Document:

<PAGE>
                                                                   EXHIBIT 10.11

May 7, 2004

Mr. Thomas Lemberg
13 Gypsy Trail
Weston, MA 02493

Dear Tom:

On behalf of UGS PLM Solutions, I am pleased to extend you an offer to join the
UGS PLM Solutions Finance organization as Senior Vice President and General
Counsel. I believe this offer provides you with a unique opportunity to further
develop your professional career and to contribute significantly to the future
of UGS PLM Solutions.

Your initial base annual salary will be $315,000 to be paid in twenty-four (24)
semimonthly payments. In addition to your base salary, you will be eligible for
an annual performance-based incentive opportunity equal to 70% (not pro-rated
for 2004) of your annual base salary. Furthermore, you will have the opportunity
to participate in UGS PLM Solutions benefits. You are entitled to four weeks of
paid vacation per year.

Should you decide to accept UGS PLM Solutions offer of employment, please be
advised that UGS PLM Solutions Code of Business Conduct requires you to honor
any agreements you have with your previous employers, including obligations
regarding the disclosure or use of proprietary information.

Along with this letter you will receive information regarding the EDS employee
relocation policy. This policy will be adapted to UGS PLM Solutions following
the UGS PLM sale. In addition to your relocation, UGS will move your Mother in
Law and her belongings at the company's expense if she chooses to move at the
same time as you.

In the event that UGS involuntarily terminates your employment other than for
"Cause" prior to the second anniversary of your start date with UGS, you will be
entitled to a lump sum in the amount of $75,000 to cover relocation costs. This
amount is payable within 14 days of your separation. For the purpose of this
agreement, "Cause" is defined as (a) material breach of any agreement entered
into between you and UGS; (b) material misconduct; (c) material failure to
follow UGS' policies, directives or orders applicable to UGS employees holding
comparable positions; (d) intentional destruction or theft of UGS property or
falsification of UGS documents; (e) material failure or refusal to faithfully,
diligently, and competently perform the usual and customary duties associated
with your position; or (f) conviction of a felony or any crime involving moral
turpitude.

<PAGE>

As we discussed, UGS PLM Solutions offer of employment is contingent upon
passing the UGS PLM Solutions standard employment practices, including a
Background Investigation and Drug Screening, as well as execution of the EDS
Code of Business Conduct.

As a U.S. employer, UGS PLM Solutions is required by law to review required
documentation verifying your identity and authorization to work in the United
States. This documentation must be available at the time of your employment
start date.

Please understand nothing in this letter alters the at-will nature of your
employment relationship with UGS PLM Solutions. In that regard, either you or
UGS PLM Solutions may terminate your employment at any time, for any reason,
with or without notice.

Please indicate your acceptance of the terms set forth in this letter by signing
and returning it and the other enclosed hiring documents to me. A return Federal
Express mailer has been included for your convenience.

If you need any additional information about UGS PLM Solutions or this offer of
employment please contact Dan Malliet at 515.296.8050 or me directly at
972.797.2056.

I believe UGS PLM Solutions can offer you opportunities and challenges that will
be professionally rewarding and mutually satisfying. I am enthusiastic about
having you as a valued member of our executive team.

Sincerely,

/s/ Tony Affuso

Tony Affuso
President & CEO

PWO/srb
Enclosures

I ACCEPT THE TERMS OF EMPLOYMENT OUTLINED IN THIS LETTER.

     /s/ Thomas Lemberg                                            5/11/04
-------------------------                                     ----------------
Candidate Signature                                           Date<PAGE>
                                                                   Exhibit 10.12

                                UGS CAPITAL CORP.
                              UGS CAPITAL CORP. II

                                    UGS CORP.

                                  May 18, 2004

Anthony J. Affuso
3132 Seneca Drive
Frisco, Texas 75034

      Re: Rollover Arrangements

Dear Mr. Affuso:

When signed by you in the space indicated below, this letter will confirm our
irrevocable agreement that, if the transaction contemplated by the Stock
Purchase Agreement, dated as of March 12, 2004 (the "Purchase Agreement"), among
Electronic Data Systems Corporation, UGS Capital Corp. (formerly known as BSW
Holdings, Inc.) ("Capital Corp.") and UGS PLM Solutions Inc. (the "Company")
closes in accordance with the Purchase Agreement on or prior to June 30, 2004:

            (a) you agree to forego the amounts set forth on Schedule 1 hereto
      to which you would otherwise be entitled to be paid pursuant to your
      letter agreement with the Company, dated on or about February 16, 2004
      (the "Retention Incentive Agreement"); and

