Stock on such date, then the opening
price of the Common Stock as quoted on such Composite Tape on the next
preceding date on which there was trading in such shares; (ii) if the Common
Stock is not listed or admitted to trade on a national securities exchange,
the opening price for the Common Stock on such date, as furnished by the
National Association of Securities Dealers, Inc. ("NASD") through the NASDAQ
National Market Reporting System or a similar organization if the NASD is no
longer reporting such information; (iii) if the Common Stock is not listed
or admitted to trade on a national securities exchange and is not reported
on the National Market Reporting System, the mean between the bid and asked
price for the Common Stock on such date, as furnished by the NASD or a
similar organization; or (iv) if the Common Stock is not listed or admitted
to trade on a national securities exchange, is not reported on the National
Market Reporting System and if bid and asked prices for the stock are not
furnished by the NASD or a similar organization, the value as established by
the Committee at such time for purposes of this Plan. Any determination as
to fair market value made
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pursuant to this Plan shall be determined without regard to any restriction
other than a restriction which, by its terms, will never lapse, and shall be
conclusive and binding on all persons.
NET CASH FLOW means cash and cash equivalents derived from either (i) net
cash flow from operations or (ii) net cash flow from operations, financings
and investing activities, as determined by the Committee at the time an
Annual Bonus is granted.
OPERATING MARGIN means earnings before interest and taxes divided by
revenues.
PARTICIPANT means any Eligible Employee who has been selected by the
Committee to participate in this Plan.
PERFORMANCE CYCLE means the period of time over which performance is
measured for determining the amount of any Annual Bonus granted under the
Plan. Unless the Committee determines otherwise, Performance Cycles are
annual.
PERFORMANCE TARGET(S) means the specific objective goal or goals (which may
be cumulative or alternative) that are timely set in writing by the
Committee for each Participant for the Performance Cycle in respect of any
one or more of the Business Criteria.
PLAN means this MSC.Software Corporation 2000 Executive Bonus Plan.
REVENUE GROWTH means for any period of time, the increase (or decrease) in
the Company's revenue as compared to a prior period of time determined by
the Committee at the time an Annual Bonus is granted.
ROE means for any fiscal year, consolidated net income of the Company,
divided by the average consolidated common stockholders equity.
STOCK BONUS means the percentage of the Annual Bonus that is payable solely
in shares of Common Stock.
STOCK UNIT means a bookkeeping entry which serves as a unit of measurement
relative to a share of Common Stock for purposes of determining the payment,
in Common Stock, of an Award, including a deferred benefit or right under
this Plan. Stock Units are not outstanding shares and do not entitle a
Participant to any dividend, voting or other rights in respect of any Common
Stock represented thereby or acquirable thereunder. Stock Units, can,
however, accrue Dividend Equivalent Rights.
STOCK UNIT AWARD means an award of Stock Units granted by the Committee
under the Plan based on the Conversion Amount.
STOCK UNIT AWARD AGREEMENT means an agreement substantially in the form of
Exhibit B (as from time to time revised by the Committee).
STOCK UNIT ACCOUNT means the bookkeeping account maintained by the Company
on behalf of each Participant which is credited with Stock Units calculated
in accordance with Section 5.4.
TOTAL STOCKHOLDER RETURN means with respect to the Company or other entities
(if measured on a relative basis), the (i) change in the market price of its
Common Stock (as quoted in the principal market on which it is traded as of
the beginning and ending of the period) plus dividends and other
distributions paid, divided by (ii) the beginning quoted market price, all
of which is adjusted for any changes in equity structure, including but not
limited to stock splits and stock dividends.
YEAR means the applicable calendar year.
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2.2 FINANCIAL AND ACCOUNTING TERMS
Except as otherwise expressly provided or the context otherwise requires,
financial and accounting terms are used as defined for purposes of, and shall be
determined in accordance with, generally accepted accounting principles, as from
time to time in effect, and, if applicable, as specifically applied and
reflected in financial statements of the Company, prepared in the ordinary
course of business. Without limiting the generality of the foregoing, such
calculations shall be made after all compensation accruals.
ARTICLE III
PARTICIPATION, ELIGIBILITY AND INDIVIDUAL LIMITS
3.1 PARTICIPATION AND ELIGIBILITY
Awards may be granted only to Eligible Employees. Actual Participants in the
Plan will be determined for each Performance Cycle by the Committee at the time
the Performance Target(s) are set or, in the case of a person becoming eligible
during a Performance Cycle, within 30 days after such event.
3.2 INDIVIDUAL LIMITS
In no event shall stock-based Awards granted to a Participant under this
Plan exceed 50,000 shares in any one Year nor shall cash-based Awards be granted
for an amount of more than $500,000 with respect to a Participant's performance
during any one Year.
ARTICLE IV
BONUS PROVISIONS
4.1 PROVISION FOR BONUS
Each Participant may receive an Annual Bonus for a Performance Cycle if, and
only if, the Performance Target(s) established by the Committee for such
Performance Cycle are attained. The applicable Performance Cycle, Business
Criteria and Performance Target(s) shall be determined by the Committee
consistent with the terms of the Plan. Notwithstanding the fact that the
Performance Target(s) have been attained, the Company may pay an Annual Bonus of
less than the amount determined by the formula or standard established pursuant
to Section 4.3(d) or may pay no Annual Bonus at all.
4.2 SELECTION OF PERFORMANCE TARGET(S)
The specific Performance Target(s) with respect to the Business Criteria
shall be established by the Committee while the performance relating to the
Performance Target(s) remains substantially uncertain. At the time the
Performance Target(s) are selected for any Performance Cycle, the Committee
shall provide in terms of an objective formula or standard for each Participant,
and for any person who may become a Participant after the Performance Target(s)
are set, the method of computing the specific amount that will represent the
Participant's maximum Annual Bonus if the Performance Target(s) are attained,
subject to Sections 4.3(d) and 8.2.
4.3 PAYMENT OF ANNUAL BONUSES
(a) TIME OF PAYMENT. Annual Bonuses for any Year shall be payable as soon
as practicable following the completion of the Company's audit for the Year, but
not later than 90 days after Year end.
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(b) FORM OF PAYMENT. The Committee may grant Annual Bonuses under this
Plan that provide Participants with the opportunity to earn a cash payment (Cash
Bonus), Common Stock (Stock Bonus), or a combination thereof. For each Year, the
Committee shall determine the Applicable Percentage, if any, of the Annual Bonus
to be paid as a Stock Bonus. Unless otherwise provided by the Committee, the
number of shares of Common Stock comprising the Stock Bonus shall be determined
by the Committee in its sole discretion and shall equal the Applicable
Percentage times the Annual Bonus divided by the Fair Market Value of the Common
Stock either: (i) on the first business day of the Year for which the Annual
Bonus is to be paid or (ii) in the case of an individual who becomes a
Participant during the Year, on the first business day of the pay period in
which he or she becomes a Participant, subject to adjustment pursuant to
Section 8.2 of this Plan.
For example, assume that for 2000, the Company grants a Participant an
Annual Bonus Award in a designated amount of $40,000, payable on March 1, 2001
and that the Committee determines that the Applicable Percentage for the Stock
Bonus portion of the Annual Bonus is 50%. The Fair Market Value of a share of
Common Stock on January 4, 2000 was $20. The Participant will receive $20,000 in
cash and 1,000 shares of Common Stock, regardless of the Fair Market Value of
the Common Stock on the date of the grant of the Award or payment.
(c) COMMITTEE CERTIFICATION. As a condition to the right of a Participant
to receive any payment under the Plan, the Committee shall first be required to
certify, by resolution of the Committee or other appropriate action, that the
Annual Bonus has been accurately determined in accordance with the provisions of
the Plan and that the Performance Target(s) and any other material terms were in
fact satisfied. The amount of the Annual Bonus remains subject to the discretion
of the Committee until paid and no part of it shall be deemed vested or payable
until that time.
(d) COMMITTEE DISCRETION TO REDUCE BONUSES. The Committee in its sole
discretion may reduce the amount payable under the formula provisions of the
Plan as applied to the pre-established goals to any one or more Participants for
any Year as to which the Committee determines that the level of achievement of
the pre-established Performance Target(s) was influenced by any extraordinary,
non-recurring event or other factor extraneous to such individual Participant's
performance, or that the Company or the Participant failed to achieve other
corporate or individual objectives. Subject to Section 7.1, the Committee may
also define such other conditions and terms of payment of Annual Bonuses
(including but not limited to the achievement of other financial, strategic or
individual goals, which may be objective or subjective) as it may deem desirable
in carrying out the purposes of the Plan, PROVIDED, HOWEVER, that, except
pursuant to adjustments contemplated by Section 8.2, the Committee may not
increase the maximum amount payable hereunder, under the applicable formula or
otherwise, to any individual.
(e) DEFERRAL. The Committee may determine that payment of all or a portion
of any Cash Bonus may be deferred in accordance with the terms and conditions of
the MacNeal-Schwendler Corporation Supplemental Retirement and Deferred
Compensation Plan. The Committee may determine that payment of all or a portion
of any Stock Bonus may be deferred in accordance with Article V of this Plan.
ARTICLE V
STOCK UNIT DEFERRAL ELECTIONS
5.1 TIME AND TYPES OF DEFERRAL ELECTIONS
On or before the commencement of any Year, the Committee may authorize each
Eligible Employee to make an irrevocable election to receive all or a part of
any Stock Bonus that may be payable to the Eligible Employee during the
following Year in Stock Units. This election shall become effective only if the
Committee, in authorizing a Stock Bonus or prior thereto, expressly recognizes
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such alternative payment opportunity in Stock Units Awards. A person who first
becomes an Eligible Employee after the applicable deadline may, within 30 days
of becoming and being designated as an Eligible Employee, make an irrevocable
election to receive any Stock Bonus granted for the applicable Year (or
remaining portion thereof, as the case may be) in Stock Units, subject to the
same other limitations.
5.2 ELECTION PROCEDURES
The elections shall be made in writing on forms provided by the Company and
authorized by the Committee. These forms shall take the form of the Distribution
Election Agreement attached hereto as Exhibit A, as from time to time amended by
the Committee. Neither the distribution nor completion of election agreements
shall convey any right to receive an Annual Bonus, in cash, Common Stock or
Stock Units, unless the Committee otherwise provides. Failure to timely elect
payment in the form of Stock Units, however, will result in the payment in
Common Stock if any Stock Bonus is awarded.
