Agreement and Plan of Merger

Exhibit 2.1

EXECUTION COPY

AGREEMENT AND PLAN OF MERGER

dated as of

July 7, 2009

among

MSC.SOFTWARE CORPORATION,

MAXIMUS HOLDINGS INC.

and

MAXIMUS INC.

1	The Table of Contents is not a part of this Agreement.

 

i

TABLE OF CONTENTS

(continued)

 

 

ii

TABLE OF CONTENTS

(continued)

 

 

iii

AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER (this “ Agreement ”) dated as of July 7, 2009 among MSC.Software Corporation, a Delaware corporation (the “ Company ”), Maximus Holdings Inc., a Delaware corporation (“ Parent ”), and Maximus Inc., a Delaware corporation and a wholly-owned subsidiary of Parent (“ Merger Subsidiary ”).

W I T N E S S E T H :

WHEREAS, the respective Boards of Directors of the Company and Merger Subsidiary have approved and deemed it advisable that the respective stockholders of the Company and Merger Subsidiary approve and adopt this Agreement pursuant to which, among other things, Parent would acquire the Company by means of a merger of Merger Subsidiary with and into the Company on the terms and subject to the conditions set forth in this Agreement;

WHEREAS, concurrently with the execution of this Agreement, as a condition and inducement to Parent’s willingness to enter into this Agreement, the directors and executive officers of the Company set forth on Schedule I hereto have entered into a voting agreement with Parent in the form attached as Exhibit A-1 hereto and certain stockholders of the Company set forth on Schedule II hereto have entered into a voting agreement with Parent in the form attached as Exhibit A-2 hereto (collectively, the “ Voting Agreements ”);

WHEREAS, concurrently with the execution of this Agreement, and as a condition and inducement to the Company’s willingness to enter into this Agreement, the Guarantors (as defined below) are entering into Limited Guarantee (as defined below) in favor of the Company with respect to certain of Parent’s obligations under this Agreement; and

NOW, THEREFORE, in consideration of the foregoing premises and the representations, warranties, covenants and agreements contained herein, as well as other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE 1

D EFINITIONS

Section 1.01 . Definitions. (a) As used herein, the following terms have the following meanings:

“ Acquisition Proposal ” means, other than the transactions contemplated by this Agreement, any offer or proposal from any Third Party relating to (i) any acquisition, purchase, lease or license, direct or indirect, of 15% or more of the consolidated assets of the Company and its Subsidiaries or 15% or more of any class of equity or voting securities of the Company or any of its Subsidiaries

whose assets, individually or in the aggregate, constitute 15% or more of the consolidated assets of the Company, (ii) any tender offer (including a self-tender offer) or exchange offer that, if consummated, would result in such Third Party’s beneficially owning 15% or more of any class of equity or voting securities of the Company or any of its Subsidiaries whose assets, individually or in the aggregate, constitute 15% or more of the consolidated assets of the Company or (iii) any merger, consolidation, share exchange, business combination, sale of substantially all the assets, reorganization, recapitalization, liquidation, dissolution or other similar transaction involving the Company or any of its Subsidiaries whose assets, individually or in the aggregate, constitute 15% or more of the consolidated assets of the Company.

“ Affiliate ” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person.

“ Applicable Law ” means, with respect to any Person, any federal, state or local law (statutory, common or otherwise), constitution, treaty, convention, ordinance, code, rule, regulation, order, injunction, judgment, decree, ruling or other similar requirement enacted, adopted, promulgated or applied by a Governmental Authority that is binding upon or applicable to such Person, as amended unless expressly specified otherwise.

“ Business Day ” means a day, other than Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by Applicable Law to close.

“ Code ” means the Internal Revenue Code of 1986.

“ Company Balance Sheet ” means the consolidated balance sheets of the Company as of December 31, 2008 and the footnotes thereto set forth in the Company 10-K.

“ Company Balance Sheet Date ” means December 31, 2008.

“ Company Cash Deposit ” shall mean an amount of cash equal to $109,250,000.

“ Company Disclosure Schedule ” means the disclosure schedule dated the date hereof regarding this Agreement that has been provided by the Company to Parent and Merger Subsidiary.

“ Company Intellectual Property ” means the Owned Intellectual Property and the Licensed Intellectual Property.

“ Company IP Agreements ” means all (i) licenses of Intellectual Property by the Company or any Subsidiary of the Company to any Person, and (ii) licenses of Intellectual Property by any Person to the Company or its Subsidiary of the Company.

 

2

“ Company Products ” means all service offerings or products currently made commercially available by the Company or any of its Subsidiaries or made commercially available in the past and currently supported by the Company or any of its Subsidiaries, other than the Reseller Products.

“ Company Rights ” means the preferred stock purchase rights issued pursuant to the Company Rights Agreement.

“ Company Rights Agreement ” means the Rights Agreement between the Company and Mellon Investor Services LLC, as Rights Agent, dated as of October 10, 2008.

“ Company Software ” means all software owned by the Company or its Subsidiaries and all other software that is used or held for use in connection with the operation of the business of the Company and its Subsidiaries as currently conducted, including all (i) software used in the Company’s or any Subsidiary’s provision of Company Products to customers and/or end users, including any software incorporated in, or integrated or bundled with, any Company Product, (ii) software intended for license to customers and/or end users, and (iii) software, libraries, modules and other materials used by the Company or any Subsidiary in the development, design, construction or testing of any of the software described in clause (i) or (ii) above.

“ Company Stock ” means the common stock, $0.01 par value, of the Company, together with the associated Company Rights.

“ Company Stock Awards ” means the Company Stock Options and Company Stock Units.

“ Company Stock Option ” means any option to purchase shares of Company Stock granted under the Company Stock Plans.

“ Company Stock Plans ” means the 1991 Stock Option Plan, the 1998 Stock Option Plan, the 2001 Stock Option Plan, the Advanced Enterprise Solutions Program, the 2006 Performance Incentive Plan and the non-plan option agreements set forth on Section 4.05(b) of the Company Disclosure Schedule.

“ Company Stock Unit ” means any restricted stock unit or performance stock unit with respect to Company Stock granted under the Company Stock Plans.

“ Company US Cash Threshold ” means an amount of cash equal to the excess of (i) the amount of cash reflected in the Cash and Working Capital Statement over (ii) an amount between $8,000,000 and $18,000,000 selected by Parent and provided in a written notice by Parent to the Company no later than August 1, 2009.

 

3

“ Company 10-K ” means the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2008.

“ Delaware Law ” means the General Corporation Law of the State of Delaware.

“ Environmental Laws ” means any and all statutes, laws, regulations or rules or any binding agreement with any Governmental Authority, in each case relating to worker safety as it relates to Hazardous Substances, the environment or Hazardous Substances.

“ ERISA ” means the Employee Retirement Income Security Act of 1974.

“ ERISA Affiliate ” of any entity means any other entity that, together with such entity, would be treated as a single employer under Section 414 of the Code.

“ GAAP ” means generally accepted accounting principles in the United States.

“ Governmental Authority ” means (a) any transnational, domestic or foreign federal, state or local governmental, regulatory or administrative authority, department, court or tribunal, agency, governmental body, instrumentality or official, including any political subdivision thereof or (b) the Nasdaq Global Select Market.

“ Governmental Authorizations ” means, with respect to any Person, all licenses, permits (including construction permits), certificates, waivers, consents, franchises (including similar authorizations or permits), exemptions, variances, expirations and terminations of any waiting period requirements and other authorizations and approvals issued to such Person by or obtained by such Person from any Governmental Authority, or of which such Person has the benefit under any Applicable Law.

“ Hazardous Substance ” means any pollutant, contaminant or any toxic, radioactive, ignitable, corrosive, reactive or otherwise hazardous substance, chemical, waste or material, or any substance, waste or material having any constituent elements displaying any of the foregoing characteristics that is designated, defined or regulated by any Governmental Authority as “hazardous,” “extremely hazardous,” “toxic,” a “pollutant” or a “contaminant,” including petroleum and its derivatives and by-products, natural gas and other hydrocarbons and asbestos-containing materials.