            (b) in lieu thereof, Capital Corp., UGS Capital Corp. II ("Capital
      Corp. II"), and UGS Corp. ("UGS Corp.") will make the following awards to
      you as of the date of the closing of the transactions contemplated by the
      Purchase Agreement pursuant to the Management Incentive Plan of Capital
      Corp. and Capital Corp. II:

                  -     a Restricted Stock Award of shares of "Class A Common
                        Stock" of Capital Corp. in the amount and subject to
                        vesting restrictions set forth on Schedule 2 hereto; and

                  -     a cash award equal to 5% of the total amount your
                        foregone Retention Incentive payable in full within 14
                        days of the date of closing to defray most, if not all,
                        of the tax cost in connection with the Restricted Stock
                        Award; and

                  -     a Stock Option Award for the option to purchase shares
                        of "Class L Common Stock" of Capital Corp. in the amount
                        and subject to vesting restrictions set forth on
                        Schedule 2 hereto; and

<PAGE>

                  -     a deferred cash award in an amount set forth on Schedule
                        2 payable by UGS Corp. at the time you exercise your
                        option to purchase shares of "Class L Common Stock" of
                        Capital Corp.; and

                  -     a Stock Option Award for the option to purchase shares
                        of "Cumulative Preferred Stock" of Capital Corp. II in
                        the amount and subject to vesting restrictions set forth
                        on Schedule 2 hereto; and

                  -     a deferred cash award in an amount set forth on Schedule
                        2 payable by UGS Corp. at the time you exercise your
                        option to purchase shares of "Cumulative Preferred
                        Stock" of Capital Corp. II.

Descriptions of the equity interests of Capital Corp. and Capital Corp. II
contained in this letter shall substantially conform to the descriptions thereof
in the confidential memorandum dated as of May 12, 2004. As a condition to your
receipt of the benefits of this letter, you agree to join the Stockholders
Agreement of Capital Corp. and Capital Corp. II on the closing date. Capital
Corp., Capital Corp. II, UGS Corp., and you agree that nothing in this letter,
or the awards made hereunder, is intended to or will affect your employment
status with the Company as an at-will employee. Capital Corp., Capital Corp. II,
UGS Corp., and you agree that this letter and your choice to forego the amounts
set forth in Schedule 1 hereto will not affect any of the rights and obligations
of the Company or you pursuant to the Retention Incentive Agreement with respect
to the cash amounts you chose not to forego as set forth in Schedule 1. Capital
Corp., Capital Corp. II, UGS Corp., and you further agree that nothing in this
letter is intended to or will affect any of the rights and obligations of the
Company or you pursuant to the Retention Incentive Agreement (a) if the closing
pursuant to the Purchase Agreement does not occur on or prior to June 30, 2004,
in which case this letter shall be null and void or (b) to the extent you have
not foregone 100% of your Retention Incentive hereby, in which case your
Retention Incentive Agreement shall apply to the portion of Retention Incentive
retained. All payments taxed at ordinary income rates are subject to
withholding.

<PAGE>

If the foregoing is in accordance with your understanding, please sign this
letter and return it to Capital Corp.

                                           Very truly yours,

                                           UGS CAPITAL CORP.

                                                   /s/ Kenneth Hao
                                               ---------------------------------
                                               By: Kenneth Hao
                                               Title: Co-President

                                           UGS CAPITAL CORP. II

                                                   /s/ Kenneth Hao
                                               ---------------------------------
                                               By: Kenneth Hao
                                               Title: Co-President

                                           UGS CORP.

                                                   /s/ Kenneth Hao
                                               ---------------------------------
                                               By: Kenneth Hao
                                               Title: Co-President

The foregoing is hereby agreed to and accepted:

/s/Tony Affuso
-----------------

Letter Agreement

<PAGE>

                                   SCHEDULE 1

       Cash Retention Incentive Pursuant to Retention Incentive Agreement

<TABLE>
<CAPTION>

                      PERCENTAGE OF RETENTION  PAYMENT WITHIN 14 DAYS  PAYMENT AT   PAYMENT AT
                             INCENTIVE           OF DATE OF CLOSING      YEAR 1       YEAR 2         TOTAL
                      -----------------------  ----------------------  -----------  -----------  -------------
<S>                   <C>                      <C>                     <C>          <C>          <C>
Retention Incentive
Foregone                       100%                  $250,000.00       $375,000.00  $375,000.00  $1,000,000.00
Retention Incentive
Retained                         0%                  $         0       $         0  $         0  $           0
                               ---                   -----------       -----------  -----------  -------------
   TOTAL RETENTION
   INCENTIVE:                  100%                  $250,000.00       $375,000.00  $375,000.00  $1,000,000.00
                               ---                   -----------       -----------  -----------  -------------
</TABLE>