5.3 DISTRIBUTION OF BENEFITS
(a) TIME AND MANNER OF DISTRIBUTION. A Participant shall be entitled to
receive a distribution solely in shares of Common Stock, in an amount equal to
the number of Stock Units, if any, allocated to his or her Stock Unit Account,
at such time and in such manner as set forth in the form of agreement approved
by the Committee. A Participant may elect any of the distribution commencement
dates and methods of distribution (lump sum or annual installments) set forth in
the form of Distribution Election Agreement, from time to time, approved by the
Committee, for the applicable year, subject to such conditions as the Committee
may impose.
(b) CHANGE IN TIME OR MANNER OF DISTRIBUTION OF STOCK UNITS.
(i) LUMP SUM/INSTALLMENT. To the extent permitted by the Committee and
set forth in any applicable Distribution Election Agreement, a Participant
may change the manner of any distribution election from a lump sum to annual
installments (or vice versa) made with respect to Stock Units credited under
any Stock Unit Account by filing a written election with the Committee on a
form provided by the Committee; PROVIDED, HOWEVER, that no such election
shall be effective until 12 months after such election is filed with the
Committee, and no such election shall be effective if it is made with
respect to any Stock Unit Account after distributions with respect to such
Stock Unit Account have commenced. An election made pursuant to this
Section 5.3(b)(i) shall not affect the date of the commencement of benefits.
(ii) TIME OF COMMENCEMENT. To the extent permitted by the Committee
and set forth in any applicable Distribution Election Agreement, a
Participant may elect to further defer the commencement of any distribution
to be made with respect to Stock Units credited under any Stock Unit Account
by filing a new written election with the Committee on a form approved by
the Committee; PROVIDED, HOWEVER, that (A) no such election shall be
effective until 12 months after such election is filed with the Committee,
(B) no such new election shall be effective with respect to any Stock Unit
Account after benefits with respect to such Stock Unit Account shall have
commenced, and (C) no more than three new elections shall be valid as to any
Stock Unit Account. An election made pursuant to this Section 5.3(b)(ii)
shall not affect the manner of distribution (I.E., lump sum versus
installments), the terms of which shall be subject to Section 5.3(b)(i)
above.
5.4 NUMBER OF STOCK UNITS
The number of Stock Units to be credited under the Plan shall equal the
number of shares of Common Stock otherwise comprising the Stock Bonus multiplied
by the percentage of the Stock Bonus which the Participant has elected to defer,
subject to adjustment pursuant to Section 8.2 of this Plan.
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For example, assume that prior to January 1, 2000 the Participant from the
prior example elects to receive 40% of her Stock Bonus in Stock Units. The
Committee authorizes an Annual Bonus Award in a designated amount of $40,000,
payable on March 1, 2001 and determines that the Applicable Percentage for the
Stock Bonus portion is 50%. On March 1, 2001,The Participant will receive
$20,000 in cash, 600 shares of Common Stock and 400 Stock Units.
5.5 NO FRACTIONAL SHARE INTERESTS
If a distribution would result in the issuance of a fractional share, the
amount of Stock Units granted shall be rounded down to the next whole share and
the cash equivalent value in lieu of the fractional interest shall be paid in
cash.
ARTICLE VI
STOCK UNIT AWARDS
The grant of Stock Unit Awards, including, but not limited to, the terms of
grant, conditions and restrictions, the consideration (other than services) to
be paid, the form and content of Dividend Equivalent rights, vesting terms, and
adjustments in case of changes in the Common Stock, shall be governed by the
terms of the Stock Unit Award Agreement, substantially in the form of Exhibit B
(as from time to time revised by the Committee), to be executed and delivered by
the Company and the Participant. After an election is made, the form of the
Stock Unit Award Agreement (if applicable) may not be changed in any manner
materially adverse to the Participant without his or her consent. All Stock Unit
Awards are subject to express prior authorization by the Committee. The number
of Stock Units credited (and the number of Shares to which the Participant is
entitled under this Plan) shall be subject to adjustment in accordance with
Section 8.2 of this Plan.
ARTICLE VII
ADMINISTRATION
7.1 RIGHTS AND DUTIES.
This Plan shall be administered by and all Awards to Eligible Employees
shall be authorized by the Committee. The Committee shall have all powers
necessary to accomplish those purposes, including, but not by way of limitation,
the following:
(a) to determine the particular Eligible Employees who will receive
Annual Bonuses (which need not be identical from year to year), the size of
Annual Bonuses awarded to Participants under the Plan, designate the
specific Business Criteria and set the Performance Target(s) for the
Performance Cycles, the duration of the Performance Cycles, and the
weighting of the Business Criteria used to determine Annual Bonuses under
the Plan and make adjustments contemplated by this Plan;
(b) the extent to which and price at which an Annual Bonus will or may
be settled in shares of Common Stock or Stock Units, and the other specific
terms and conditions of Annual Bonuses and Stock Unit Awards consistent with
the express limits of this Plan;
(c) to approve from time to time the election agreement and other forms
of Award Agreements (which need not be identical either as among
Participants or from year to year); and
(d) to resolve any questions concerning benefits payable to a
Participant and make all other determinations and take such other action as
contemplated by this Plan or as may be necessary or advisable for the
administration or interpretation of this Plan.
A-7
<PAGE>
7.2 CLAIMS PROCEDURES.
To the extent the Committee permits deferral elections extending to the
termination of employment or beyond, the following claims procedures shall
apply:
(a) The Committee shall notify Participants and, where appropriate, the
Beneficiary(ies) of their right to claim benefits under these claims
procedures, shall make forms available for filing of such claims, and shall
provide the name of the person or persons with whom such claims should be
filed.
(b) The Committee shall act upon claims as required and communicate a
decision to the claimant promptly and, in any event, not later than 90 days
after the claim is received by the Committee, unless special circumstances
require an extension of time for processing the claim. If an extension is
required, notice of the extension shall be furnished to the claimant prior
to the end of the initial 90-day period, which notice shall indicate the
reasons for the extension and the expected decision date. The extension
shall not exceed 90 days. The claim may be deemed by the claimant to have
been denied for purposes of further review described below in the event a
decision is not furnished to the claimant within the period described in the
preceding three sentences. Every claim for benefits which is denied shall be
denied by written notice setting forth in a manner calculated to be
understood by the claimant (i) the specific reason or reasons for the
denial, (ii) specific reference to any provisions of this Plan on which
denial is based, (iii) description of any additional material or information
necessary for the claimant to perfect his claim with an explanation of why
such material or information is necessary, and (iv) an explanation of the
procedure for further review of the denial of the claim under this Plan.
(c) The claimant or his or her duly authorized representative shall have
60 days after receipt of denial of his or her claim to request a review of
such denial, the right to review all pertinent documents and the right to
submit issues and comments in writing. Upon receipt of a request for a
review of the denial of a benefit claim, the Committee shall undertake a
full and fair review of the denial.
(d) The Committee shall issue a decision not later than 60 days after
receipt of a request for review from a claimant unless special
circumstances, such as the need to hold a hearing, require a longer period
of time, in which case a decision shall be rendered as soon as possible but
not later than 120 days after receipt of the claimant's request for review.
The decision on review shall be in writing and shall include specific
reasons for the decision written in a manner calculated to be understood by
the claimant with specific reference to any provisions of this Plan on which
the decision is based.
ARTICLE VIII
MISCELLANEOUS
8.1 AMENDMENT, TERMINATION AND SUSPENSION
The Committee or the Board may, at any time, terminate or, from time to
time, amend, modify or suspend this Plan, in whole or in part, subject to
Section 1.2. No Awards may be granted under this Plan during any suspension of
this Plan or after termination of this Plan. Termination or amendment of this
Plan shall have no effect on any then outstanding Awards.
8.2 ADJUSTMENTS
Notwithstanding any other provisions hereof, if there shall occur any change
in the outstanding shares of the Company's Common Stock by reason of any
extraordinary dividend or other extraordinary distribution in respect of the
Common Stock (whether in the form of cash, Common Stock, other
A-8
<PAGE>
securities, or other property), or any reclassification, recapitalization, stock
split (including a stock split in the form of a stock dividend), reverse stock
split, reorganization, merger, combination, consolidation, split-up, spin-off,
repurchase, or exchange of Common Stock or other securities of the Company, or
any similar, unusual or extraordinary corporate transaction (or event in respect
of the Common Stock) or a sale of substantially all the assets of the Company as
an entirety, the Committee shall make such proportionate and equitable
adjustments consistent with the effect of such event on stockholders generally
(but without duplication of benefits if Dividend Equivalents are credited), as
the Committee determines to be necessary or appropriate, in the Performance
Target(s), Business Criteria, number, kind and/or character of shares of Common
Stock or other securities, property and/or rights available under this Plan and
payable in respect of Annual Bonuses, shares deliverable, Stock Units and Stock
Unit Accounts credited under this Plan, and the individual share limits under
Section 3.2, and, if applicable, the applicable Fair Market Value on which the
number of shares or such other securities, property or rights was or is to be
determined.
8.3 TERM OF THIS PLAN
The term of this Plan is indefinite, subject to the provisions of
Section 8.1. All authority of the Committee with respect to Awards hereunder,
including its authority to amend an Award, shall continue during any suspension
of this Plan, in respect of outstanding Awards on the Termination Date.
8.4 NON-EXCLUSIVITY OF PLAN
Nothing in this Plan shall limit or be deemed to limit the authority of the
Board or the Committee to grant bonuses or other awards or authorize any other
compensation, with or without reference to the Common Stock, under any other
plan or authority.
8.5 NO RESTRICTION ON CORPORATE POWERS
The existence of the Plan and the Awards granted hereunder shall not affect
or restrict in anyway the right or power of the Board or the stockholders of the
Company to make or authorize any adjustment, recapitalization, reorganization or
other change in the Company's capital structure or its business, any merger or
consolidation of the Company, any issue of obligations or equity prior to or
affecting the Company's capital stock or the rights thereof, the dissolution or
liquidation of the Company or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding.