“ HSR Act ” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

“ Indebtedness ” shall mean, with respect to the Company and its Subsidiaries, (a) any liabilities for borrowed money or amounts owed or indebtedness issued in substitution for or exchange of indebtedness for borrowed

 

4

money, (b) obligations evidenced by notes, bonds, debentures or other similar instruments, (c) obligations under leases (contingent or otherwise, as obligor, guarantor or otherwise) required to be accounted for as capitalized leases pursuant to GAAP, (d) obligations for amounts drawn under acceptances, letters of credit, contingent reimbursement liabilities with respect to letters of credit or similar facilities, (e) any liability for deferred purchase price of property or services, contingent or otherwise, as obligor or otherwise, other than accounts payable incurred in the ordinary course of business, (f) all guaranties and other contingent obligations in respect of liabilities for borrowed money of others and similar commitments relating to any of the foregoing items and (g) any accrued and unpaid interest on, and any prepayment premiums, penalties or similar contractual charges in respect of, any of the foregoing.

“ Intellectual Property ” means, in any and all jurisdictions worldwide, all (i) patents, utility models, inventions and discoveries, statutory invention registrations, mask works, invention disclosures, and industrial designs, Community designs and other designs, (ii) trademarks, service marks, domain names, logos, uniform resource locators, trade dress, trade names, geographical indications and other identifiers of source or goodwill, including the goodwill associated therewith, (iii) works of authorship (including software) and copyrights, and moral rights, design rights and database rights therein and thereto, (iv) confidential and proprietary information, including trade secrets, know how and invention rights, (v) rights of privacy and publicity, (vi) registrations, applications, renewals and extensions for any of the foregoing in (i)-(v), and (vii) any and all other proprietary rights.

“ knowledge ” means (i) with respect to the Company, the actual knowledge of those persons who the Company has deemed an “officer” of the Company (as defined in Rule 16a-1(f) promulgated pursuant to the 1934 Act) and (ii) with respect to Parent, the actual knowledge of the officers of Parent.

“ Licensed Intellectual Property ” means all Intellectual Property that the Company and/or any Subsidiary of the Company is licensed or otherwise permitted by other Persons to use, including without limitation Off-the-Shelf software.

“ Lien ” means, with respect to any property or asset, any mortgage, lien, license, pledge, charge, security interest, encumbrance or other adverse claim of any kind in respect of such property or asset, other than any Permitted Lien. For purposes of this Agreement, a Person shall be deemed to own subject to a Lien any property or asset that it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such property or asset.

“ Material Adverse Effect ” means, with respect to the Company, any change, event, occurrence or state of facts that (a) is materially adverse to the financial condition, business, assets, or results of operations of the Company and

 

5

its Subsidiaries, taken as a whole, or (b) prevents the Company from consummating the Merger and the other transactions contemplated by this Agreement, excluding, in the case of clause (a), any effect resulting from (A) changes in the financial or securities markets (including, but not limited to, changes in currency exchange rates and interest rates) or changes in general global, national or regional economic or political conditions, in either case not having a materially disproportionate effect on the Company and its Subsidiaries, taken as a whole, relative to other participants in the software industry, (B) changes (including changes of Applicable Law or in GAAP or regulatory accounting requirements) generally affecting the software industry and not specifically relating to or having a materially disproportionate effect on the Company and its Subsidiaries, taken as a whole, relative to other participants in the software industry, (C) acts of war, sabotage or terrorism or natural disasters not having a materially disproportionate effect on the Company and its Subsidiaries, taken as a whole, relative to other participants in the software industry, (D) the announcement, pendency or consummation of the transactions contemplated by this Agreement (including any loss of, or adverse change in, the relationship of the Company and its Subsidiaries with their respective employees, customers, distributors, partners or suppliers resulting therefrom, (E) any failure by the Company and its Subsidiaries to meet any internal or published budgets, projections, forecasts or predictions of financial performance for any period (it being understood that the causes underlying such failure may be considered in determining whether a Material Adverse Effect has occurred or would reasonably be expected to occur), (F) any action taken by the Company or its Subsidiaries at the written request of Parent or that is expressly required pursuant to this Agreement in and of itself (it being understood that the manner in which any such action is taken, and the effects of any such action, may be considered in determining whether a Material Adverse Effect has occurred or would reasonably be expected to occur) or (G) any assignment of Intellectual Property from any Subsidiary of the Company to the Company made at Parent’s direction.

“ Material Adverse Effect ” means, with respect to any Person other than the Company, any change, event, occurrence or state of facts that prevents such Person from consummating the Merger and the other transactions contemplated by this Agreement.

“ Off-the-Shelf software ” means all software that is commercially and generally available software that has not been modified or customized for the Company or any of its Subsidiaries (other than for the purposes of inter-operability or integration with the hardware or software of the Company and its Subsidiaries) and (a) is licensed to the Company or any Subsidiary for a one-time license fee of $100,000 or less, or annual license fee of $100,000 or less, or (b) was licensed to the Company or a Subsidiary more than three (3) years ago, such software is not incorporated into any Company Products, and in respect of which there are no current license fee obligations. Notwithstanding anything to the contrary in the above definition and for the avoidance of doubt, the term “Off-the-Shelf” software includes Public Software.

 

6

“ Owned Intellectual Property ” means all Intellectual Property owned by or under obligation of assignment to the Company or any Subsidiary of the Company.

“ Parent Disclosure Schedule ” means the disclosure schedule dated the date hereof regarding this Agreement that has been provided by Parent to the Company.

“ PBGC ” means the Pension Benefit Guaranty Corporation.

“ Permitted Liens ” means (i) statutory Liens securing payments not yet due, (ii) Liens for real property Taxes not yet due and payable or that are being contested in good faith, (iii) easements, rights of way, and other similar encumbrances that do not materially affect the use of the properties or assets subject thereto or affected thereby or otherwise materially impair business operations at such properties and (iv) such imperfections or irregularities of title or Liens as do not materially affect the use of the properties or assets subject thereto or affected thereby or otherwise materially impair business operations at such properties.

“ Person ” means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

“ Public Software ” means any software that contains, or is derived in any manner from, in whole or in part, any software that is distributed as freeware, shareware, open source software (e.g., Linux) or similar licensing or distribution models. For the avoidance of doubt, “ Public Software ” includes, without limitation, software licensed or distributed under any of the following licenses or distribution models (or licenses or distribution models similar thereto): (i) the GNU General Public License (GPL) or Lesser/Library GPL (LGPL); (ii) the Artistic License (e.g., PERL); (iii) the Mozilla Public License; (iv) the Netscape Public License; (v) the Sun Community Source License (SCSL); (vi) the Sun Industry Standards Source License (SISSL); (vii) the BSD License; (viii) Red Hat Linux; (ix) the Apache License; and (x) any other license or distribution model described by the Open Source Initiative as set forth on www.opensource.org .

“ Registered ” means issued by, registered, recorded or filed with, renewed by or the subject of a pending application before any Governmental Authority or Internet domain name registrar.

“ Reseller Products ” means the “Thermica” engineering tool which is resold by the Company and its Subsidiaries on behalf of EADS Asthium and the “Genoa” software suite which is resold by the Company and its Subsidiaries on behalf of AlphaSTAR Corporation and “MSC.Actran” which is resold by the Company and its Subsidiaries on behalf of Free Field Technologies.

“ Sarbanes-Oxley Act ” means the Sarbanes-Oxley Act of 2002.

 

7

“ SEC ” means the Securities and Exchange Commission.

“ Significant Subsidiary ” means, with respect to any Person, any Subsidiary of such Person that constitutes a “Significant Subsidiary” of such Person within the meaning of Rule 1-02 of Regulation S-X of the 1934 Act.

“ Subsidiary ” means, with respect to any Person, any entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at any time directly or indirectly owned by such Person.

“ Third Party ” means any Person, including as defined in Section 13(d) of the 1934 Act, other than Parent or any of its Affiliates.