<PAGE>

                                   SCHEDULE 2

                                 Rollover Awards

<TABLE>
<CAPTION>

                                 AMOUNT                              VESTING
                               (AFTER 5%                  -----------------------------
           AWARD               DEDUCTION)    PRICE/SHARE   CLOSING   YEAR 1     YEAR 2            PAYMENT
--------------------------    -----------    -----------  --------- --------- ---------  ----------------------------
<S>                           <C>            <C>          <C>       <C>       <C>        <C>
Shares of Class A Common
Stock of Capital Corp.          76,000.00        $  1     19,000.00 28,500.00 28,500.00               N/A

Options to Purchase Shares
of Class L Common Stock of       8,444.44        $ 81      2,111.11  3,166.66  3,166.67               N/A
Capital Corp.

Options to Purchase Shares
of Cumulative Preferred          1,900.00        $100        475.00    712.50    712.50               N/A
Stock of Capital Corp. II

Deferred Cash Bonus                                                                        In proportion to Class L
(Class L Common Stock         $684,000.00        N/A         N/A       N/A       N/A     Common Stock Option exercise
Options)

Deferred Cash Bonus                                                                      In proportion to Cumulative
(Cumulative Preferred         $190,000.00        N/A         N/A       N/A       N/A        Preferred Stock Option
Stock Options)                                                                                     exercise
</TABLE>

          Cash Award of 5% of Foregone Retention Incentive: $50,000.00

<PAGE>

                                UGS CAPITAL CORP.
                         2004 MANAGEMENT INCENTIVE PLAN

           THIS AWARD AND THE SHARES ISSUED HEREUNDER ARE SUBJECT TO
          RESTRICTIONS ON VOTING AND TRANSFER AND REQUIREMENTS OF SALE
              AND OTHER PROVISIONS AS SET FORTH IN THE STOCKHOLDERS
          AGREEMENT AMONG UGS CAPITAL CORP., UGS CAPITAL CORP. II, UGS
       HOLDINGS, INC., UGS CORP. AND CERTAIN STOCKHOLDERS OF UGS CAPITAL
         CORP. AND UGS CAPITAL CORP. II, DATED AS OF MAY 24, 2004 (THE
                           "STOCKHOLDERS AGREEMENT").

        UGS CAPITAL CORP. STRONGLY ENCOURAGES YOU TO SEEK THE ADVICE OF
           YOUR OWN LEGAL AND FINANCIAL ADVISORS WITH RESPECT TO YOUR
                   AWARD AND ITS TAX CONSEQUENCES.THANK YOU.

UGS Capital Corp.

      Attn: Board of Directors

Ladies and Gentlemen:

      The undersigned (i) acknowledges receipt of an award (the "Award") of
restricted stock from UGS Capital Corp. (the "Company") under the UGS Capital
Corp. and UGS Capital Corp. II 2004 Management Incentive Plan (the "Plan"),
subject to the terms set forth below and in the Plan; (ii) further acknowledges
receipt of a copy of the Plan in effect as of the date hereof; and (iii) agrees
with the Company as follows:

      1.    Effective Date. This Agreement shall take effect as of May 27, 2004.

      2.    Shares Subject to Award. The Company hereby agrees to issue, and the
            undersigned hereby agrees to accept in accordance with the terms
            hereof, that total number of shares set forth in Schedule A (the
            "Award Shares") of the Class A-4 Common Stock of the Company (the
            "Restricted Stock"). Except as otherwise specifically provided
            herein, the undersigned's rights to the Award Shares, whether vested
            or unvested, are subject to the restrictions and other provisions
            contained in the Plan and the Stockholders Agreement (both of which
            are incorporated herein by reference) in addition to such other
            restrictions, if any, as may be imposed by law. In the event of a
            conflict between the Plan and the Stockholders Agreement, the
            Stockholders Agreement shall control.

      3.    Meaning of Certain Terms. Except as otherwise defined herein, all
            initially- capitalized terms used herein shall have the same meaning
            as in the Plan and the Stockholders Agreement. The term "vest" as
            used herein with respect to any Award Share means the lapsing of the
            requirement under Section 5 below that the Award Share be forfeited
            under certain circumstances.