A-9
<PAGE>
EXHIBIT A
YEAR 2000 ELECTION
MSC.SOFTWARE CORPORATION
IRREVOCABLE ELECTION AGREEMENT
2000 EXECUTIVE BONUS PLAN
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
IF DURING THE YEAR 2001, THE COMPENSATION COMMITTEE APPROVES A STOCK BONUS TO ME
UNDER THE PLAN AND IF THE COMPENSATION COMMITTEE THEN EXPRESSLY AUTHORIZES ME TO
RECEIVE ALL OR PART OF THE STOCK BONUS IN THE FORM OF A STOCK UNIT AWARD:
I IRREVOCABLY ELECT TO TAKE _______% OF MY STOCK BONUS IN THE FORM OF A STOCK
UNIT AWARD.
I UNDERSTAND THAT:
- THE CONVERSION RATE, FOR PURPOSES OF DETERMINING THE NUMBER OF SHARES
PAYABLE UNDER THE AWARD WILL BE 1.
- THE STOCK UNIT AWARD WILL BE AT ALL TIMES FULLY VESTED AND NOT SUBJECT TO
A RISK OF FORFEITURE.
- THIS ELECTION IS IRREVOCABLE AND MUST BE FILED BY _____________________,
20____ WITH:
LOUIS A. GRECO
815 COLORADO BOULEVARD
LOS ANGELES, CALIFORNIA 90041
- IF THIS ELECTION IS NOT TIMELY FILED, I WILL NOT HAVE AN OPPORTUNITY TO
DEFER ANY STOCK BONUS IN THE PLAN FOR THE YEAR 2000.
- THIS ELECTION IS SUBJECT TO THE TERMS OF THE PLAN AND THE APPLICABLE STOCK
UNIT AWARD AGREEMENT.
- THIS ELECTION DOES NOT CONSTITUTE A GUARANTEE THAT I WILL RECEIVE ANY
BONUS FROM THE COMPANY.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ACKNOWLEDGMENT AND AGREEMENT
I ACKNOWLEDGE AND AGREE TO THE FOREGOING TERMS OF THIS ELECTION AGREEMENT.
<TABLE>
<S> <C>
- ---------------------------------------
(PARTICIPANT'S SIGNATURE)
- --------------------------------------- ---------------------------------------
(PRINT NAME) (DATE)
</TABLE>
A-10
<PAGE>
EXHIBIT B
MSC.SOFTWARE CORPORATION
STOCK UNIT AWARD AGREEMENT
2000 EXECUTIVE CASH OR STOCK BONUS PLAN
<TABLE>
<S> <C>
PARTICIPANT NAME: ----------------------------
SOC. SEC. NO.:
----------------------------
NO. STOCK UNITS:
----------------------------
AWARD DATE:
--------------, 2001
</TABLE>
THIS AGREEMENT is among MSC.SOFTWARE CORPORATION, a Delaware corporation
(the "Company") and the employee named above (the "Participant") and is
delivered under the 2000 Executive Cash or Stock Bonus Plan (the "Plan").
W I T N E S S E T H
WHEREAS, pursuant to the Plan, the Company has granted to the Participant
with reference to services rendered and to be rendered to the Company, effective
as of the Award Date, a stock unit award (the "Stock Unit Award" or "Award"),
upon the terms and conditions set forth herein and in the Plan.
NOW THEREFORE, in consideration of services rendered by the Participant and
the mutual promises made herein and the mutual benefits to be derived therefrom,
the parties agree as follows:
1. DEFINED TERMS. Capitalized terms used herein and not otherwise defined
herein shall have the meaning assigned to such terms in the Plan.
2. GRANT. Subject to the terms of this Agreement and the Plan the Company
grants to the Participant a Stock Unit Award with respect to an aggregate number
of Stock Units (the "Stock Units") set forth above. The Company acknowledges
receipt of consideration for the shares payable with respect to the Stock Units
on the terms set forth in this Agreement in the form of services rendered to the
Company by the Participant prior to the Award Date with a value equal to the
Annual Bonus that would otherwise have been payable to the Participant but for
the Participant's election to receive Stock Units under the Plan.
3. VESTING. The Award shall be at all times fully vested and not subject
to risk of forfeiture, with respect to the total number of Stock Units
comprising the Award (subject to adjustment under Section 8.2 of the Plan.
4. DIVIDEND AND VOTING RIGHTS.
(a) LIMITATIONS ON RIGHTS ASSOCIATED WITH UNITS. The Participant shall
have no rights as a stockholder of the Company, no dividend rights (except
as expressly provided in Section 4(b) with respect to Dividend Equivalent
Rights) and no voting rights, with respect to the Stock Units and any shares
of Common Stock underlying or issuable in respect of such Stock Units until
such shares of Common Stock are actually issued to and held of record by the
Participant. No adjustments will be made for dividends or other rights of a
holder for which the record date is prior to the date of issuance of the
stock certificate.
(b) DIVIDEND EQUIVALENT RIGHTS DISTRIBUTIONS. As of any applicable
dividend or distribution payment date, the Participant shall receive a cash
payment in an amount equal to the amount of
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<PAGE>
the Dividend Equivalent Rights multiplied by the number of Units in the
Account as of the applicable dividend payment date.
5. TIMING AND MANNER OF DISTRIBUTION WITH RESPECT TO STOCK UNITS. At the
time the Participant executes this Agreement and subject to any changes imposed
by or allowed under the provisions of the Plan, the Participant shall make an
irrevocable election for the manner of distribution with respect to his or her
Stock Units credited under the Plan pursuant to this Agreement, in shares of
Common Stock, subject to and in accordance with the Plan and the elections made
by the Participant. The election shall specify the time of payout and shall be
made on a Distribution Election Agreement, substantially in the form of Exhibit
A. If no election is made, any Stock Unit credited to a Participant's Stock Unit
Account will be distributed in a single lump sum of shares of Common Stock upon
the Participant's termination of employment.
6. TAX WITHHOLDING. Upon payment of Dividend Equivalent Rights and/or the
distribution of shares of Common Stock in respect of a Participant's Stock Unit
Account, the entity within the Company last employing the Participant shall have
the right at its option to (i) require the Participant (or the Participant's
Personal Representative or Beneficiary, as the case may be) to pay or provide
for payment in cash of the amount of any taxes which the Company may be required
to withhold with respect to such payment or distribution or (ii) deduct from any
amount payable to the Participant the amount of any taxes which the Company may
be required to withhold with respect to such payment or distribution. In any
case where a tax is required to be withheld in connection with the delivery of
shares of Common Stock under this Agreement, the Committee may permit the
Participant to elect, pursuant to such rules and subject to such conditions as
the Committee may establish, to have the Company reduce the number of shares to
be delivered by (or otherwise reacquire) the appropriate number of shares valued
at their then Fair Market Value, to satisfy such withholding obligation.
7. NOTICES. Any notice to be given under the terms of this Agreement shall
be in writing and addressed to the Company at its principal office located at
815 Colorado Boulevard, Los Angeles, California 90041, to the attention of the
Corporate Secretary and to the Participant at the address given beneath the
Participant's signature hereto, or at such other address as either party may
hereafter designate in writing to the other.
8. PLAN. The Award and all rights of the Participant with respect thereto
are subject to, and the Participant agrees to be bound by, all of the terms and
conditions of the provisions of the Plan, incorporated herein by reference, to
the extent such provisions are applicable to Awards granted to Eligible
Employees. The Participant acknowledges receipt of a copy of the Plan, which is
made a part hereof by this reference, and agrees to be bound by the terms
thereof. Unless otherwise expressly provided in other Sections of this
Agreement, provisions of the Plan that confer discretionary authority on the
Committee do not (and shall not be deemed to) create any rights in the
Participant unless such rights are expressly set forth herein or are otherwise
in the sole discretion of the Committee so conferred by appropriate action of
the Committee under the Plan after the date hereof.
9. NO SERVICE COMMITMENT BY COMPANY. Nothing contained in this Agreement
or the Plan constitutes an employment or other commitment by the Company as to
the Participant's service, confers upon the Participant any right to remain
employed by or in service of the Company or any subsidiary, interferes in any
way with the right of the Company or any subsidiary at any time to terminate
such employment or service, or affects the right of the Company or any
subsidiary to increase or decrease his or her other compensation.
10. LIMITATION ON PARTICIPANT'S RIGHTS. Participation in the Plan confers
no rights or interests other than as herein provided. This Agreement creates
only a contractual obligation on the part of the Company as to amounts payable
and shall not be construed as creating a trust. The Plan, in and of itself, has
no assets. The Participant shall have only the rights of a general unsecured
creditor of the Company with respect to amounts credited and benefits payable,
if any, on Stock Unit Account(s), and
A-12
<PAGE>
rights no greater than the right to receive the Common Stock (or equivalent
value) as a general unsecured creditor with respect to Stock Units, as and when
payable thereunder.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written. By the Participant's execution of this Agreement, the
Participant agrees to the terms and conditions hereof and of the Plan.
<TABLE>
<S> <C>
MSC.SOFTWARE CORPORATION PARTICIPANT
(a Delaware corporation)
By ---------------------------------------
-----------------------------------------
Louis A. Greco (Signature)
-----------------------------------------
(Print Name)
-----------------------------------------
(Address)
-----------------------------------------
(City, State, Zip Code)
</TABLE>
A-13
<PAGE>
CONSENT OF SPOUSE
In consideration of the execution of the foregoing Stock Unit Award
Agreement by MSC.Software Corporation, I, _____________________, the spouse of
the Participant therein named, do hereby join with my spouse in executing the
foregoing Stock Unit Award Agreement and do hereby agree to be bound by all of
the terms and provisions thereof and of the Plan. Dated: ______________,
_______.
--------------------------------------
Signature of Spouse
A-14
<PAGE>
EXHIBIT A
DISTRIBUTION ELECTION AGREEMENT
MSC.SOFTWARE CORPORATION
2000 EXECUTIVE CASH OR STOCK BONUS PLAN
IRREVOCABLE DISTRIBUTION ELECTION AGREEMENT
- --------------------------------------------------------------------------------
I HEREBY IRREVOCABLY ELECT TO RECEIVE THE PAYMENTS OF BENEFITS IN ACCORDANCE
WITH THE CHOICE INDICATED BY ME BELOW, EXCEPT AS MAY BE OTHERWISE PROVIDED IN
THE PLAN.