“ Working Capital ” as of any date means (x) the Company’s “current assets” (as defined in the Company’s most recent Company SEC Documents), including cash, as of such date minus (y) (A) the Company’s “current liabilities” (as defined in the Company’s most recent Company SEC Documents) as of such date (other than such current liabilities (including, without limitation, tax liabilities, withholding or otherwise) resulting from (I) the repatriation of funds to the U.S. for the purpose of making the Company Cash Deposit or from (II) any assignment of Intellectual Property from any Subsidiary of the Company to the Company made at Parent’s direction) plus (B) all of the Company’s unpaid transaction fees and expenses incurred in connection with this Agreement and the Company’s prior acquisition and disposition activity.

“ 1933 Act ” means the Securities Act of 1933, as amended.

“ 1934 Act ” means the Securities Exchange Act of 1934, as amended.

(b) Each of the following terms is defined in the Section set forth opposite such term:

 

 

8

 

9

Section 1.02 . Other Definitional and Interpretative Provisions. The words “hereof”, “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. References to Articles, Sections, Exhibits and Schedules are to Articles, Sections, Exhibits and Schedules of this Agreement unless otherwise specified. All Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any capitalized terms used in any Exhibit or Schedule but not otherwise defined therein, shall have the meaning as defined in this Agreement. Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”, whether or not they are in fact followed by those words or words of like import. “Writing”, “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form. References to any statute shall be deemed to refer to such statute as amended from time to time and to any rules or regulations promulgated thereunder. References to any agreement or contract are to that agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. References to any Person include the successors and permitted assigns of that Person. References from or through any date mean, unless otherwise specified, from and including or through and including, respectively. References to “law”, “laws” or to a particular statute or law shall be deemed also to include any Applicable Law.

ARTICLE 2

T HE M ERGER

Section 2.01 . The Merger. (a) At the Effective Time, Merger Subsidiary shall be merged (the “ Merger ”) with and into the Company in accordance with Delaware Law, whereupon the separate existence of Merger Subsidiary shall cease, and the Company shall be the surviving corporation (the “ Surviving Corporation ”).

 

10

(b) Subject to the provisions of Article 9, the closing of the Merger (the “ Closing ”) shall take place in San Francisco, California at the offices of Shearman & Sterling LLP, 525 Market Street, San Francisco, California, 94105, on the second Business Day after the date the conditions set forth in Article 9 (other than conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or, to the extent permissible, waiver of those conditions at the Closing) have been satisfied or, to the extent permissible, waived by the party or parties entitled to the benefit of such conditions, or at such other place, at such other time or on such other date as Parent and the Company may mutually agree.

(c) At the Closing, the Company and Merger Subsidiary shall file a certificate of merger with the Delaware Secretary of State and make all other filings or recordings required by Delaware Law in connection with the Merger. The Merger shall become effective at such time (the “ Effective Time ”) as the certificate of merger is duly filed with the Delaware Secretary of State (or at such later time as may be specified in the certificate of merger).

(d) From and after the Effective Time, the Surviving Corporation shall possess all the rights, powers, privileges and franchises and be subject to all of the obligations, liabilities, restrictions and disabilities of the Company and Merger Subsidiary, all as provided under Delaware Law.

Section 2.02. Conversion of Shares. At the Effective Time:

(a) Except as otherwise provided in Section 2.02(b), Section 2.02(c) or Section 2.04, each share of Company Stock outstanding immediately prior to the Effective Time shall be converted into the right to receive $7.63 in cash, without interest (the “ Merger Consideration ”). As of the Effective Time, all such shares of Company Stock shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and shall thereafter represent only the right to receive the Merger Consideration to be paid in accordance with Section 2.03, without interest.

(b) Each share of Company Stock held by the Company as treasury stock (other than shares in an Employee Plan of the Company) or owned by Parent immediately prior to the Effective Time (other than shares held for the account of clients, customers or other Persons) shall be canceled, and no payment shall be made with respect thereto.

(c) By virtue of the Merger and without any action by Merger Subsidiary or Parent, as the holder of all outstanding capital stock of Merger Subsidiary (other than the requisite approval by Parent as the sole stockholder of Merger Subsidiary in accordance with Delaware Law, which approval has been obtained), each share of common stock of Merger Subsidiary outstanding immediately prior to the Effective Time shall be converted into and become one share of common stock of the Surviving Corporation with the same rights, powers and privileges as the shares so converted and shall constitute the only outstanding shares of capital stock of the Surviving Corporation.

 

11

Section 2.03 . Surrender and Payment. (a) Prior to the Effective Time, Parent shall appoint an agent reasonably acceptable to the Company (the “ Exchange Agent ”) for the purpose of exchanging for the Merger Consideration (i) certificates representing shares of Company Stock (the “ Certificates ”) or (ii) uncertificated shares of Company Stock (the “ Uncertificated Shares ”). On the Business Day prior to the Closing, the Company shall deposit the Company Cash Deposit with the Exchange Agent (provided, that, if the Closing does not occur on such next Business Day, Parent will return, or cause to be returned, such Company Cash Deposit to the Company on the second Business Day after such deposit). The Company Cash Deposit shall be made solely out of cash on hand and shall be used solely for purposes of paying a portion of the Merger Consideration in accordance with this Article 2 and shall not be used to satisfy any other obligation of the Company or any of its Subsidiaries. Promptly after the Effective Time, Parent shall make available to the Exchange Agent cash in an amount sufficient to pay all remaining aggregate Merger Consideration to be paid in respect of the Certificates and the Uncertificated Shares in excess of the Company Cash Deposit. As promptly as reasonably practicable after the Effective Time, Parent shall send, or shall cause the Exchange Agent to send, to each holder of shares of Company Stock at the Effective Time a letter of transmittal and instructions (which shall specify that the delivery shall be effected, and risk of loss and title shall pass, only upon proper delivery of the Certificates or transfer of the Uncertificated Shares to the Exchange Agent) for use in such exchange.

(b) Except as set forth in Sections 2.02(b) and (c), each holder of shares of Company Stock shall be entitled to receive, upon (i) surrender to the Exchange Agent of a Certificate, together with a properly completed letter of transmittal, or (ii) receipt of an “agent’s message” by the Exchange Agent (or such other evidence, if any, of transfer as the Exchange Agent may reasonably request) in the case of a book-entry transfer of Uncertificated Shares, the Merger Consideration in respect of the Company Stock represented by a Certificate or Uncertificated Share. Until so surrendered or transferred, as the case may be, each such Certificate or Uncertificated Share shall represent after the Effective Time for all purposes only the right to receive such Merger Consideration.

(c) If any portion of the Merger Consideration is to be paid to a Person other than the Person in whose name the surrendered Certificate or the transferred Uncertificated Share is registered, it shall be a condition to such payment that (i) either such Certificate shall be properly endorsed or shall otherwise be in proper form for transfer or such Uncertificated Share shall be properly transferred and (ii) the Person requesting such payment shall pay to the Exchange Agent any transfer or other taxes required as a result of such payment to a Person other than the registered holder of such Certificate or Uncertificated Share or establish to the satisfaction of the Exchange Agent that such tax has been paid or is not payable.

 

12

(d) After the Effective Time, there shall be no further registration of transfers of shares of Company Stock. If, after the Effective Time, Certificates or Uncertificated Shares are presented to the Surviving Corporation or the Exchange Agent, they shall be canceled and exchanged for the Merger Consideration provided for, and in accordance with the procedures set forth, in this Article 2.

(e) Any portion of the Merger Consideration made available to the Exchange Agent pursuant to Section 2.03(a) that remains unclaimed by the holders of shares of Company Stock 180 days after the Effective Time shall be returned to the Surviving Corporation, upon demand, and any such holder who has not exchanged shares of Company Stock for the Merger Consideration in accordance with this Section 2.03 prior to that time shall thereafter look only to the Surviving Corporation for payment of the Merger Consideration in respect of such shares without any interest thereon. Notwithstanding the foregoing, neither Parent nor the Surviving Corporation shall be liable to any holder of shares of Company Stock for any amounts paid to a public official pursuant to applicable abandoned property, escheat or similar laws.