<PAGE>

      4.    Vesting of Shares. Any unvested Award Shares held by the undersigned
            shall vest immediately if (i) the undersigned's Employment (as
            defined in the Plan) is terminated by the Company without Cause (as
            defined in Section 5 below), or (ii) a Change of Control occurs.
            Otherwise, Award Shares shall vest in accordance with Schedule A.

      5.    Forfeiture Risk.

            a.    If the undersigned's Employment ceases for any reason other
                  than termination by the Company without Cause, any unvested
                  Award Shares shall be forfeited.

            b.    For this purpose, "Cause" means (a) material breach of any
                  agreement entered into between the undersigned and the
                  Company, (b) material misconduct, (c) material failure to
                  follow the Company's policies, directives or orders applicable
                  to Company employees holding comparable positions, (d)
                  intentional destruction or theft of Company property or
                  falsification of Company documents, (e) material failure or
                  refusal to faithfully, diligently and competitively perform
                  the usual and customary duties associated with the
                  undersigned's position, or (f) conviction of a felony or any
                  crime involving moral turpitude.

      6.    Company's Continuing Call Right. The Company shall have the right to
            purchase the Award Shares in accordance with the terms of the
            Stockholders Agreement whether or not the Shares are vested.

      7.    Transfers of Shares. Award Shares shall not be sold, transferred,
            pledged, assigned or otherwise encumbered or disposed of except in
            accordance with the Stockholders Agreement.

      8.    Legend / Certificate Retention. Award Shares shall bear such legends
            as are required by the Stockholders Agreement and as may be
            determined by the Administrator prior to issuance, and certificates
            representing unvested Award Shares shall held by the Company if the
            Administrator so specifies.

      9.    Dividends. No dividends shall be payable with respect to unvested
            Award Shares but such dividends shall be paid, without interest,
            only when, and if, said Award Shares become vested.

      10.   Certain Tax Matters. The undersigned expressly acknowledges the
            following:

            a.    The Company has strongly recommended that the undersigned
                  consider making a so-called "83(b) election" with respect to
                  the Award Shares. The undersigned has been advised to confer
                  promptly with a professional tax adviser to consider whether
                  to make such election. Any such election, to be

<PAGE>

                  effective, must be made in accordance with applicable
                  regulations and within thirty (30) days following the date of
                  "transfer" of the Shares (as determined under Section 83 of
                  the Internal Revenue Code). The undersigned hereby agrees that
                  if the undersigned makes an 83(b) election, the undersigned
                  will provide a copy of the election to the Company not later
                  than ten (10) days after filing the election with the Internal
                  Revenue Service.

            b.    The award or vesting of the Award Shares may give rise to
                  "wages" subject to withholding. The undersigned expressly
                  acknowledges and agrees that the undersigned's rights
                  hereunder are subject to the undersigned promptly paying to
                  the Company in cash (or by such other means as may be
                  acceptable to the Administrator in its discretion) all taxes
                  required to be withheld. The undersigned also authorizes the
                  Company or its subsidiaries to withhold such amount from any
                  amounts otherwise owed to the undersigned.

<PAGE>

      By acceptance of this Award, the undersigned agrees to hereby become a
party to, and be bound by the terms of, the Stockholders Agreement and the
Participation and Registration Rights Agreement among UGS Capital Corp., UGS
Capital Corp. II, UGS Holdings, Inc., UGS Corp. and certain stockholders of UGS
Capital Corp. and UGS Capital Corp. II, dated as of May 24, 2004, in each case
treating the undersigned as a "Manager" and the Award Shares as "Purchased and
Roll-Over Shares."

                                                     Very truly yours,

                                                     /s/ Anthony J. Affuso
                                                     ---------------------------

Dated: May 27, 2004

The foregoing Restricted Stock
Award Agreement is hereby accepted:

UGS Capital Corp.