LUMP SUM OR INSTALLMENTS [CHECK APPLICABLE ITEM AND ENTER NUMBER (IF ANY)]:
----------- A Single Lump Sum, deliverable as elected below.
----------- In Annual Installments: Specify number (not less than 5 nor
more than 10): _________, commencing as elected below.
TIME OF COMMENCEMENT OF DISTRIBUTION [CHECK APPLICABLE ITEM]:
----------- Delivered or commencing as soon as practicable after
______________, 200____ (select a date not earlier than 12
months from the date of election).
----------- Delivered or commencing as soon as practicable after a
termination of service.
----------- Delivered or commencing as soon as practicable after the
EARLIER OF ______________, 200____ (select a date not
earlier than 12 months from the date of election) or a
termination of service.
----------- Delivered or commencing as soon as practicable after the
LATER OF ______________, 200____ (select a date not earlier
than 12 months from the date of election) OR a termination
of service.
REMAINING BALANCES OF LESS THAN 100 STOCK UNITS WILL BE PAID IN SHARES OF COMMON
STOCK IN A SINGLE LUMP SUM.
I UNDERSTAND THAT IF I FAIL TO COMPLETE THIS DISTRIBUTION ELECTION AGREEMENT, MY
STOCK UNIT ACCOUNT WILL BE DISTRIBUTED IN A SINGLE DISTRIBUTION OF SHARES OF
COMMON STOCK AS SOON AS PRACTICABLE AFTER A TERMINATION OF SERVICE.
- --------------------------------------------------------------------------------
SIGNATURE AND ACKNOWLEDGMENT
I HEREBY ACKNOWLEDGE THAT I UNDERSTAND AND CONSENT TO THE TERMS OF THIS
DISTRIBUTION ELECTION AGREEMENT AND THE PLAN. I UNDERSTAND THAT THE PAYMENT
PERIODS ABOVE ARE IRREVOCABLE (EXCEPT AS PROVIDED IN SECTION 5.3(B) OF THE PLAN)
AND ARE SUBJECT TO THE TERMS OF THE PLAN, WHICH REQUIRE AMONG OTHER THINGS THAT
I PAY OR PROVIDE FOR (THROUGH WITHHOLDING AND OTHER ACCEPTABLE MEANS) PAYMENT IN
CASH OF ALL APPLICABLE TAX WITHHOLDING IN RESPECT OF ANY PAYMENT OF THE SHARES
OF COMMON STOCK TO ME. THE COMMITTEE MAY PERMIT THE OFFSET OF SHARES OF COMMON
STOCK AT THEIR THEN MARKET VALUE TO COVER WITHHOLDING OBLIGATIONS, BUT I HAVE NO
RIGHT TO SUCH OFFSET, AND (IN THE ABSENCE OF COMMITTEE APPROVAL TO OFFSET SHARES
OF COMMON STOCK) I WILL BE REQUIRED TO PAY WITHHOLDING OBLIGATIONS TO THE
COMPANY IN CASH.
<TABLE>
<S> <C>
- -------------------------------------- --------------------------------------
(SIGNATURE) (DATE)
- --------------------------------------
(PRINT NAME)
</TABLE>
A-15
<PAGE>
EXHIBIT B
THE MACNEAL-SCHWENDLER CORPORATION
1998 STOCK OPTION PLAN, AS AMENDED
1. THE PLAN.
1.1 PURPOSE. The purpose of this Plan is to promote the success of the
Company and the interests of its stockholders by attracting, retaining and
rewarding officers, employees, and other eligible persons through the grant of
equity incentives and to attract, motivate and retain experienced and
knowledgeable independent directors through the benefits provided under
Section 3. Capitalized terms used herein are defined in Section 5.
1.2 ADMINISTRATION AND AUTHORIZATION; POWER AND PROCEDURE.
1.2.1 COMMITTEE. This Plan will be administered by and all Options to
Eligible Persons will be authorized by the Committee. Action of the
Committee with respect to the administration of this Plan will be taken
pursuant to a majority vote or by unanimous written consent of its members.
1.2.2 PLAN AWARDS; INTERPRETATION; POWERS OF COMMITTEE. Subject to the
express provisions of this Plan and any express limitations on the delegated
authority of a Committee, the Committee will have the authority to:
(a) determine eligibility and the particular Eligible Persons who
will receive Options;
(b) grant Options to Eligible Persons, determine the price at which
securities will be offered and the amount of securities to be offered or
awarded to any of such persons, and determine the other specific terms
and conditions of such Options consistent with the express limits of this
Plan, and establish the installments (if any) in which such Options will
become exercisable or will vest, or determine that no delayed
exercisability or vesting is required, and establish the events of
termination of such Options;
(c) approve the forms of Option Agreements (which need not be
identical either as to type of Option or among Participants);
(d) construe and interpret this Plan and any agreements defining the
rights and obligations of the Company and Participants under this Plan,
further define the terms used in this Plan, and prescribe, amend and
rescind rules and regulations relating to the administration of this
Plan;
(e) cancel, modify, or waive the Corporation's rights with respect
to, or modify, discontinue, suspend, or terminate any or all outstanding
Options held by Eligible Persons, subject to any required consent under
Section 4.6;
(f) accelerate or extend the exercisability or extend the term of any
or all such outstanding Options within the maximum ten-year term of
Options under Section 2.3; and
(g) make all other determinations and take such other action as
contemplated by this Plan or as may be necessary or advisable for the
administration of this Plan and the effectuation of its purposes.
Notwithstanding the foregoing, the provisions of Section 3 relating to
Non-Employee Director Options will be automatic and, to the maximum extent
possible, self-effectuating. To the extent required, any interpretation or
administration of this Plan in respect of Options granted under Section 3
will be the responsibility of the Board.
B-1
<PAGE>
1.2.3 BINDING DETERMINATIONS. Any action taken by, or inaction of, the
Corporation, any Subsidiary, the Board or the Committee relating or pursuant
to this Plan will be within the absolute discretion of that entity or body
and will be conclusive and binding upon all persons. No member of the Board
or Committee, or officer of the Corporation or any Subsidiary, will be
liable for any such action or inaction of the entity or body, of another
person or, except in circumstances involving bad faith, of himself or
herself. Subject only to compliance with the express provisions hereof, the
Board and Committee may act in their absolute discretion in matters within
their authority related to this Plan.
1.2.4 RELIANCE ON EXPERTS. In making any determination or in taking or
not taking any action under this Plan, the Committee or the Board, as the
case may be, may obtain and may rely upon the advice of experts, including
professional advisors to the Corporation. No director, officer or agent of
the Company will be liable for any such action or determination taken or
made or omitted in good faith.
1.2.5 BIFURCATION OF PLAN ADMINISTRATION & DELEGATION. Subject to the
limits set forth in the definition of Committee in Section 5, the Board may
delegate different levels of authority to different Committees with
administration and grant authority under this Plan, provided that each
designated Committee granting any Options hereunder will consist exclusively
of a member or members of the Board. A majority of the members of the acting
Committee will constitute a quorum. The vote of a majority of a quorum or
the unanimous written consent of a Committee will constitute action by the
Committee. A Committee may delegate ministerial, non-discretionary functions
to individuals who are officers or employees of the Company.
1.3 PARTICIPATION. Options may be granted by the Committee only to those
persons that the Committee determines to be Eligible Persons. An Eligible Person
who has been granted an Option may, if otherwise eligible, be granted additional
Options if the Committee so determines.
1.4 SHARES AVAILABLE FOR OPTIONS; SHARE LIMITS.
1.4.1 SHARES AVAILABLE. Subject to the provisions of Section 4.2, the
capital stock that may be delivered under this Plan will be shares of the
Corporation's Common Stock. The Shares may be delivered for any lawful
consideration.
1.4.2 SHARE LIMITS. The maximum number of Shares that may be delivered
pursuant to Options granted under this Plan is 3,500,000 Shares (the "SHARE
LIMIT"). The maximum number of Shares that may be delivered pursuant to
Options granted to Non-Employee Directors is 60,000 Shares. The maximum
number of Shares subject to those Options that are granted during any
calendar year to any one individual is 500,000 Shares. Each of the foregoing
numerical limits will be subject to adjustment as contemplated by this
Section 1.4 and Section 4.2.
1.4.3 SHARE LIMIT; REPLENISHMENT AND REISSUE OF UNVESTED OPTIONS. No
Option may be granted under this Plan unless, on the date of grant, the sum
of (i) the maximum number of Shares issuable at any time pursuant to such
Option, plus (ii) the number of Shares that have previously been issued
pursuant to Options granted under this Plan, other than reacquired Shares
available for reissue consistent with any applicable limitations, plus
(iii) the maximum number of Shares that may be issued at any time after such
date of grant pursuant to Options that are outstanding on such date, does
not exceed the Share Limit. Shares that are subject to or underlie Options
that expire or for any reason are cancelled or terminated, are forfeited,
fail to vest, or for any other reason are not paid or delivered under this
Plan, as well as reacquired Shares, will again, except to the extent
prohibited by law, be available for subsequent Options under this Plan.
1.5 GRANT OF OPTION. Subject to the express provisions of this Plan, the
Committee will determine the number of Shares subject to each Option and the
price to be paid for the Shares. Each
B-2
<PAGE>
Option will be evidenced by an Option Agreement signed by the Corporation and,
if required by the Committee, by the Participant.
1.6 OPTION PERIOD. Any option and related right will expire not more than
10 years after the date of grant; provided, however, that the delivery of stock
pursuant to an Option may be delayed until a future date if specifically
authorized by the Committee in writing.
1.7 LIMITATIONS ON EXERCISE AND VESTING OF OPTIONS.
1.7.1 PROVISIONS FOR EXERCISE. Unless the Committee otherwise
expressly provides, no Option will be exercisable or will vest until at
least six months after the initial Option Date, and once exercisable an
Option will remain exercisable until the expiration or earlier termination
of the Option.
1.7.2 PROCEDURE. Any exercisable Option will be deemed to be exercised
when the Secretary of the Corporation receives written notice of such
exercise from the Participant, together with any required payment made in
accordance with Section 2.2(b) or 3.3, as the case may be.
1.7.3 FRACTIONAL SHARES/MINIMUM ISSUE. Fractional share interests will
be disregarded, but may be accumulated. The Committee, however, may
determine in the case of Eligible Persons that cash, other securities, or
other property will be paid or transferred in lieu of any fractional share
interests. No fewer than 100 Shares may be purchased on exercise of any
Option at one time unless the number purchased is the total number at the
time available for purchase under the Option.