Section 2.04 . Dissenting Shares . Notwithstanding Section 2.02, shares of Company Stock outstanding immediately prior to the Effective Time and held by a holder who has not voted in favor of the Merger or consented thereto in writing and who has demanded appraisal for such shares in accordance with Delaware Law shall not be converted into the right to receive the Merger Consideration, unless such holder fails to perfect, withdraws or otherwise loses the right to appraisal. If, after the Effective Time, such holder fails to perfect, withdraws or otherwise loses the right to appraisal, such shares shall be treated as if they had been converted as of the Effective Time into the right to receive the Merger Consideration. The Company shall give Parent prompt notice of any demands received by the Company for appraisal of shares, and Parent shall have the right to participate in all negotiations and proceedings with respect to such demands. Except with the prior written consent of Parent, the Company shall not make any payment with respect to, or offer to settle or settle, any such demands, or agree to do any of the foregoing.

Section 2.05 . Company Stock Options. (a) At the Effective Time, each outstanding Company Stock Option, shall be converted, by virtue of the Merger and without any action on the part of any individual option holders into the right to receive an amount in cash determined by multiplying (i) the excess, if any, of the per share Merger Consideration over the applicable exercise price of such option by (ii) the number of shares of Company Stock such holder could have acquired under such option (a “ Conversion Right ”). The Conversion Right shall be subject to the same terms and conditions as the related Company Stock Option, including the vesting and forfeiture provisions, except that the holder thereof shall be entitled to automatic settlement in cash of the vested portion of the Conversion Right in accordance with the original vesting schedule (including any terms related to automatic accelerated vesting in connection with certain terminations of employment following the Merger) of the related Company Stock Option. To the

 

13

extent that a Company Stock Option is vested as of, or vests upon the Effective Time in accordance with its terms as of the date hereof (including any terms related to accelerated vesting), Parent shall, or shall cause the Company, to settle the resulting vested Conversion Right promptly after the Effective Time. As of the Effective Time, each holder of a Company Stock Option shall cease to have any rights with respect thereto, except the right to receive a Conversion Right under this Section 2.05(a).

(b) Company Stock Units . At the Effective Time, each outstanding Company Stock Unit, whether or not vested, as of the Effective Time, shall be converted into the right to receive, by virtue of the Merger and without any action on the part of any individual award holders, an amount in cash determined by multiplying the per share Merger Consideration by the number of shares of Company Stock such holder could have acquired under the terms of such Company Stock Unit immediately prior to the Effective Time (a “ Conversion Unit ”). The Conversion Unit shall be subject to the same terms and conditions as the related Company Stock Unit, including the vesting and forfeiture provisions, except that the holder thereof shall be entitled to automatic settlement in cash of the vested portion of the Conversion Unit in accordance with the original vesting schedule (including any terms related to automatic accelerated vesting in connection with certain terminations of employment following the Merger) of the related Company Stock Unit. To the extent that a Company Stock Unit is vested as of, or vests upon the Effective Time in accordance with its terms as of the date hereof (including any terms related to accelerated vesting), Parent shall, or shall cause the Company, to settle the resulting vested Conversion Unit promptly after the Effective Time. As of the Effective Time, each holder of a Company Stock Unit shall cease to have any rights with respect thereto, except the right to receive a Conversion Unit under this Section 2.05(b).

(c) Parent shall assume the applicable Company Stock Plan with such assumption being effective as of the Effective Time, and the Parent Board of Directors or a committee thereof shall succeed to the authority and responsibility of the Company Board of Directors or any committee thereof with respect to each Conversion Right and Conversion Unit.

Section 2.06 . Adjustments. If, during the period between the date of this Agreement and the Effective Time, any change in the outstanding shares of capital stock of the Company shall occur by reason of any reclassification, recapitalization, stock split or combination, reverse stock split, exchange or readjustment of shares, or any stock dividend thereon with a record date during such period, but excluding any change that results from any exercise of options outstanding as of the date hereof to purchase shares of Company Stock granted under the Company’s stock option or compensation plans or arrangements, the Merger Consideration and any other amounts payable pursuant to this Agreement shall be appropriately and equitably adjusted.

 

14

Section 2.07 . Withholding Rights. Notwithstanding any provision contained herein to the contrary, each of the Exchange Agent, the Surviving Corporation and Parent shall be entitled to deduct and withhold from the consideration otherwise payable to any Person pursuant to this Article 2 such amounts as it is required to deduct and withhold with respect to the making of such payment under any applicable provision of U.S. federal, state, local or foreign tax or social insurance law. If the Exchange Agent, the Surviving Corporation or Parent, as the case may be, so withholds amounts, such amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of Company Stock in respect of which the Exchange Agent, the Surviving Corporation or Parent, as the case may be, made such deduction and withholding.

Section 2.08 . Lost Certificates. If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by the Surviving Corporation, the posting by such Person of a bond, in such reasonable amount as the Surviving Corporation may direct, as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will issue, in exchange for such lost, stolen or destroyed Certificate, the Merger Consideration to be paid in respect of the shares of Company Stock represented by such Certificate, as contemplated by this Article 2.

ARTICLE 3

T HE S URVIVING C ORPORATION

Section 3.01 . Certificate of Incorporation. The certificate of incorporation of Merger Subsidiary in effect at the Effective Time shall be the certificate of incorporation of the Surviving Corporation until amended in accordance with Applicable Law (except that the name of the Surviving Corporation shall be “MSC.Software Corporation”).

Section 3.02 . Bylaws. The bylaws of Merger Subsidiary in effect at the Effective Time shall be the bylaws of the Surviving Corporation until amended in accordance with Applicable Law (except that the name of the Surviving Corporation shall be “MSC.Software Corporation”).

Section 3.03 . Directors and Officers. From and after the Effective Time, until successors are duly elected or appointed and qualified in accordance with Applicable Law, (i) the directors of Merger Subsidiary at the Effective Time shall be the directors of the Surviving Corporation and (ii) the officers of the Company at the Effective Time shall be the officers of the Surviving Corporation.

 

15

ARTICLE 4

R EPRESENTATIONS AND W ARRANTIES OF THE C OMPANY

Subject to Section 11.05, except as set forth in the Company Disclosure Schedule, the Company represents and warrants to Parent that:

Section 4.01 . Corporate Existence and Power. (a) The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has all corporate powers and all Governmental Authorizations that are material to the Company and its Subsidiaries, taken as a whole, and required to carry on its business as now conducted and as currently proposed by its management to be conducted. The Company is duly licensed or qualified to do business as a foreign corporation and is in good standing in each jurisdiction where such qualification is necessary, except for those jurisdictions where failure to be so qualified would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company.

(b) The Company has made available to Parent complete and correct copies of its certificate of incorporation and bylaws (the “ Company Charter Documents ”) and the articles of incorporation and bylaws (or comparable organizational documents) of each of the Company’s Subsidiaries (the “ Subsidiary Documents ”), in each case as amended to the date of this Agreement. The Company Charter Documents and the Subsidiary Documents are in full force and effect and neither the Company nor any of its Subsidiaries is in violation of any of their respective provisions.

Section 4.02 . Corporate Authorization. (a) The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby are within the Company’s corporate powers and, except for the required approval of the Company’s stockholders in connection with the consummation of the Merger, have been duly authorized by all necessary corporate action on the part of the Company. The affirmative vote of the holders of a majority of the outstanding shares of Company Stock is the only vote of the holders of any of the Company’s capital stock necessary in connection with the consummation of the Merger (the “ Company Stockholder Approval ”). This Agreement constitutes a valid and binding agreement of the Company enforceable in accordance with its terms (subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws affecting creditors’ rights generally and general principles of equity).

(b) At a meeting duly called and held, the Company’s Board of Directors has (i) unanimously determined that this Agreement and the transactions contemplated hereby are fair to and in the best interests of the Company’s stockholders, (ii) unanimously approved, adopted and declared advisable this

 

16

Agreement and the transactions contemplated hereby and (iii) unanimously resolved, subject to Section 6.03(b), to recommend approval and adoption of this Agreement by the Company’s stockholders (such recommendation, the “ Company Board Recommendation ”) and (iv) approved and adopted an amendment to the Company Rights Agreement to render the Company Rights inapplicable to the Merger, this Agreement and the transactions contemplated hereby (a copy of which amendment was made available to Parent prior to the date of this Agreement), in each case, subject to the recusal of any members of the Company’s Board of Directors.