/s/ Douglass E. Barnett
--------------------------
Douglas E. Barnett
Executive Vice President

Roll-Over Restricted Stock Agreement

<PAGE>

                                   SCHEDULE A

Total number of Award Shares: 76,000.00

25% Shares vest on the date of the Award;

an additional 37.5% Shares vest on the one year anniversary of the date of the
Award and

an additional 37.5% Shares vest on the two year anniversary of the date of the
Award.
<PAGE>

                   UGS CAPITAL CORP. AND UGS CAPITAL CORP. II
                         2004 MANAGEMENT INCENTIVE PLAN

THIS AWARD AND ANY SECURITIES ISSUED UPON EXERCISE OF THIS OPTION ARE SUBJECT TO
     RESTRICTIONS ON VOTING AND TRANSFER AND REQUIREMENTS OF SALE AND OTHER
 PROVISIONS AS SET FORTH IN THE STOCKHOLDERS AGREEMENT AMONG UGS CAPITAL CORP.,
UGS CAPITAL CORP. II, UGS HOLDINGS, INC., UGS CORP. AND CERTAIN STOCKHOLDERS OF
    UGS CAPITAL CORP. AND UGS CAPITAL CORP. II, DATED AS OF MAY 24, 2004 (THE
                           "STOCKHOLDERS AGREEMENT").

 UGS CAPITAL CORP. STRONGLY ENCOURAGES YOU TO SEEK THE ADVICE OF YOUR OWN LEGAL
   AND FINANCIAL ADVISORS WITH RESPECT TO YOUR AWARD AND ITS TAX CONSEQUENCES.
                                   THANK YOU.

                                UGS CAPITAL CORP.
       NON-QUALIFIED ROLL-OVER OPTION AND CONDITIONAL DEFERRED CASH AWARD
                                    AGREEMENT

      This Agreement evidences a stock option granted by UGS Capital Corp., a
Delaware corporation (the "Company") and a deferred cash award conditionally
payable by UGS Corp., a Delaware corporation and an indirect subsidiary of the
Company ("UGS Corp."), to the undersigned (the "Optionee"), pursuant to, and
subject to the terms of, the UGS Capital Corp. and UGS Capital Corp. II 2004
Management Incentive Plan (the "Plan"), which is incorporated herein by
reference and of which the Optionee hereby acknowledges receipt.

            (a) Grant of Option. The Company grants to the Optionee as of May
      27, 2004, an option (the "Option") to purchase, in whole or in part, on
      the terms provided herein and in the Plan, that total number of shares set
      forth in Schedule A (the "Option Shares") of Class L Common Stock of the
      Company, par value $.001 per share, at an exercise price of eighty-one
      dollars ($81.00) per share. The Option evidenced by this Agreement is
      intended to be a non-qualified option and is granted to the Optionee in an
      Employment capacity as an employee. The latest date on which this Option,
      or any portion of it, may be exercised shall be May 27, 2014 (the "Final
      Exercise Date).

            (b) Meaning of Certain Terms. Except as otherwise defined herein,
      all initially-capitalized terms used in this Agreement shall have the same
      meaning as in the Plan and the Stockholders Agreement. As used herein with
      respect to the Option, the term "vest" means to become exercisable in
      whole or in specified part.

            (c) Vesting of Option. The Option shall vest in full immediately if
      (i) the undersigned's Employment (as defined in the Plan) is terminated by
      the Company without Cause (as defined in Section 5 below), or (ii) a
      Change of Control occurs. Otherwise, the Option shall vest in accordance
      with Schedule A.

<PAGE>

            (d) Exercise of Option. Each election to exercise this Option shall
      be in writing, signed by the Participant or the Participant's executor,
      administrator, or legally appointed representative (in the event of the
      Participant's incapacity) or the person or persons to whom this Option is
      transferred by will or the applicable laws of descent and distribution
      (collectively, the "Option Holder"), and received by the Company at its
      principal office, accompanied by payment in full as provided in the Plan.
      Subject to the further terms and conditions provided in the Plan, the
      purchase price may be paid by delivery of cash or check acceptable to the
      Administrator or by such other method provided under the Plan and
      explicitly approved by the Administrator. In the event that this Option is
      exercised by an Option Holder other than the Participant, the Company will
      be under no obligation to deliver Shares hereunder unless and until it is
      satisfied as to the authority of the Option Holder to exercise this
      Option.

            (e) Cessation of Employment. Unless the Administrator determines
      otherwise, the following will apply if the Optionee's Employment ceases:

   1. If the Optionee's Employment is terminated by the Company other than
for Cause (as defined below), the Option will vest fully.

   2. To the extent the Option is neither vested prior to cessation of
Employment nor vested upon cessation in accordance with (a) above, the Option
will be forfeited immediately by the Optionee and will terminate.