1.8 NO TRANSFERABILITY.
1.8.1 LIMIT ON EXERCISE AND TRANSFER. Unless otherwise expressly
provided in (or pursuant to) this Section 1.8, by applicable law and by the
Option Agreement, as the same may be amended, (i) all Options are
non-transferable and will not be subject in any manner to sale, transfer,
anticipation, alienation, assignment, pledge, encumbrance or charge;
(ii) Options will be exercised only by the Participant; and (iii) amounts
payable or Shares issuable pursuant to an Option will be delivered only to
(or for the account of) the Participant.
1.8.2 EXCEPTIONS. The Committee may permit Options to be exercised by
and paid only to certain persons or entities related to the Participant
pursuant to such conditions and procedures as the Committee may establish.
Any permitted transfer will be subject to the condition that the Committee
receive evidence satisfactory to it that the transfer is being made for
estate and/or tax planning purposes and without consideration (other than
nominal consideration). Incentive Stock Options will be subject to any and
all additional transfer restrictions under the Code (notwithstanding
Section 1.8.3).
1.8.3 FURTHER EXCEPTIONS TO LIMITS ON TRANSFER. The exercise and
transfer restrictions in Section 1.8.1 will not apply to:
(a) transfers to the Corporation,
(b) the designation of a beneficiary to receive benefits if the
Participant dies or, if the Participant has died, transfers to or
exercise by the Participant's beneficiary, or, in the absence of a
validly designated beneficiary, transfers by will or the laws of descent
and distribution,
(c) transfers pursuant to a QDRO if approved or ratified by the
Committee,
(d) if the Participant has suffered a disability, permitted transfers
or exercises on behalf of the Participant by the Participant's legal
representative, or
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(e) the authorization by the Committee of cashless exercise
procedures with third parties who provide financing for the purpose of
(or who otherwise facilitate) the exercise of Options consistent with
applicable laws and the express authorization of the Committee.
2. ELIGIBLE PERSON OPTIONS.
2.1 GRANTS. One or more Options may be granted under this Section 2 to any
Eligible Person. Each Option granted will be designated in the applicable Option
Agreement, by the Committee, as either an Incentive Stock Option, subject to
Section 2.4, or a Nonqualified Stock Option.
2.2 OPTION PRICE.
2.2.1 PRICING LIMITS. The purchase price per Share covered by each
Option will be determined by the Committee at the time of the grant, but in
all cases will not be less than 100% (110% in the case of a Participant
described in Section 2.4.3) of the Fair Market Value of the Common Stock on
the date of grant and in all cases will not be less than the par value
thereof.
2.2.2 PAYMENT PROVISIONS. The purchase price of any Shares purchased
on exercise of an Option granted under this Section 2 will be paid in full
at the time of each purchase in one or a combination of the following
methods: (i) in cash or by electronic funds transfer; (ii) by certified or
cashier's check payable to the order of the Corporation; (iii) by notice and
third party payment in such manner as may be authorized by the Committee; or
(iv) by the delivery of shares of Common Stock of the Corporation already
owned by the Participant, PROVIDED, HOWEVER, that the Committee may in its
absolute discretion limit the Participant's ability to exercise an Option by
delivering such Shares, and any Shares delivered that were initially
acquired upon exercise of a stock option must have been owned by the
Participant at least six months as of the date of delivery. Shares used to
satisfy the exercise price of an Option will be valued at their Fair Market
Value on the date of exercise. Without limiting the generality of the
foregoing, the Committee may provide that the Option can be exercised and
payment made by delivering a properly executed exercise notice together with
irrevocable instructions to a broker to promptly deliver to the Corporation
the amount of sale proceeds necessary to pay the exercise price and, unless
otherwise prohibited by the Committee or applicable law, any applicable tax
withholding under Section 4.5. The Corporation will not be obligated to
deliver certificates for the Shares unless and until it receives full
payment of the exercise price therefor and any related withholding
obligations have been satisfied.
2.3 VESTING; OPTION PERIOD.
2.3.1 VESTING. Subject to Section 1.6, each Option will vest and
become exercisable as of the date or dates determined by the Committee and
set forth in the applicable Option Agreement.
2.3.2 OPTION PERIOD. Subject to Section 1.6, each Option and all
rights thereunder will expire no later than 10 years after the Option Date.
2.4 LIMITATIONS ON GRANT AND TERMS OF INCENTIVE STOCK OPTIONS.
2.4.1 $100,000 LIMIT. To the extent that the aggregate "FAIR MARKET
VALUE" of stock with respect to which incentive stock options first become
exercisable by a Participant in any calendar year exceeds $100,000, taking
into account both Common Stock subject to Incentive Stock Options under this
Plan and stock subject to incentive stock options under all other plans of
the Company or any parent corporation, such options will be treated as
Nonqualified Stock Options. For this purpose, the "FAIR MARKET VALUE" of the
stock subject to options will be determined as of the date the options were
awarded. In reducing the number of options treated as incentive stock
options to meet the $100,000 limit, the most recently granted options will
be reduced first. To the extent a reduction of simultaneously granted
options is necessary to meet the $100,000 limit, the Committee
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may, in the manner and to the extent permitted by law, designate which
shares are to be treated as shares acquired pursuant to the exercise of an
Incentive Stock Option.
2.4.2 OTHER CODE LIMITS. Incentive Stock Options may only be granted
to Eligible Employees of the Corporation or a Subsidiary that satisfies the
other eligibility requirements of the Code. There will be imposed in any
Option Agreement relating to Incentive Stock Options such other terms and
conditions as from time to time are required in order that the Option be an
"incentive stock option" as that term is defined in Section 422 of the Code.
2.4.3 LIMITS ON 10% HOLDERS. No Incentive Stock Option may be granted
to any person who, at the time the Option is granted, owns (or is deemed to
own under Section 424(d) of the Code) shares of outstanding Common Stock
possessing more than 10% of the total combined voting power of all classes
of stock of the Corporation, unless the exercise price of such Option is at
least 110% of the Fair Market Value of the stock subject to the Option and
such Option by its terms is not exercisable after the expiration of five
years from the date such Option is granted.
2.5 CANCELLATION AND REGRANT/WAIVER OF RESTRICTIONS/NO REPRICING. Subject
to Section 1.4 and Section 4.6 and the specific limitations on Options contained
in this Plan, the Committee from time to time may authorize, generally or in
specific cases only, for the benefit of any Eligible Person any adjustment in
the vesting schedule, the number of Shares subject to, or the restrictions upon
or the term of, an Option granted under this Section 2 by cancellation of an
outstanding Option and a subsequent regranting of an Option, by amendment, by
substitution of an outstanding Option, by waiver or by other legally valid
means; provided, however, that no such amendment, cancellation and regrant, or
other adjustment to an Option shall reduce the per Share exercise price of the
Option to a price less than 100% of the Fair Market Value of the Common Stock on
the Option Date of the initial Option (subject to permitted adjustments pursuant
to Section 4.2). Such amendment or other action may provide, subject to
Section 2.2, for among other changes, for a greater or lesser number of Shares
subject to the Option, or provide for a longer or shorter vesting or exercise
period.
2.6 OPTIONS IN SUBSTITUTION FOR STOCK OPTIONS GRANTED BY OTHER
CORPORATIONS. Options may be granted to Eligible Persons under this Plan in
substitution for employee stock options granted by other entities to persons who
are or who will become Eligible Persons in respect of the Company, in connection
with a distribution, merger or reorganization by or with the granting entity or
an affiliated entity, or the acquisition by the Company, directly or indirectly,
of all or a substantial part of the stock or assets of the employing entity.
3. NON-EMPLOYEE DIRECTOR OPTIONS.
3.1 PARTICIPATION/COMMENCEMENT. Options under this Section 3 will be made
only to Non-Employee Directors and will be evidenced by Option Agreements
substantially in the form of Exhibit A hereto. No Option shall be granted under
the 1998 Plan to any Non-Employee Director until the earlier of (i) the
termination of the 1991 Plan (for any reason), or (ii) the lack of capacity
under Article III of the 1991 Plan to grant further Non-Employee Director
Options.
3.2 OPTION GRANTS.
3.2.1 INITIAL OPTIONS. After approval of this Plan by the stockholders
of the Corporation and after the commencement of this Section 3 of the Plan
upon the earlier occurance of (i) or (ii) as listed in Section 3.1 above
(the "Commencement Date"), if any person who is not then an officer or
employee of the Company becomes a Non-Employee Director, on the date of
election to the Board such person will automatically be granted (without any
action by the Board or the Committee) a Nonqualified Stock Option (the
Option Date of which shall be the date such person takes office) to purchase
10,000 shares of Common Stock.
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3.2.2 SUBSEQUENT ANNUAL OPTIONS. Subject to Section 3.2.3, at the
close of trading on the first business day in each calendar year during the
term of this Plan commencing in the following year after the year in which
the Commencement Date occurs, there will be granted automatically (without
any action by the Board or the Committee) a Nonqualified Stock Option (the
Option Date of which shall be such date) to each Non-Employee Director then
in office to purchase 3,000 shares of Common Stock.
3.2.3 MAXIMUM NUMBER OF OPTIONS/SHARES. Annual grants that would
otherwise exceed the maximum number of shares under Section 1.4.2 will be
prorated within such limitation.
3.3 OPTION PRICE. The purchase price per Share of the Common Stock covered
by each Option granted pursuant to Section 3.2 will be 100% of the Fair Market
Value of the Common Stock on the Option Date. The purchase price of any Shares
purchased shall be paid in full at the time of each purchase either in cash or
by check or in shares of Common Stock valued at their Fair Market Value on the
date of exercise of the Option, or partly in Shares and partly in cash; provided
that any Shares used for such payment must be owned by the Participant at least
six months prior to the date of such exercise.
3.4 OPTION PERIOD AND EXERCISABILITY. Each Option granted under
Section 3.2 and all rights or obligations thereunder will expire on the day
before the fifth anniversary of the Option Date and will be subject to earlier
termination as provided below. Each Option granted under Section 3.2 will become
100% vested and exercisable on the day before the first anniversary of the
Option Date.