Section 4.03 . Governmental Authorization. The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby require no action by or in respect of, or filing with, any Governmental Authority other than (i) the filing of a certificate of merger with respect to the Merger with the Delaware Secretary of State and appropriate documents with the relevant authorities of other states in which the Company is qualified to do business, (ii) compliance with any applicable requirements of the HSR Act and of laws analogous to the HSR Act existing in foreign jurisdictions (the “ Foreign Antitrust Laws ”), including the German Act against Restraints of Competition of 1958, as amended, (iii) compliance with any applicable requirements of the 1933 Act, the 1934 Act, and any other applicable state or federal securities laws and (iv) any actions or filings the absence of which would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company.

Section 4.04 . Non-contravention. The execution, delivery and performance by the Company of this Agreement and the consummation of the transactions contemplated hereby do not and will not (i) contravene, conflict with, or result in any violation or breach of any provision of the Company Charter Documents, (ii) assuming compliance with the matters referred to in Section 4.03, contravene, conflict with or result in a material violation or breach of any provision of any material Applicable Law, (iii) other than the actions and filings referred to in Section 4.03, require any consent or other action by any Person under, constitute a default under, or cause or permit the termination, cancellation, acceleration or other change of any right or obligation or the loss of any benefit to which the Company or any of its Subsidiaries is entitled under any provision of any material agreement or other instrument binding upon the Company or any of its Subsidiaries or (iv) result in the creation or imposition of any Lien on a material asset of the Company or any of its Subsidiaries.

Section 4.05 . Capitalization. (a) The authorized capital stock of the Company consists of 100,000,000 shares of Company Stock and 10,000,000 shares of preferred stock, par value $0.01 per share, of the Company. As of June 30, 2009, there were outstanding 45,517,868 shares of Company Stock, none of which were subject to vesting or forfeiture, and no shares of preferred stock of the Company, Company Stock Options to purchase an aggregate of 4,077,806 shares of Company Stock (of which options to purchase an aggregate of 2,459,531 shares of Company Stock were exercisable for which the aggregate in-the-money spread based on the Merger Consideration does not exceed $900,000) and

 

17

Company Stock Units with respect to 1,216,547 shares of Company Stock. All outstanding shares of capital stock of the Company have been, and all shares that may be issued pursuant to the Company Stock Plans will be, when issued in accordance with the respective terms thereof, duly authorized and validly issued and fully paid.

(b) Except as would not result in a material liability to the Company or any Subsidiary of the Company, each grant of a Company Stock Option was duly authorized no later than the date on which the grant of such Company Stock Option was by its terms to be effective by all necessary corporate action, including, as applicable, approval by the Company’s Board of Directors (or a duly constituted and authorized committee thereof), or a duly authorized delegate thereof, and any required shareholder approval by the necessary number of votes or written consents and since the Company’s initial public offering, the per share exercise price of each Company Stock Option was not less than the fair market value of a share of Company Stock on the applicable date of grant. Each grant of a Company Stock Award was made in accordance with the terms of the relevant Company Stock Plan and Applicable Laws, and each such grant was properly accounted for in all material respects in accordance with GAAP in the consolidated financial statements contained in the Company SEC Documents and with Applicable Laws. Section 4.05 of the Disclosure Schedule sets forth the following information with respect to each Company Stock Award outstanding on the date of this Agreement: (i) the particular plan pursuant to which such Company Stock Award was granted; (ii) the number of shares of Company Stock subject to such Company Stock Award; (iii) the exercise or purchase price of such Company Stock Award (if any); (iv) the date on which such Company Stock Award was granted; (v) the applicable vesting schedule; and (vi) the date on which such Company Stock Award expires. The Company has made available to Parent accurate and complete copies of all Company Stock Plans pursuant to which the Company has granted the Company Stock Awards that are currently outstanding and the form of all stock award agreements evidencing such Company Stock Awards. There are no commitments or agreements of any character to which the Company is bound obligating the Company to accelerate the vesting of any Company Stock Awards as a result of the transactions contemplated by this Agreement.

(c) Except as set forth in this Section 4.05 and for changes since June 30, 2009 resulting from the exercise of Company Stock Options outstanding on such date, there are no issued, reserved for issuance or outstanding (i) shares of capital stock or other voting securities of or ownership interests in the Company, (ii) securities of the Company convertible into or exchangeable for shares of capital stock or other voting securities of or ownership interests in the Company or (iii) warrants, calls, options or other rights to acquire from the Company, or other obligation of the Company to issue, any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of the Company or (iv) restricted shares, stock appreciation rights, performance units, contingent value rights, “phantom” stock or similar securities or rights that

 

18

are derivative of, or provide economic benefits based, directly or indirectly, on the value or price of, any capital stock of or voting securities of the Company (the items in clauses (i) through (iv) being referred to collectively as the “ Company Securities ”). There are no outstanding obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any of the Company Securities.

(d) Except as set forth in this Section 4.05, none of (i) the shares of capital stock of the Company or (ii) Company Securities are owned by any Subsidiary of the Company.

Section 4.06 Subsidiaries; Minority Investments. (a) Each Subsidiary of the Company is duly formed, validly existing and (where applicable) in good standing under the laws of its jurisdiction of organization, has all organizational powers and all Governmental Authorizations that are material to the Company and its Subsidiaries, taken as a whole, and required to carry on its business as now conducted. Each such Subsidiary is duly qualified to do business as a foreign entity and is in good standing in each jurisdiction where such qualification is necessary, except for those jurisdictions where failure to be so qualified would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company. All Subsidiaries of the Company and their respective jurisdictions of organization are identified in the Company 10-K.

(b) All of the outstanding capital stock of or other voting securities of, or ownership interests in, each Subsidiary of the Company, have been duly authorized and validly issued and are fully paid, nonassessable and were not issued in violation of any preemptive rights, purchase option, call or right of first refusal or similar rights, and are owned by the Company, directly or indirectly, free and clear of any Lien (including any restriction on the right to vote or transfer the same, except for such transfer restrictions of general applicability as may be provided under the 1933 Act). As of the date of this Agreement, there were no issued, reserved for issuance or outstanding (i) securities of the Company or any of its Subsidiaries convertible into, or exchangeable for, shares of capital stock or other voting securities of, or ownership interests in, any Subsidiary of the Company, (ii) warrants, calls, options or other rights to acquire from the Company or any of its Subsidiaries, or other obligations of the Company or any of its Subsidiaries to issue, any capital stock or other voting securities of, or ownership interests in, or any securities convertible into, or exchangeable for, any capital stock or other voting securities of, or ownership interests in, any Subsidiary of the Company or (iii) restricted shares, stock appreciation rights, performance units, contingent value rights, “phantom” stock or similar securities or rights that are derivative of, or provide economic benefits based, directly or indirectly, on the value or price of, any capital stock or other voting securities of, or ownership interests in, any Significant Subsidiary of the Company (the items in clauses (i) through (iii) being referred to collectively as the “ Company Subsidiary Securities ”). There are no outstanding obligations of the Company or any of its Significant Subsidiaries to repurchase, redeem or otherwise acquire any of the Company Subsidiary Securities.

 

19

(c) Except for the Subsidiaries of the Company identified in the Company 10-K, the Company does not directly or indirectly own any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for any equity or similar interest in, any corporation, limited liability company, partnership, association, trust or other entity.

Section 4.07 . SEC Filings and the Sarbanes-Oxley Act. (a) The Company has filed with or furnished to the SEC, and made available to Parent, all reports, schedules, forms, statements, prospectuses, registration statements and other documents required to be filed or furnished by the Company since January 1, 2008 (collectively, together with any exhibits and schedules thereto and other information incorporated therein, the “ Company SEC Documents ”).