   3. Subject to (d) below, to the extent the Option is vested prior to
cessation of Employment or becomes vested upon cessation in accordance with (a)
above, the Option will remain exercisable for the shorter of (i) a period of 60
days or (ii) the period ending on the Final Exercise Date, and will thereupon
terminate.

   4. The Option will immediately terminate on cessation of Employment if the
Administrator in its sole discretion determines that such cessation has resulted
for reasons that cast such discredit on the Optionee as to justify immediate
forfeiture of the Option.

   5. As used herein, "Cause" is defined as (a) material breach of any
agreement entered into between the Optionee and the Company, (b) material
misconduct, (c) material failure to follow the Company's policies, directives or
orders applicable to Company employees holding comparable positions, (d)
intentional destruction or theft of Company property or falsification of Company
documents, (e) material failure or refusal to faithfully, diligently and
competitively perform the usual and customary duties associated with your
position, or (f) conviction of a felony or any crime involving moral turpitude.

            (f) Share Restrictions, etc. The Optionee's rights to Option Shares
      are subject to the restrictions and other provisions contained in the Plan
      and the Stockholders Agreement in addition to such other restrictions, if
      any, as may be imposed by law. In the event of a conflict between the Plan
      and the Stockholders Agreement, the Stockholders Agreement shall control.

<PAGE>

            (g) Legends, etc. Option Shares issued upon exercise shall bear such
      legends as are required by the Stockholders Agreement and as may be
      determined by the Administrator prior to issuance.

            (h) Transfer of Option. This Option is not transferable by the
      Optionee other than in accordance with the Stockholders Agreement.

            (i) Withholding. The exercise of the Option will give rise to
      "wages" subject to withholding. The Optionee expressly acknowledges and
      agrees that the Optionee's rights hereunder, including the right to be
      issued Shares upon exercise, are subject to the Optionee promptly paying
      to the Company in cash (or by such other means as may be acceptable to the
      Administrator in its discretion) all taxes required to be withheld. The
      Optionee also authorizes the Company or its subsidiaries to withhold such
      amount from any amounts otherwise owed to the Optionee.

            (j) Conditional Deferred Cash Award. The Company shall cause UGS
      Corp. to pay a conditional deferred cash Award to the Optionee in
      conjunction with the exercise of this Option. The conditional deferred
      cash Award will be paid only if, when, and to the extent that, the Option
      is exercised, and if the Option is forfeited as provided in Section 5
      above, the deferred cash award shall be forfeited. The total amount of
      cash that will be paid if the Option is exercised in full is set forth in
      Schedule B. The amount of cash that will be payable upon any partial
      exercise of the Option shall be determined by multiplying the amount set
      forth in Schedule B by a fraction, the numerator of which is the number of
      Option Shares as to which the Option is then being exercised and the
      denominator of which is the total number of Option Shares as to which the
      Option was granted.

      By acceptance of this Option and conditional deferred cash award, the
undersigned agrees to hereby become a party to, and be bound by the terms of,
the Stockholders Agreement and the Participation and Registration Rights
Agreement among UGS Capital Corp., UGS Capital Corp. II, UGS Holdings, Inc., UGS
Corp. and certain stockholders of UGS Capital Corp. and UGS Capital Corp. II,
dated as of May 24, 2004, in each case treating the undersigned as a "Manager"
and the Option Shares as "Purchased and Roll-Over Shares."

<PAGE>

      Executed as of the 27th day of May, 2004.

UGS Capital Corp.                                    UGS Capital Corp.

                                                      /s/ Douglas E. Barnett
                                                     ------------------------
                                                     Douglas E. Barnett
                                                     Executive Vice President

UGS Corp.                                            UGS Corp.

                                                      /s/ Douglas E. Barnett
                                                     ------------------------
                                                     Douglas E. Barnett
                                                     Executive Vice President

Optionee                                              /s/ Anthony J. Affuso
                                                     ------------------------
                                                     Name: Anthony J. Affuso

Rollover Class Option Agreement
<PAGE>

                                   SCHEDULE A

                                VESTING SCHEDULE

Total number of Option Shares: 8,444.44

25%Shares are exercisable on or after the grant of the Option;

an additional 37.5% Shares are exercisable on and after the one year anniversary
of the grant of the Option; and

      an additional 37.5% Shares are exercisable on and after the two year
                    anniversary of the grant of the Option.