3.5 TERMINATION OF DIRECTORSHIP. If a Non-Employee Director's services as
a member of the Board terminate for any reason, an Option granted pursuant to
Section 3.2 that is held by such Participant will terminate to the extent that
it is not then exercisable, and any portion of such Option that is then
exercisable may be exercised for only six months after the date of such
termination or until the expiration of the stated term of such Option, whichever
first occurs.
3.6 ADJUSTMENTS; ACCELERATION; TERMINATION. Options granted under
Section 3.2 will be subject to adjustments, accelerations, and terminations as
provided in Section 4.2, but only to the extent that such adjustment and any
Board or Committee action in respect thereof in the case of a Change in Control
is effected pursuant to the terms of a reorganization agreement approved by
stockholders of the Corporation, or is otherwise consistent with adjustments to
Options held by persons other than executive officers of the Corporation (or, if
there are none, consistent in respect of the underlying Shares with the effect
on stockholders generally).
4. OTHER PROVISIONS.
4.1 RIGHTS OF ELIGIBLE PERSONS, PARTICIPANTS AND BENEFICIARIES.
4.1.1 EMPLOYMENT STATUS. Status as an Eligible Person will not be
construed as a commitment that any Option will be granted under this Plan to
an Eligible Person or to Eligible Persons generally.
4.1.2 NO EMPLOYMENT CONTRACT. Nothing contained in this Plan (or in
any other documents related to this Plan or to any Option) will confer upon
any Eligible Person or other Participant any right to continue in the employ
or other service of the Company or constitute any contract or agreement of
employment or other service, nor will interfere in any way with the right of
the Company to change such person's compensation or other benefits or to
terminate the employment (or services) of such person, with or without
cause, but nothing contained in this Plan or any related document will
adversely affect any independent contractual right of such person without
the person's consent thereto.
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4.1.3 PLAN NOT FUNDED. Options payable under this Plan will be payable
in Shares or from the general assets of the Corporation. No Participant,
Beneficiary or other person will have any right, title or interest in any
fund or in any specific asset (including Shares, except as expressly
otherwise provided) of the Company by reason of any Option hereunder.
Neither the provisions of this Plan (or of any related documents), nor the
creation or adoption of this Plan, nor any action taken pursuant to the
provisions of this Plan will create, or be construed to create, a trust of
any kind or a fiduciary relationship between the Company and any
Participant, Beneficiary or other person. To the extent that a Participant,
Beneficiary or other person acquires a right to receive payment pursuant to
any Option hereunder, such right will be no greater than the right of any
unsecured general creditor of the Company.
4.2 ADJUSTMENTS; ACCELERATION.
4.2.1 ADJUSTMENTS. The following provisions will apply if any
extraordinary dividend or other extraordinary distribution occurs in respect
of the Common Stock (whether in the form of cash, Common Stock, other
securities, or other property), or any reclassification, recapitalization,
stock split (including a stock split in the form of a stock dividend),
reverse stock split, reorganization, merger, combination, consolidation,
split-up, spin-off, repurchase, or exchange of Common Stock or other
securities of the Corporation, or any similar, unusual or extraordinary
corporate transaction (or event in respect of the Common Stock) or a sale of
substantially all the assets of the Corporation as an entirety occurs. The
Committee will, in such manner and to such extent (if any) as it deems
appropriate and equitable:
(a) proportionately adjust any or all of (i) the number and type of
Shares (or other securities) that thereafter may be made the subject of
Options (including the specific maxima and numbers of Shares set forth
elsewhere in this Plan), (ii) the number, amount and type of Shares (or
other securities or property) subject to any or all outstanding Options,
(iii) the grant, purchase, or exercise price of any or all outstanding
Options, or (iv) the securities, cash or other property deliverable upon
exercise of any outstanding Options, or
(b) in the case of an extraordinary dividend or other distribution,
recapitalization, reclassification, merger, reorganization,
consolidation, combination, sale of assets, split up, exchange, or spin
off, make provision for a cash payment or for the substitution or
exchange of any or all outstanding Options or the cash, securities or
property deliverable to the holder of any or all outstanding Options
based upon the distribution or consideration payable to holders of the
Common Stock upon or in respect of such event. In each case, with respect
to Incentive Stock Options, no such adjustment will be made that would
cause this Plan to violate Section 422 or 424(a) of the Code or any
successor provisions without the written consent of the holders
materially adversely affected thereby. In any of such events, the
Committee may take such action sufficiently prior to such event if
necessary to permit the Participant to realize the benefits intended to
be conveyed with respect to the underlying shares in the same manner as
is available to stockholders generally.
4.2.2 ACCELERATION OF OPTIONS UPON CHANGE IN CONTROL. Unless prior to
a Change in Control Event the Committee determines that, upon its
occurrence, benefits under any or all Options will not accelerate or
determines that only certain or limited benefits under any or all Options
will be accelerated and the extent to which they will be accelerated, and/or
establishes a different time in respect of such Change in Control Event for
such acceleration, then upon the occurrence of a Change in Control Event,
each Option and Stock Appreciation Right will become fully vested and
immediately exercisable.
However, in the case of a transaction intended to be accounted for as a
pooling of interests transaction, the Committee will have no discretion with
respect to the foregoing acceleration of Options. The Committee may override
the limitations on acceleration in this Section 4.2.2 by
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express provision in the Option Agreement and may accord any Eligible Person
a right to refuse any acceleration, whether pursuant to the Option Agreement
or otherwise, in such circumstances as the Committee may approve. Any
acceleration of Options will comply with applicable legal requirements.
4.2.3 POSSIBLE EARLY TERMINATION OF ACCELERATED OPTIONS. If any Option
under this Plan (other than an Option granted under Section 3.2) has been
fully accelerated as permitted by Section 4.2.2 but is not exercised prior
to (i) a dissolution of the Corporation, or (ii) a reorganization event
described in Section 4.2.1 that the Corporation does not survive, or
(iii) the consummation of reorganization event described in Section 4.2.1
that results in a Change in Control Event approved by the Board, and no
provision has been made for the survival, substitution, exchange or other
settlement of such Option, such Option will thereupon terminate.
4.3 EFFECT OF TERMINATION OF EMPLOYMENT; TERMINATION OF SUBSIDIARY STATUS;
DISCRETIONARY PROVISIONS.
4.3.1 OPTIONS--RESIGNATION OR DISMISSAL. If the Participant's
employment by (or other service specified in the Option Agreement to) the
Company terminates for any reason (the date of such termination being
referred to as the "SEVERANCE DATE") other than due to Retirement, Total
Disability or death, or "FOR CAUSE" (as determined in the discretion of the
Committee), the Participant will have, unless otherwise provided in the
Option Agreement and subject to earlier termination pursuant to or as
contemplated by Section 1.6 or Section 4.2, three months after the Severance
Date to exercise any Option to the extent it has become vested the Severance
Date. In the case of a termination for cause, the Option will terminate on
the Severance Date (whether or not vested). In all cases, the Option, to the
extent not vested on the Severance Date, will terminate.
4.3.2 OPTIONS--DEATH OR DISABILITY. If the Participant's employment by
(or specified service to) the Company terminates as a result of Total
Disability or death, the Participant, the Participant's Personal
Representative or the Participant's Beneficiary, as the case may be, will
have, unless otherwise provided in the Option Agreement and subject to
earlier termination pursuant to or as contemplated by Section 1.6 or
Section 4.2, until 12 months after the Severance Date to exercise any Option
to the extent it has become vested on the Severance Date. The Option, to the
extent not vested on the Severance Date, will terminate.
4.3.3 OPTIONS--RETIREMENT. If the Participant's employment by (or
specified service to) the Company terminates as a result of Retirement, the
Participant, Participant's Personal Representative or the Participant's
Beneficiary, as the case may be, will have, unless otherwise provided in the
Option Agreement and subject to earlier termination pursuant to or as
contemplated by Section 1.6 or Section 4.2, until 12 months after the
Severance Date to exercise any Nonqualified Stock Option (three months after
the Severance Date in the case of an Incentive Stock Option) to the extent
it has become vested on the Severance Date. The Option, to the extent not
vested on the Severance Date, will terminate.
4.3.4 COMMITTEE DISCRETION. Notwithstanding the foregoing provisions
of this Section 4.3, in the event of, or in anticipation of, a termination
of employment with the Company for any reason, other than discharge for
cause, the Committee may increase the portion of the Participant's Option
available to the Participant, or Participant's Beneficiary or Personal
Representative, as the case may be, or, subject to the provisions of
Section 1.6, extend the exercisability period upon such terms as the
Committee determines and expressly sets forth in or by amendment to the
Option Agreement.
4.4 COMPLIANCE WITH LAWS. This Plan, the granting and vesting of Options
under this Plan and the offer, issuance and delivery of securities and/or the
payment of money under this Plan or under
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Options granted hereunder are subject to compliance with all applicable federal
and state laws, rules and regulations (including but not limited to state and
federal securities law and federal margin requirements) and to such approvals by
any listing, regulatory or governmental authority as may, in the opinion of
counsel for the Corporation, be necessary or advisable in connection therewith.
Any securities delivered under this Plan will be subject to such restrictions
and to any restrictions the Committee may require to preserve a pooling of
interests under generally accepted accounting principles, and the person
acquiring such securities will, if requested by the Corporation, provide such
assurances and representations to the Corporation as the Corporation may deem
necessary or desirable to assure compliance with all applicable legal
requirements.
4.5 TAX WITHHOLDING.
4.5.1 CASH OR SHARES. Upon any exercise, vesting, or payment of any
Option or upon the disposition of Shares acquired pursuant to the exercise
of an Incentive Stock Option prior to satisfaction of the holding period
requirements of Section 422 of the Code, the Company will have the right at
its option to (i) require the Participant (or Personal Representative or
Beneficiary, as the case may be) to pay or provide for payment of the amount
of any taxes which the Company may be required to withhold with respect to
such Option event or payment or (ii) deduct from any amount payable in cash
the amount of any taxes which the Company may be required to withhold with
respect to such cash payment. In any case where a tax is required to be
withheld in connection with the delivery of shares of Common Stock under
this Plan, the Committee may in its sole discretion (subject to
Section 4.4) grant (either at the time of the Option or thereafter) to the
Participant the right to elect, pursuant to such rules and subject to such
conditions as the Committee may establish, to have the Corporation reduce
the number of Shares to be delivered by (or otherwise reacquire) the
appropriate number of Shares valued at their then Fair Market Value, to
satisfy such withholding obligation.