(b) As of its filing date (and as of the date of any amendment), each Company SEC Document complied, and each Company SEC Document filed subsequent to the date hereof will comply, as to form in all material respects with the applicable requirements of the 1933 Act and the 1934 Act, as the case may be.

(c) As of its filing date (or, if amended or superseded by a filing prior to the date hereof, on the date of such filing), each Company SEC Document filed pursuant to the 1934 Act did not, and each Company SEC Document filed subsequent to the date hereof will not, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.

(d) Each Company SEC Document that is a registration statement, as amended or supplemented, if applicable, filed pursuant to the 1933 Act, as of the date such registration statement or amendment became effective, did not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading.

(e) The Company and each of its officers are in compliance in all material respects with the applicable provisions of the Sarbanes-Oxley Act. The management of the Company has, in material compliance with Rule 13a-15 under the 1934 Act, (i) designed disclosure controls and procedures to ensure that material information relating to the Company, including its consolidated Subsidiaries, is made known to the management of the Company by others within those entities, and (ii) disclosed, based on its most recent evaluation prior to the date hereof, to the Company’s auditors and the audit committee of the Company’s Board of Directors (A) any significant deficiencies in the design or operation of internal control over financial reporting (“ Internal Controls ”) which would adversely affect the Company’s ability to record, process, summarize and report financial data and have identified for the Company’s auditors any material

 

20

weaknesses in Internal Controls and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s Internal Controls.

(f) Since January 1, 2008, the Company has complied in all material respects with the applicable listing and corporate governance rules and regulations of the Nasdaq Global Select Market.

Section 4.08 . Financial Statements. The audited consolidated financial statements and unaudited consolidated interim financial statements of the Company (including, in each case, any notes thereto) included or incorporated by reference in the Company SEC Documents complied as to form, as of their respective dates of filing with the SEC, in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with GAAP applied on a consistent basis during the periods involved and fairly present (except as may be indicated in the notes thereto) the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and their consolidated results of operations and cash flows for the periods then ended (subject to normal year-end audit adjustments and the absence of footnotes in the case of any unaudited interim financial statements).

Section 4.09 . Disclosure Documents. The proxy statement of the Company to be filed with the SEC in connection with the Merger (the “ Proxy Statement ”) will, when filed, comply as to form in all material respects with the applicable requirements of the 1934 Act. At the time the Proxy Statement and any amendments or supplements thereto are first mailed to the stockholders of the Company and at the time of the Company Stockholder Approval, the Proxy Statement, as supplemented or amended, if applicable, will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The representations and warranties contained in this Section 4.09 will not apply to statements or omissions included or incorporated by reference in the Proxy Statement based upon information supplied by Parent, Merger Subsidiary or any of their respective representatives or advisors specifically for use or incorporation by reference therein.

Section 4.10 . Absence of Certain Changes. (a) Since the Company Balance Sheet Date, (i) the business of the Company and its Subsidiaries has been conducted in the ordinary course consistent with past practices and (ii) there has not been any event, occurrence, development or state of circumstances or facts that has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company.

(b) From the Company Balance Sheet Date until the date hereof, there has not been any action taken by the Company or any of its Subsidiaries that, if taken during the period from the date of this Agreement through the Effective Time without Parent’s consent, would constitute a breach of Section 6.01.

 

21

Section 4.11 . No Undisclosed Material Liabilities. There are no liabilities or obligations of the Company or any of its Subsidiaries of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, other than: (i) liabilities or obligations disclosed and provided for in the Company Balance Sheet or in the notes thereto; (ii) liabilities or obligations incurred in the ordinary course of business consistent with past practice since the Company Balance Sheet Date; (iii) liabilities or obligations incurred in connection with the transactions contemplated hereby or (iv) liabilities or obligations that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company.

Section 4.12 . Compliance with Laws and Court Orders . The Company and each of its Subsidiaries is in compliance with, and to the knowledge of the Company is not under investigation with respect to and has not been threatened to be charged with or given notice of any material violation of, any material Governmental Authorization or any Applicable Law.

Section 4.13 . Litigation. As of the date hereof, there is no material action, suit, investigation or proceeding pending against or, to the knowledge of the Company, threatened against or affecting, the Company or any of its Subsidiaries before (or, in the case of threatened actions, suits, investigations or proceedings, would be before) or by any Governmental Authority. Neither the Company nor any of its Subsidiaries is subject to any material continuing order, judgment, injunction or decree of any Governmental Authority.

Section 4.14 . Properties. (a) The Company and its Subsidiaries have marketable title to, or valid leasehold interests in, all property and assets used in their respective businesses, free and clear of any Liens, except Permitted Liens.

(b) The Company and its Subsidiaries do not own any real property. Section 4.14(b) of the Company Disclosure Schedule contains the true and correct address of all real property leased by the Company or any of its Subsidiaries. Each lease, sublease or license (each, a “ Lease ”) under which the Company or any of its Subsidiaries leases, subleases or licenses any real property is valid and in full force and effect and neither the Company nor any of its Subsidiaries, nor to the Company’s knowledge any other party to a Lease, has violated any provision of, or taken or failed to take any act which, with or without notice, lapse of time, or both, would constitute a default under the provisions of such Lease, and neither the Company nor any of its Subsidiaries has received notice that it has breached, violated or defaulted under any Lease. The Company has made available to Parent accurate and complete copies of each Lease.

Section 4.15. Intellectual Property. (a) Section 4.15(a) of the Company Disclosure Schedule sets forth a true and complete list of all (i) Owned

 

22

Intellectual Property that is Registered, indicating for each such item, as applicable, the application or registration number, date and jurisdiction of filing or issuance, and the identity of the current applicant or registered owner, (ii) Company Products, and (iii) Company IP Agreements (other than licenses of Off-the-Shelf software and non-exclusive licenses granted to customers, end-users and hardware and software partners in the ordinary course of business consistent with past practice).

(b) The Company and its Subsidiaries have sufficient rights to use the Company Intellectual Property in connection with the operation of the business of the Company and its Subsidiaries as currently conducted. The Company Intellectual Property includes all Intellectual Property used or held for use in connection with the operation of the business of the Company and its Subsidiaries as currently conducted. The Company or a Subsidiary of the Company is the sole and exclusive owner of all right, title and interest in and to each item Owned Intellectual Property, free and clear of all Liens (excluding non-exclusive licenses granted in the ordinary course of business consistent with past practice and rights of customers to customer-specific customizations made by the Company or a Subsidiary on behalf of a customer), or any obligation to grant any Lien. To the knowledge of the Company, the Company and each Subsidiary of the Company has a valid license to use the Licensed Intellectual Property in connection with the operation of the business of the Company and its Subsidiaries as currently conducted.

(c) To the knowledge of the Company, the Owned Intellectual Property that is Registered and the Licensed Intellectual Property are valid, subsisting and enforceable, as applicable. The Owned Intellectual Property, and to the knowledge of the Company, the Licensed Intellectual Property, is not subject to any outstanding order, judgment, injunction, decree, ruling or agreement adversely affecting the Company’s or any Subsidiary of the Company’s use thereof or rights thereto, or that would impair the validity or enforceability thereof. Except for office actions in the normal course of the examination of applications for registration of Intellectual Property, there is no action or claim pending or threatened in writing by or against the Company or any Subsidiary of the Company contesting or challenging the ownership, validity, registerability, right to use or enforceability of any Owned Intellectual Property.

(d) The Company, its Subsidiaries, the operation of the business of the Company, the use of the Company Intellectual Property, the Company Products and the Company Software in connection therewith do not, and have not in the last six (6) years, infringed, misappropriated or otherwise violated or conflicted with the Intellectual Property rights of any other Person. There is no action or claim pending or threatened in writing against the Company or any Subsidiary of the Company (i) alleging that the Company or any of its Subsidiaries has infringed, misappropriated, or violated the Intellectual Property rights of any Person, or (ii) challenging the ownership of or licensed right to use any Company Intellectual Property, or (iii) that a license under any other Person’s Intellectual

 

23

Property (other than licenses included in the Company IP Agreements) is or may be required to operate the business of the Company and its Subsidiaries as currently conducted. There is no action or claim pending, asserted or threatened in writing by the Company or any of its Subsidiaries against any other Person alleging that such Person infringes, misappropriates or otherwise violates or conflicts with any Owned Intellectual Property and to the knowledge of the Company, no third party is infringing, misappropriating or otherwise violating any material Owned Intellectual Property.