<PAGE>

                                   SCHEDULE B

                         CONDITIONAL DEFERRED CASH AWARD

Total amount of conditional deferred cash award: $684,000.00

<PAGE>

                   UGS CAPITAL CORP. AND UGS CAPITAL CORP. II
                         2004 MANAGEMENT INCENTIVE PLAN

THIS AWARD AND ANY SECURITIES ISSUED UPON EXERCISE OF THIS OPTION ARE SUBJECT TO
     RESTRICTIONS ON VOTING AND TRANSFER AND REQUIREMENTS OF SALE AND OTHER
 PROVISIONS AS SET FORTH IN THE STOCKHOLDERS AGREEMENT AMONG UGS CAPITAL CORP.,
UGS CAPITAL CORP. II, UGS HOLDINGS, INC., UGS CORP. AND CERTAIN STOCKHOLDERS OF
    UGS CAPITAL CORP. AND UGS CAPITAL CORP. II, DATED AS OF MAY 24, 2004 (THE
                           "STOCKHOLDERS AGREEMENT").

   UGS CAPITAL CORP. II STRONGLY ENCOURAGES YOU TO SEEK THE ADVICE OF YOUR OWN
       LEGAL AND FINANCIAL ADVISORS WITH RESPECT TO YOUR AWARD AND ITS TAX
                            CONSEQUENCES. THANK YOU.

                              UGS CAPITAL CORP. II
       NON-QUALIFIED ROLL-OVER OPTION AND CONDITIONAL DEFERRED CASH AWARD
                                    AGREEMENT

      This Agreement evidences a stock option granted by UGS Capital Corp. II, a
Delaware corporation (the "Company") and a deferred cash award conditionally
payable by UGS Corp., a Delaware corporation and an indirect subsidiary of the
Company ("UGS Corp."), to the undersigned (the "Optionee"), pursuant to, and
subject to the terms of, the UGS Capital Corp. and UGS Capital Corp. II 2004
Management Incentive Plan (the "Plan"), which is incorporated herein by
reference and of which the Optionee hereby acknowledges receipt.

      1. Grant of Option. The Company grants to the Optionee as of May 27, 2004,
an option (the "Option") to purchase, in whole or in part, on the terms provided
herein and in the Plan, that total number of shares set forth in Schedule A (the
"Option Shares") of Cumulative Preferred Stock of the Company, par value $.001
per share, at an exercise price of one-hundred dollars ($100.00) per share. The
Option evidenced by this Agreement is intended to be a non-qualified option and
is granted to Optionee in an Employment capacity as an employee. The latest date
on which this Option, or any portion of it, may be exercised shall be May 27,
2014 (the "Final Exercise Date).

      2. Meaning of Certain Terms. Except as otherwise defined herein, all
initially-capitalized terms used in this Agreement shall have the same meaning
as in the Plan and the Stockholders Agreement. As used herein with respect to
the Option, the term "vest" means to become exercisable in whole or in specified
part.

      3. Vesting of Option. The Option shall vest in full immediately if (i) the
undersigned's Employment (as defined in the Plan) is terminated by the Company
without Cause (as defined in Section 5 below), or (ii) a Change of Control
occurs. Otherwise, the Option shall vest in accordance with Schedule A.

<PAGE>

      4.    Exercise of Option. Each election to exercise this Option shall be
in writing, signed by the Participant or the Participant's executor,
administrator, or legally appointed representative (in the event of the
Participant's incapacity) or the person or persons to whom this Option is
transferred by will or the applicable laws of descent and distribution
(collectively, the "Option Holder"), and received by the Company at its
principal office, accompanied by payment in full as provided in the Plan.
Subject to the further terms and conditions provided in the Plan, the purchase
price may be paid by delivery of cash or check acceptable to the Administrator
or by such other method provided under the Plan and explicitly approved by the
Administrator. In the event that this Option is exercised by an Option Holder
other than the Participant, the Company will be under no obligation to deliver
Shares hereunder unless and until it is satisfied as to the authority of the
Option Holder to exercise this Option.

      5.    Cessation of Employment. Unless the Administrator determines
otherwise, the following will apply if the Optionee's Employment ceases:

      (a)   If the Optionee's Employment is terminated by the Company other than
            for Cause (as defined below), the Option will vest fully.

      (b)   To the extent the Option is neither vested prior to cessation of
            Employment nor vested upon cessation in accordance with (a) above,
            the Option will be forfeited immediately by the Optionee and will
            terminate.

      (c)   Subject to (d) below, to the extent the Option is vested prior to
            cessation of Employment or becomes vested upon cessation in
            accordance with (a) above, the Option will remain exercisable for
            the shorter of (i) a period of 60 days or (ii) the period ending on
            the Final Exercise Date, and will thereupon terminate.