4.5.2 TAX LOANS. The Company may, in its discretion, authorize a loan
to an Eligible Person in the amount of any taxes which the Company may be
required to withhold with respect to Shares received (or disposed of, as the
case may be) pursuant to a transaction described in Section 4.5.1. Such a
loan shall be for a term, at a rate of interest and pursuant to such other
terms and conditions as the Company, under applicable law may establish.
4.6 PLAN AMENDMENT, TERMINATION AND SUSPENSION.
4.6.1 BOARD AUTHORIZATION. The Board may, at any time, terminate or,
from time to time, amend, modify or suspend this Plan, in whole or in part.
No Options may be granted during any suspension of this Plan or after
termination of this Plan, but the Committee shall retain jurisdiction as to
Options then outstanding in accordance with the terms of this Plan.
4.6.2 STOCKHOLDER APPROVAL. To the extent then required under Sections
422 and 424 of the Code or any other applicable law, or deemed necessary or
advisable by the Board, any amendment to this Plan will be subject to
stockholder approval.
4.6.3 AMENDMENTS TO OPTIONS. Without limiting any other express
authority of the Committee under but subject to the express limits of this
Plan, the Committee by agreement or resolution may waive conditions of or
limitations on Options to Eligible Persons that the Committee in the prior
exercise of its discretion has imposed, without the consent of a
Participant, and may make other changes to the terms and conditions of
Options that do not affect in any manner materially adverse to the
Participant, his or her rights and benefits under an Option.
4.6.4 LIMITATIONS ON AMENDMENTS TO PLAN AND OPTIONS. No amendment,
suspension or termination of this Plan or change of or affecting any
outstanding Option will, without written consent of the Participant, affect
in any manner materially adverse to the Participant any rights or benefits
of the Participant or obligations of the Corporation under any Option
granted under this
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Plan prior to the effective date of such change. Changes contemplated by
Section 4.2 will not be deemed to constitute changes or amendments for
purposes of this Section 4.6.
4.7 PRIVILEGES OF STOCK OWNERSHIP. Except as otherwise expressly
authorized by the Committee or this Plan, a Participant will not be entitled to
have any privilege of stock ownership as to any Shares not actually delivered to
and held of record by the Participant. No adjustment will be made for dividends
or other rights as a stockholder for which a record date is prior to such date
of delivery.
4.8 EFFECTIVE DATE OF THE PLAN. This Plan will be effective upon its
approval by the Board (the "EFFECTIVE DATE"), subject to approval by the
stockholders of the Corporation within twelve months after the date of such
Board approval.
4.9 TERM OF THE PLAN. Unless earlier terminated by the Board, this Plan
will terminate at the close of business on the day before the tenth anniversary
of the Effective Date (the "TERMINATION DATE") and no Options may be granted
under this Plan after that date. Unless otherwise expressly provided in this
Plan or in an applicable Option Agreement, any Option theretofore granted may
extend beyond such date, and all authority of the Committee with respect to
Options hereunder, including the authority to amend an Option, will continue
during any suspension of this Plan and in respect of outstanding Options on the
Termination Date.
4.10 GOVERNING LAW/CONSTRUCTION/SEVERABILITY.
4.10.1 CHOICE OF LAW. This Plan, the Options, all documents evidencing
Options and all other related documents will be governed by, and construed
in accordance with the laws of the State of Delaware.
4.10.2 SEVERABILITY. If a court of competent jurisdiction holds any
provision invalid and unenforceable, the remaining provisions of this Plan
will continue in effect.
4.10.3 PLAN CONSTRUCTION.
(a) RULE 16b-3. It is the intent of the Corporation that
transactions in and affecting Options in the case of Participants who are
or may be subject to Section 16 of the Exchange Act satisfy any then
applicable requirements of Rule 16b-3 so that such persons (unless they
otherwise agree) will be entitled to the benefits of Rule 16b-3 or other
exemptive rules under Section 16 of the Exchange Act in respect of those
transactions and will not be subjected to avoidable liability thereunder.
(b) SECTION 162(m). It is the further intent of the Company that
Options with an exercise price not less than Fair Market Value on the
date of grant that are granted to or held by a person subject to
Section 162(m) will qualify as performance-based compensation under
Section 162(m) to the extent that the Committee authorizing the Option
satisfies the administrative requirements thereof.
This Plan will be interpreted consistent with such intent.
4.11 CAPTIONS. Captions and headings are given to the sections and
subsections of this Plan solely as a convenience to facilitate reference.
Such headings will not be deemed in any way material or relevant to the
construction or interpretation of this Plan or any provision thereof.
4.12 EFFECT OF CHANGE OF SUBSIDIARY STATUS. For purposes of this Plan
and any Option hereunder, if an entity ceases to be a Subsidiary, a
termination of employment and service will be deemed to have occurred with
respect to each Eligible Person in respect of such Subsidiary who does not
continue as an Eligible Person in respect of another entity within the
Company.
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4.13 NON-EXCLUSIVITY OF PLAN. Nothing in this Plan will limit or be
deemed to limit the authority of the Board or the Committee to grant awards
or authorize any other compensation, with or without reference to the Common
Stock, under any other plan or authority.
5. DEFINITIONS.
"BENEFICIARY" means the person, persons, trust or trusts designated by a
Participant or, in the absence of a designation, entitled by will or the laws of
descent and distribution, to receive the benefits specified in the Option
Agreement and under this Plan if the Participant dies, and means the
Participant's executor or administrator if no other Beneficiary is designated
and able to act under the circumstances.
"BOARD" means the Board of Directors of the Corporation.
"CHANGE IN CONTROL EVENT" means any of the following:
(a) Approval by the stockholders of the Corporation of the dissolution
or liquidation of the Corporation;
(b) Approval by the stockholders of the Corporation of an agreement to
merge or consolidate, or otherwise reorganize, with or into one or more
entities that are not Subsidiaries or other affiliates, as a result of which
less than 50% of the outstanding voting securities of the surviving or
resulting entity immediately after the reorganization are, or will be,
owned, directly or indirectly, by stockholders of the Corporation
immediately before such reorganization (assuming for purposes of such
determination that there is no change in the record ownership of the
Corporation's securities from the record date for such approval until such
reorganization and that such record owners hold no securities of the other
parties to such reorganization), but including in such determination any
securities of the other parties to such reorganization held by affiliates of
the Corporation);
(c) Approval by the stockholders of the Corporation of the sale of
substantially all of the Corporation's business and/or assets to a person or
entity that is not a Subsidiary or other affiliate; or;
(d) Any "PERSON" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act but excluding any person described in and satisfying the
conditions of Rule 13d-1(b)(1) thereunder) becomes the beneficial owner (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Corporation representing more than 30% of the combined
voting power of the Corporation's then outstanding securities entitled to
then vote generally in the election of directors of the Corporation; or
(e) During any period not longer than two consecutive years, individuals
who at the beginning of such period constituted the Board cease to
constitute at least a majority thereof, unless the election, or the
nomination for election by the Corporation's stockholders, of each new Board
member was approved by a vote of at least three-fourths of the Board members
then still in office who were Board members at the beginning of such period
(including for these purposes, new members whose election or nomination was
so approved).
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time.
"COMMISSION" means the Securities and Exchange Commission.
"COMMITTEE" shall mean the Board or any one or more committees of directors
appointed by the Board to administer this Plan with respect to the Options
within the scope of authority delegated by the Board. At least one committee
will be comprised only of two or more directors, each of whom, in respect of any
decision involving both (i) a Participant affected by the decision who is or may
be
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subject to Section 162(m), and (ii) compensation intended as performance-based
compensation within the meaning of Section 162(m), will be Disinterested; in
acting on any transaction with or for the benefit of a Section 16 Person, the
participating members of such Committee also shall be Non-Employee Directors
within the meaning of Rule 16b-3.
"COMMON STOCK" means the Common Stock of the Corporation, par value $0.01
per share, and such other securities or property as may become the subject of
Options, or become subject to Options, pursuant to an adjustment made under
Section 4.2 of this Plan.
"COMPANY" means, collectively, the Corporation and its Subsidiaries.
"CORPORATION" means The MacNeal-Schwendler Corporation, a Delaware
corporation, and its successors.
"DISINTERESTED" means a director who is an "outside director" within the
meaning of Section 162(m) and any applicable legal or regulatory requirements.
"ELIGIBLE EMPLOYEE" means an officer (whether or not a director) or other
employee of the Company.
"ELIGIBLE PERSON" means an Eligible Employee, or any Other Eligible Person,
as determined by the Committee.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from
time to time.
"FAIR MARKET VALUE" on any date means (a) if the stock is listed or admitted
to trade on a national securities exchange, the closing price of the stock on
the Composite Tape, as published in the Western Edition of The Wall Street
Journal, of the principal national securities exchange on which the stock is so
listed or admitted to trade, on such date, or, if there is no trading of the
stock on such date, then the closing price of the stock as quoted on such
Composite Tape on the next preceding date on which there was trading in such
shares; (b) if the stock is not listed or admitted to trade on a national
securities exchange, the last/closing price for the stock on such date, as
furnished by the National Association of Securities Dealers, Inc. ("NASD")
through the NASDAQ National Market Reporting System or a similar organization if
the NASD is no longer reporting such information; (c) if the stock is not listed
or admitted to trade on a national securities exchange and is not reported on
the National Market Reporting System, the mean between the bid and asked price
for the stock on such date, as furnished by the NASD or a similar organization;
or (d) if the stock is not listed or admitted to trade on a national securities
exchange, is not reported on the National Market Reporting System and if bid and
asked prices for the stock are not furnished by the NASD or a similar
organization, the value as established by the Committee at such time for
purposes of this Plan. Any determination as to fair market value made pursuant
to this Plan shall be determined without regard to any restriction other than a
restriction which, by its terms, will never lapse, and shall be conclusive and
binding on all persons.
"INCENTIVE STOCK OPTION" means an Option that is designated and intended as
an incentive stock option within the meaning of Section 422 of the Code, the
award of which contains such provisions (including but not limited to the
receipt of stockholder approval of this Plan, if the award is made prior to such
approval) and is made under such circumstances and to such persons as may be
necessary to comply with that section.