(e) The Company and its Subsidiaries have taken commercially reasonable measures consistent with industry standards to maintain the confidentiality and value of all confidential information used or held for use in the operation of the business of the Company and its Subsidiaries, including the source code for any Company Products, Company Software and all other confidential Owned Intellectual Property.

(f) The Company and its Subsidiaries have obtained all approvals necessary for exporting the Company Software outside the United States and importing the Company Software into any country in which the Company Software is currently sold, licensed for use or otherwise distributed (in each case only to the extent the Company Software is exported or imported by the Company or any Subsidiary), and all such approvals are valid, current and in full force and effect.

(g) Except as set forth in Section 4.15(g)(i) of the Company Disclosure Schedule, no Public Software forms part of, is incorporated into or is being (or has been) distributed with, in whole or in part, any Company Product in a manner that would (A) require the licensing, disclosure or distribution of any portion of any source code within (or distributed with) the Company Products (other than source code that is a part of such Public Software); or (B) prohibit or limit the receipt of consideration in connection with licensing, sublicensing or distributing of any Company Products; or (C) except as specifically permitted by Applicable Law, allow any Person to decompile, disassemble or otherwise reverse-engineer any source code within (or distributed with) the Company Products (other than source code that is a part of such Public Software); or (D) require the licensing of any Company Products to any other Person for the purpose of making derivative works. With respect to any Public Software listed therein, Section 4.15(g)(i) of the Company Disclosure Schedule also identifies the underlying Public Software, the license agreement governing the use of such Public Software, where such agreements exist, the particular Company Products in which such Public Software is present and the nature of use of such Public Software. To the knowledge of the Company, Section 4.15(g)(ii) of the Company Disclosure Schedule sets forth a list of all other Public Software that, forms part of, is incorporated into or is being (or has been) distributed with, in whole or in part, any Company Product, which the Company has identified as of the date of this Agreement, in accordance with its open-source software usage records.

 

24

(h) To the knowledge of the Company, all source code and other documentation concerning Company Products is sufficiently documented to enable a software developer of reasonable skill who is experienced in the field of computer aided engineering and has no less than five (5) years of recent work experience in such field to understand, modify, debug, enhance, compile, support and otherwise utilize the software to which it pertains, without reference to other confidential sources of information. Except as disclosed in Section 4.15(h) of the Company Disclosure Schedule, no such source code (other than application program interfaces) has been delivered or licensed to any other Person, or is subject to any source code escrow, license, delivery or assignment obligation, except license and/or delivery obligations pursuant to agreements with consultants and software or hardware partners engaged in development activities for the Company and its Subsidiaries in the ordinary course of business.

(i) All Company Products (other than Licensed Intellectual Property and other than rights of customers to customer-specific customizations made by the Company or a Subsidiary on behalf of a customer) were (i) developed by employees of the Company or the Company Subsidiaries within the scope of their employment and any and all rights to Intellectual Property created by such employees have been assigned to the Company or a Subsidiary, (ii) developed by independent contractors who have expressly transferred the entire and unencumbered right, title and interest in and to such Company Products to the Company or a Subsidiary pursuant to valid written assignments or by operation of law, or (iii) otherwise acquired by the Company or a Subsidiary from a third party pursuant to a valid written agreement in which the entire and unencumbered right, title and interest in and to such Company Products were expressly assigned to the Company or such Subsidiary. The Company or a Subsidiary exclusively owns the entire and unencumbered right, title and interest in and to the Company Products (other than Licensed Intellectual Property and other than rights of customers to customer-specific customizations made by the Company or a Subsidiary on behalf of a customer), including the source code therefor and Intellectual Property rights therein. No rights in the Intellectual Property of any Company Product have been transferred or granted to any other Person, except for non-exclusive licenses of Company Products granted by the Company or its Subsidiaries to their customers in the ordinary course of business and other than rights of customers to customer-specific customizations made by the Company or a Subsidiary on behalf of a customer.

(j) The Company has furnished to the Parent prior to the execution and delivery of this Agreement true and complete copies of the standard form agreements used by the Company or any Subsidiary relating to the license or sale of Company Products. Neither the Company nor any Subsidiary has granted or is obligated to grant any Person any exclusive rights in, to or under any Owned Intellectual Property (other than rights of customers to customer-specific customizations made by the Company or a Subsidiary on behalf of a customer). Except as disclosed in Section 4.15(j) of the Company Disclosure Schedule and except for any Off-the-Shelf software, no royalties, honoraria, fees or other payments are paid or payable by the Company or any Subsidiary to any Person for the purchase, license, sublicense or use of any Licensed Intellectual Property.

 

25

(k) Neither the Company nor any Subsidiary of the Company has entered into any agreement or is otherwise obligated to indemnify any other Person against any claim of infringement, misappropriation or other violation of or conflict with the Intellectual Property rights of any third party, other than customary indemnities agreed to in the ordinary course of business and included as part of the Company’s and/or its Subsidiaries’ contracts for the license, sale or purchase of products or services.

(l) The negotiation, execution, delivery and performance of this Agreement and the consummation of the transactions contemplated by this Agreement will not, under any agreement, contract, obligation or commitment under which the Company or any Subsidiary is bound or purported to be bound, result in (i) Parent or any of its Affiliates being (A) bound by or subject to any non-compete or licensing obligation, covenant not to sue, or other restriction on or modification of the current or contemplated operation or scope of its business, which the Parent or any of its Affiliates was not bound by or subject to prior to the Closing, or (B) obligated to (1) pay any royalties, honoraria, fees or other payments to any Person in excess of those payable by the Parent or any of its Affiliates prior to the Closing, or (2) provide or offer any discounts or other reduced payment obligations to any Person in excess of those provided to such Person by the Parent or any of its Affiliates prior to the Closing.

(m) No university, military, educational institution, research center or Governmental Authority (each, a “ R&D Sponsor ”) has funded or sponsored research and development of the Company or its Subsidiaries such that it has any claim of right to, ownership of, security interest in or exclusive license to any Company Products (other than rights of customers to customer-specific customizations made by the Company or a Subsidiary on behalf of a customer). Neither the Company nor any Subsidiary has participated in any standards-setting activities or joined any standards setting or Intellectual Property sharing organization that would affect the proprietary nature of any Owned Intellectual Property or restrict the ability of the Company or any Subsidiary to enforce, license or exclude others from using any Owned Intellectual Property.

Section 4.16 . Taxes . (a) All material Tax Returns required by Applicable Law to be filed with any Taxing Authority by, or on behalf of, the Company or any of its Subsidiaries have been filed when due in accordance with all Applicable Law, and all such material Tax Returns are, or shall be at the time of filing, true, correct and complete in all material respects.

(b) The Company and each of its Subsidiaries has timely paid (or has had paid on its behalf) or has timely withheld and remitted to the appropriate Taxing Authority all material Taxes due and payable, or, where payment is not yet due, has established (or has had established on its behalf and for its sole

 

26

benefit and recourse) in accordance with GAAP an adequate accrual for all material Taxes through the end of the last period for which the Company and its Subsidiaries ordinarily record items on their respective books.

(c) The income and franchise Tax Returns of the Company and its Subsidiaries through the Tax year ended December 31, 2003 have been examined and closed or are Tax Returns with respect to which the applicable period for assessment under Applicable Law, after giving effect to extensions or waivers, has expired.

(d) No Taxing Authority has proposed, or, to the knowledge of the Company, is threatening to propose any material adjustment to any Tax Return of the Company or any of its Subsidiaries.

(e) Neither the Company nor any of its Subsidiaries has granted any waiver of any statute of limitations with respect to, or any extension of a period for the assessment of, any Tax.