      (d)   The Option will immediately terminate on cessation of Employment if
            the Administrator in its sole discretion determines that such
            cessation has resulted for reasons that cast such discredit on the
            Optionee as to justify immediate forfeiture of the Option.

      (e)   As used herein, "Cause" is defined as (a) material breach of any
            agreement entered into between the Optionee and the Company, (b)
            material misconduct, (c) material failure to follow the Company's
            policies, directives or orders applicable to Company employees
            holding comparable positions, (d) intentional destruction or theft
            of Company property or falsification of Company documents, (e)
            material failure or refusal to faithfully, diligently and
            competitively perform the usual and customary duties associated with
            your position, or (f) conviction of a felony or any crime involving
            moral turpitude.

      6.    Share Restrictions, etc. The Optionee's rights to Option Shares are
subject to the restrictions and other provisions contained in the Plan and the
Stockholders Agreement in addition to such other restrictions, if any, as may be
imposed by law. In

<PAGE>

the event of a conflict between the Plan and the Stockholders Agreement, the
Stockholders Agreement shall control.

      7.    Legends, etc. Option Shares issued upon exercise shall bear such
            legends as are required by the Stockholders Agreement and as may be
            determined by the Administrator prior to issuance.

      8.    Transfer of Option. This Option is not transferable by the Optionee
            other than in accordance with the Stockholders Agreement.

      9.    Withholding. The exercise of the Option will give rise to "wages"
            subject to withholding. The Optionee expressly acknowledges and
            agrees that the Optionee's rights hereunder, including the right to
            be issued Shares upon exercise, are subject to the Optionee promptly
            paying to the Company in cash (or by such other means as may be
            acceptable to the Administrator in its discretion) all taxes
            required to be withheld. The Optionee also authorizes the Company or
            its subsidiaries to withhold such amount from any amounts otherwise
            owed to the Optionee.

      10.   Conditional Deferred Cash Award. The Company shall cause UGS Corp.
            to pay a conditional deferred cash Award to the Optionee in
            conjunction with the exercise of this Option. The conditional
            deferred cash Award will be paid only if, when, and to the extent
            that, the Option is exercised, and if the Option is forfeited as
            provided in Section 5 above, the deferred cash award shall be
            forfeited. The total amount of cash that will be paid if the Option
            is exercised in full is set forth in Schedule B. The amount of cash
            that will be payable upon any partial exercise of the Option shall
            be determined by multiplying the amount set forth in Schedule B by a
            fraction, the numerator of which is the number of Option Shares as
            to which the Option is then being exercised and the denominator of
            which is the total number of Option Shares as to which the Option
            was granted.

      By acceptance of this Option and conditional deferred cash award, the
undersigned agrees to hereby become a party to, and be bound by the terms of,
the Stockholders Agreement and the Participation and Registration Rights
Agreement among UGS Capital Corp., UGS Capital Corp. II, UGS Holdings, Inc., UGS
Corp. and certain stockholders of UGS Capital Corp. and UGS Capital Corp. II,
dated as of May 24, 2004, in each case treating the undersigned as a "Manager"
and the Option Shares as "Purchased and Roll-Over Shares."

<PAGE>

      Executed as of the 27th day of May, 2004.

UGS Capital Corp. II                                 UGS Capital Corp. II

                                                       /s/ Douglas E. Barnett
                                                     ---------------------------
                                                     Douglas E. Barnett
                                                     Executive Vice President

UGS Corp.                                            UGS Corp.

                                                       /s/ Douglas E. Barnett
                                                     ---------------------------
                                                     Douglas E. Barnett
                                                     Executive Vice President

Optionee                                               /s/ Anthony J. Affuso
                                                       -------------------------
                                                     Name: Anthony J. Affuso

Rollover Midco Option Agreement
<PAGE>

                                   SCHEDULE A

                                VESTING SCHEDULE

Total number of Option Shares: 1,900.00

25% Shares are exercisable on or after the grant of the Option;

an additional 37.5% Shares are exercisable on and after the one year anniversary
of the grant of the Option; and

an additional 37.5% Shares are exercisable on and after the two year anniversary
of the grant of the Option.

Rollover Midco Option Agreement
<PAGE>

                                   SCHEDULE B

                         CONDITIONAL DEFERRED CASH AWARD

Total amount of conditional deferred cash award: $190,000.00

Rollover Midco Option Agreement

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