"NONQUALIFIED STOCK OPTION" means an Option that is designated as a
Nonqualified Stock Option and will include any Option intended as an Incentive
Stock Option that fails to meet the applicable legal requirements thereof. Any
Option granted hereunder that is not designated as an incentive stock
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<PAGE>
option will be deemed to be designated a nonqualified stock option under this
Plan and not an incentive stock option under the Code.
"NON-EMPLOYEE DIRECTOR" means a member of the Board who is not an officer or
employee of the Company.
"OPTION" means an option to purchase Common Stock granted under this Plan.
The Committee shall designate any Option granted to an Eligible Employee as a
Nonqualified Stock Option or an Incentive Stock Option. Options granted under
Section 3 shall be Nonqualified Stock Options.
"OPTION AGREEMENT" means any writing setting forth the terms of an Option
that has been authorized by the Committee.
"OPTION DATE" means the date upon which the Committee took the action
granting an Option or such later date as the Committee designates as the Option
Date at the time of the Option or, in the case of Options under Section 3, the
applicable dates set forth therein.
"OTHER ELIGIBLE PERSON" means any individual consultant or advisor who or,
to the extent provided in the next sentence, agent who renders or has rendered
BONA FIDE services (other than services in connection with the offering or sale
of securities of the Company in a capital raising transaction) to the Company,
and who is selected to participate in this Plan by the Committee; provided,
however, that no person shall be selected as an Other Eligible Person if such
person's participation in this Plan would adversely affect (a) the Corporation's
eligibility to use Form S-8 to register under the Securities Act the offering of
shares issuable under this Plan by the Company or (b) the Corporation's
compliance with any other applicable laws.
"PARTICIPANT" means an Eligible Person who has been granted an Option under
this Plan and a Non-Employee Director who has been granted an Option under
Section 3.2 of this Plan.
"PERSONAL REPRESENTATIVE" means the person or persons who, upon the
disability or incompetence of a Participant, has acquired on behalf of the
Participant, by legal proceeding or otherwise, the power to exercise the rights
or receive benefits under this Plan and who by virtue of having become the legal
representative of the Participant.
"PLAN" means this The MacNeal-Schwendler Corporation 1998 Stock Option Plan.
"QDRO" means a qualified domestic relations order as defined in
Section 414(p) of the Code or Title I, Section 206(d)(3) of ERISA (to the same
extent as if this Plan were subject thereto), or the applicable rules
thereunder.
"RULE 16b-3" means Rule 16b-3 as promulgated by the Commission pursuant to
the Exchange Act, as amended from time to time.
"SECTION 16 PERSON" means a person subject to Section 16(a) of the Exchange
Act. Securities Act means the Securities Act of 1933, as amended from time to
time.
"SHARE" means a share of Common Stock.
"SUBSIDIARY" means any corporation or other entity a majority of whose
outstanding voting stock or voting power is beneficially owned, directly or
indirectly, by the Corporation.
"TOTAL DISABILITY" means a "permanent and total disability" within the
meaning of Section 22(e)(3) of the Code and (except in the case of Incentive
Stock Options and Options granted to Non-Employee Directors) such other
disabilities, infirmities, affliction or conditions as the Committee may include
under Section 3.
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<PAGE>
EXHIBIT A
THE MACNEAL-SCHWENDLER CORPORATION
1998 STOCK OPTION PLAN
NON-EMPLOYEE DIRECTOR STOCK
OPTION AGREEMENT
THIS NON-EMPLOYEE DIRECTOR STOCK OPTION AGREEMENT (this "AGREEMENT") dated
as of the day of , , by and between The MacNeal-Schwendler
Corporation, a Delaware corporation (the "CORPORATION"), and , (the
"DIRECTOR").
R E C I T A L S
WHEREAS, the Corporation has adopted and the stockholders of the Corporation
have approved The MacNeal-Schwendler Corporation 1998 Stock Option Plan (the
"PLAN").
WHEREAS, pursuant to Section 3 of the Plan, the Corporation has granted to
the Director effective as of the day of , (the "OPTION DATE") a
stock option to purchase all or any part of shares of the Corporation's
Common Stock ("COMMON STOCK") subject to and upon the terms and conditions set
forth in this Agreement and in the Plan.
NOW, THEREFORE, in consideration of the mutual promises and covenants made
herein and the mutual benefits to be derived herefrom, the parties agree as
follows:
1. DEFINED TERMS. Capitalized terms used herein and not otherwise defined
herein shall have the meaning assigned to such terms in the Plan.
2. GRANT OF OPTION. This Agreement evidences the Corporation's grant to
the Director of the right and option to purchase, subject to and upon the terms
and conditions set forth in this Agreement and in the Plan, all or any part of
shares of the Common Stock (the "SHARES") at the price of $ per
share (the "OPTION"), exercisable from time to time, subject to the provisions
of this Agreement and the Plan, prior to the close of business on the day before
the fifth anniversary of the Option Date (the "EXPIRATION DATE"). Such price
equals not less than the Fair Market Value of a Share on the Option Date.
3. EXERCISABILITY OF OPTION. Except as provided in the Plan or in any
resolution of the Board adopted after the date hereof, the Option shall become
vested and exercisable as to 100% of the Shares on the day before the first
anniversary of the Option Date.
To the extent that the Option is vested and exercisable, if the Director
does not in any year purchase all or any part of the Shares to which the
Director is entitled, the Director has the right cumulatively thereafter to
purchase any Shares not so purchased and such right shall continue until the
Option terminates or expires. The Option shall only be exercisable in respect of
whole shares, and fractional share interests shall be disregarded. The Option
shall be exercisable by the delivery to the Secretary of the Corporation of a
written notice stating the number of Shares to be purchased pursuant to the
Option and accompanied by payment made in accordance with and in a form
permitted by Section 3.3 of the Plan for the full purchase price of the Shares
to be purchased.
4. SERVICE AND EFFECT OF TERMINATION OF SERVICE. The Director agrees to
serve as a member of the Board in accordance with the provisions of the
Corporation's Certificate of Incorporation, ByLaws, and applicable law. If the
Director's services as a member of the Board terminate for any reason, the
Option shall terminate at the time and to the extent set forth in Section 3.5 of
the Plan.
5. GENERAL TERMS. The Option and this Agreement are subject to, and the
Corporation and the Director agree to be bound by, the terms and conditions of
the Plan, incorporated herein by this reference. The Director acknowledges
receiving a copy of the Plan and reading its applicable
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<PAGE>
provisions. The Option is subject to adjustment, acceleration, and early
termination as provided in Section 3.6 of the Plan. The Option is
nontransferable as provided in Section 1.8 of the Plan.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
<TABLE>
<S> <C>
DIRECTOR THE MACNEAL-SCHWENDLER CORPORATION (a
Delaware corporation)
- ----------------------------------------
SIGNATURE
- ---------------------------------------- By: -------------------------------------
PRINT NAME
- ---------------------------------------- Its:
-------------------------------------
ADDRESS
- ----------------------------------------
CITY, STATE, ZIP CODE
</TABLE>
CONSENT OF SPOUSE
In consideration of the execution of the foregoing Agreement by The
Macneal-Schwendler Corporation, I, , the spouse of the Director therein
named, do hereby agree to be bound by all of the terms and provisions thereof
and of the Plan.
<TABLE>
<S> <C>
Date: ------------------- ----------------------------------------
SIGNATURE OF SPOUSE
</TABLE>
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<PAGE>
YOUR VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN
YOUR PROXY CARD
IN THE ENVELOPE PROVIDED
AS SOON AS POSSIBLE
<PAGE>
MSC.SOFTWARE CORPORATION
ANNUAL MEETING OF STOCKHOLDERS MAY 10, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
MSC.SOFTWARE CORPORATION
The undersigned hereby appoints Frank Perna, Jr. and Louis Greco, and
each of them, proxyholders, each with full power of substitution to vote for
the undersigned at the Annual Meeting of Stockholders of MSC.Software
Corporation to be held on May 10, 2000, and at any adjournments thereof, with
respect to the following matters, which were more fully described in the
Proxy Statement dated March 29, 2000, receipt of which is hereby acknowledged
by the undersigned.
THIS PROXY WILL BE VOTED AS DIRECTED. UNLESS OTHERWISE DIRECTED, THIS
PROXY WILL BE VOTED (1) FOR THE ELECTION OF THE TWO DIRECTOR NOMINEES, (2)
FOR THE APPROVAL OF THE 2000 EXECUTIVE CASH OR STOCK BONUS PLAN, (3) FOR THE
APPROVAL OF THE AMENDMENT TO THE 1998 STOCK OPTION PLAN, AND (4) FOR THE
RATIFICATION OF THE ACCOUNTANTS.
This proxy is valid only when signed and dated.
See Reverse Side
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
The Board recommends that you vote FOR each of the nominees on Proposal
1, FOR Proposal 2, FOR Proposal 3 and FOR Proposal 4 by indicating your
choice below:
Please mark your choice like this /X/
FOR all nominees WITHHOLD AUTHORITY
listed below to vote for all
(except as marked nominees listed
to the contrary). below.
(1) The election of the nominees / / / /
for director specified in the
Proxy Statement to Class III
of the Board.
George N. Riordan, William F. Grun
TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE, STRIKE THROUGH HIS NAME.
FOR AGAINST ABSTAIN
(2) Approval of the Company's 2000 / / / / / /
Executive Cash or Stock Bonus Plan.
(3) Approval of the amendment to the 1998 / / / / / /
Stock Option Plan.
(4) Ratification of the appointment of / / / / / /
Ernst & Young LLP to serve as the
Company's independent auditors for
fiscal year 2000.
(5) Any other matters as may properly come
before the meeting or any adjournment
thereof. As to these other matters, the
undersigned hereby confers discretionary
authority.
Dated: ___________, 2000
_______________________________________
(Please Print Name)
_______________________________________
(Signature of holder of common stock)
_______________________________________
(Signature if Held Jointly)
NOTE: Please sign exactly as your name is printed. Each joint tenant should
sign. Executors, administrators, trustees and guardians should give
full titles when signing. Corporations and partnerships should sign in
full corporate or partnership name by an authorized person. Please mark,
sign, date and return your Proxy promptly in the enclosed envelope,
which requires no postage if mailed in the United States.
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