(f) There is no claim, audit, action, suit, proceeding or investigation now pending or, to the Company’s knowledge, threatened against or with respect to the Company or its Subsidiaries in respect of any material Tax.

(g) During the two-year period ending on the date hereof, neither the Company nor any of its Subsidiaries was a distributing corporation or a controlled corporation in a transaction intended to be governed by Section 355 of the Code.

(h) Neither the Company nor any of its Subsidiaries has any liability for the Taxes of any person (other than the Company or any of its Subsidiaries).

(i) Neither the Company nor any of its Subsidiaries has participated or engaged in any transaction that constitutes a “reportable transaction” within the meaning of U.S. Treasury Regulations Section 1.6011-4(b).

(j) “ Tax ” means (i) any tax or other like assessment or charge of any kind whatsoever (including withholding on amounts paid to or by any Person), together with any interest, penalty, addition to tax or additional amount imposed by any Governmental Authority (a “ Taxing Authority ”) responsible for the imposition of any such tax (domestic or foreign), and (ii) in the case of the Company or any of its Subsidiaries, liability for the payment of any amount of the type described in clause (i) as a result of being or having been before the Effective Time a member of an affiliated, consolidated, combined or unitary group. “ Tax Return ” means any report, return, document, declaration or other information or filing required to be supplied to any Taxing Authority with respect to Taxes, including information returns, any documents with respect to or accompanying payments of estimated Taxes, or with respect to or accompanying requests for the extension of time in which to file any such report, return, document, declaration or other information.

 

27

Section 4.17 . Employee Benefit Plans. (a) Section 4.17 of the Company Disclosure Schedule contains a correct and complete list identifying (i) each “employee benefit plan,” as defined in Section 3(3) of ERISA, each severance, termination, change of control retention, sale, bonus or similar contract, plan, arrangement or policy and each other plan or arrangement providing for compensation, bonuses, profit-sharing, stock option or other stock related rights or other forms of incentive or deferred compensation, vacation benefits, insurance (including any self-insured arrangements), health or medical benefits, employee assistance program, disability or sick leave benefits, workers’ compensation, supplemental unemployment benefits, severance benefits and post-employment or retirement benefits (including compensation, pension, health, medical or life insurance benefits) which is maintained, administered or contributed to by the Company or any ERISA Affiliate and covers any current or former employee, director or consultant of the Company or any of its Subsidiaries, or with respect to which the Company or any of its Subsidiaries has any liability, and (ii) each employment, consulting or services agreement (other than at-will offer letters and consultant agreements providing no more than three months of notice of termination) of any current or former employee, director or consultant of the Company or any Subsidiary of the Company (x) to which the Company or any Subsidiary is a party or with respect to which the Company or any Subsidiary has any continuing obligation and (y) (A) relates to the provision of services in the United States or (B) provides for notice periods or material benefits in excess of the minimum requirements under applicable Law or customary practice (collectively, the “ Employee Plans ”). Each Employee Plan is in writing and true and complete copies of each material Employee Plan (and, if applicable, related trust or funding agreements or insurance policies) and all material amendments thereto and material written interpretations thereof have been furnished to Parent together with the most recent annual report (Form 5500 including, if applicable, Schedule B thereto) and tax return (Form 990) prepared in connection with any such plan or trust. Neither the Company nor any Subsidiary of the Company has any express or implied commitment, (i) to create, incur liability with respect to or cause to exist any other employee benefit plan, program or arrangement or (ii) to modify, change or terminate any Employee Plan, other than with respect to a modification, change or termination required by Applicable Law.

(b) Neither the Company nor any ERISA Affiliate nor any predecessor thereof sponsors, maintains or contributes to, or has in the past sponsored, maintained or contributed to, any Employee Plan subject to Title IV of ERISA or a single employer pension plan (within the meaning of Section 4001(a)(15) of ERISA) for which the Company or any ERISA Affiliate could incur liability under Section 4063 or 4064 of ERISA (a “ Multiple Employer Plan ”).

(c) Neither the Company nor any ERISA Affiliate nor any predecessor thereof contributes to, or has in the past contributed to, any multiemployer plan, as defined in Section 3(37) of ERISA (a “ Multiemployer Plan ”) (within the meaning of Section 406 of ERISA or Section 4975 of the Code) with respect to any Plan. Neither the Company nor any Subsidiary of the Company has incurred any liability under, arising out of or by operation of Title IV of ERISA (other than liability for premiums to the PBGC arising in the ordinary course).

 

28

(d) Each Employee Plan that is intended to be qualified under Section 401(a) of the Code has timely received a favorable determination letter from the Internal Revenue Service (the “ IRS ”) covering all of the provisions applicable to the Plan for which determination letters are currently available that the Plan is so qualified, or has timely filed a pending application for such determination from the IRS, and, to the knowledge of the Company, no fact, event or circumstance has occurred since the date of the most recent determination letter or letters from the IRS to adversely affect the qualified status of any such Employee Plan or the exempt status of any such trust. The Company has made available to Parent copies of the most recent Internal Revenue Service determination letters with respect to each such Employee Plan. Each Employee Plan is now and has always been maintained, operated, and administered in all material respects in compliance with its terms and with the requirements prescribed by Applicable Law, including ERISA and the Code. No events have occurred or fact or circumstance exists with respect to any Employee Plan that could result in payment or assessment by or against the Company or any Subsidiary of the Company of any material excise taxes under Sections 4972, 4975, 4976, 4977, 4979, 4980B, 4980D, 4980E or 5000 of the Code.

(e) The consummation of the transactions contemplated by this Agreement will not (either alone or together with any other event) entitle any current or former employee, director or consultant or independent contractor of the Company or any of its Subsidiaries to severance or termination pay or accelerate the time of payment or vesting or trigger any payment or funding (through a grantor trust or otherwise) of compensation or benefits under, increase the amount payable or trigger any other material obligation pursuant to, any Employee Plan. There is no contract, plan or arrangement (written or otherwise) covering any current or former employee, director or consultant of the Company or any of its Subsidiaries that, individually or collectively, would entitle any such individual to any severance or other payment solely as a result of the transactions contemplated by this Agreement, or could give rise to the payment of any amount that would not be deductible, as a result of the transactions contemplated by this Agreement, either alone or in combination with another event, pursuant to the terms of Section 280G or Section 162(m) of the Code. The Company and each of its Subsidiaries has the right to amend, freeze or terminate, including the right to reduce the benefits payable thereunder, or limit the eligibility therefor, each Employee Plan providing for severance, termination, redundancy or similar payments or benefits, other than (i) any International Plan, (ii) any Employee Plan that is an employment, consulting, services or similar agreement with any individual current or former employee, director or consultant of the Company or any of its Subsidiaries or (iii) any Company Stock Plan (or award agreement thereunder).

 

29

(f) Neither the Company nor any of its Subsidiaries has any liability in respect of post-retirement health, medical or life insurance benefits for retired, former or current employees, directors or consultants of the Company or its Subsidiaries except as required to avoid excise tax under Section 4980B of the Code.

(g) Any arrangement of the Company or any Subsidiary of the Company that is subject to Section 409A of the Code was administered in reasonable, good faith compliance with the requirements of Section 409A of the Code through December 31, 2008, and all arrangements of the Company and each of its Subsidiaries subject to Section 409A of the Code that provide payment after December 31, 2008 and were in existence on such date have been amended to comply with the requirements of the final regulations under Section 409A. Neither the Company nor any Subsidiary of the Company has elected to or is required to defer payment of amounts from a foreign entity which will be subject to the provisions of Section 457A of the Code. Neither the Company nor any Subsidiary of the Company has any obligation to gross-up or otherwise reimburse any person for any tax incurred by such person pursuant to Section 409A or Section 280G of the Code.

(h) All contributions, premiums and payments accrued under each Employee Plan, determined in accordance with prior funding and accrual practices under GAAP, as adjusted to include proportional accruals for the period ending as of the date hereof, have been discharged and paid on or prior to the date hereof in accordance with their terms and applicable Law except to the extent reflected as a liability on the Company Balance Sheet. The Company and each of its Subsidiaries have made all social security contributions (including contributions to a