Exhibit 10.12a
AGREEMENT
     This is an Agreement among UGS Capital Corp., (“Capital Corp.”), UGS
Capital Corp. II (“Capital Corp II”), UGS Corp., (“UGS Corp.”), all Delaware
corporations, (collectively and individually, the “Company”), and the
undersigned (the “Employee”), entered into in connection with certain awards
previously made to the Employee under the UGS Capital Corp. and UGS Capital
Corp. II 2004 Management Incentive Plan (the “Management Incentive Plan”).
     WHEREAS:
     A. As of May 27, 2004, the Employee received awards (the “Awards”) from
Capital Corp. and Capital Corp. II under the terms of the UGS Capital Corp.
Non-Qualified Roll-Over Option and Conditional Deferred Cash Award Agreement and
the UGS Capital Corp. II Non-Qualified Roll-Over Option and Conditional Deferred
Cash Award Agreement (the “Award Agreements”);
     B. The Awards granted options (the “Options”) to the Employee to purchase
stock of Capital Corp. and Capital Corp. II and, in connection with the Options,
granted to the Employee the right to receive from UGS Corp conditional deferred
cash awards (the “Deferred Cash Awards”), but only if, when, and to the extent,
that the Options were exercised;
     C. In October, 2004, Congress enacted into law Section 409A of the Internal
Revenue Code (“409A”), placing restrictions on the payment of deferred
compensation and imposing severe penalties on recipients of nonqualifying
deferred compensation;
     D. Under the initial guidance on 409A issued by the Internal Revenue
Service (the “IRS Guidance”), a stock option coupled with a cash bonus that is
payable only upon exercise of the option would be treated as nonqualifying
deferred compensation;
     E. By statute, 409A applies to pre-existing deferred compensation
arrangements to the extent that rights under such arrangements were not
scheduled to vest before the end of 2004;
     F. The Awards were not scheduled to vest fully before the end of 2004 and
are therefore subject, at least in part, to 409A;
     G. Under the IRS Guidance, nonqualifying deferred compensation awards may
be terminated or amended to comply with 409A during calendar-year 2005, provided
that the arrangement is operated in good faith prior to such termination or
amendment; and
     H. The parties wish to terminate that part of the Awards that might cause
the Awards to be treated as nonqualifying deferred compensation arrangements and
Exhibit 10.12A Affuso Agreement

 

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substitute therefor arrangements that will qualify under 409A or fall outside
the bounds of 409A.
     THEREFORE, the parties agree as follows:
     1. Each Award Agreement is amended to delete Section 10, entitled
“Conditional Deferred Cash Award,” and all other references in the Award
Agreements to “conditional deferred cash award” or “deferred cash award” shall
be of no effect. As a result of this amendment, exercise of an Option will not
cause the payment of any cash award to the Employee. All other terms and
conditions of the Award Agreements remain in full force and effect.
     2. On July 15, 2005, UGS Corp. will pay to the Employee a cash bonus in the
amount shown on the attached schedule (less applicable tax withholding) (“2005
Cash Bonus Amount”). This amount equals the “conditional deferred cash award”
that the Employee would have been eligible to receive upon exercise of vested
options prior to the date of this Agreement.
     3. UGS Corp. will pay to the Employee on the Company’s next
regularly-scheduled payroll date following the Payment Event (as defined below)
an additional cash bonus in the amount shown on the attached schedule
(“Additional Cash Bonus”), less applicable tax withholding. This amount
represents the remainder of the “conditional deferred cash award”. A Payment
Event shall be the earliest of: (a) May 27, 2006, if the Employee’s Employment
(as defined in the Management Incentive Plan) has not been terminated
previously; (b) the effective date of termination of Employee’s Employment by
the Company other than for Cause (as defined in the Award Agreement); and
(c) the effective date of a Change in Control (as defined below). For purposes
of this Agreement “Change in Control” means an event that is both a “Change in
Control” as defined for purposes of the Management Incentive Plan and a “Change
in Control Event” as defined for purposes of 409A.
     4. To the extent the Employee is not entitled to receive his bonus
(a) prior to the cessation of Employment or (b) upon cessation of Employment as
set forth in Paragraph 3 above, then upon cessation of Employment, Employee’s
right to receive any remaining cash bonus will be forfeited.
     5. Notwithstanding the foregoing, unless contrary to applicable law or the
terms of a written agreement signed by an officer of UGS, your employment with
UGS is for an indefinite term and is terminable, with or without cause, at any
time by either you or the Company. Nothing in this Agreement, will be construed
to oblige UGS to continue your employment for any particular time or under any
particular terms or conditions of employment.

          Exhibit 10.12A Affuso Agreement      

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     Executed as of the 8th day of July, 2005.

          UGS Capital Corp.   UGS Capital Corp.
 
       
 
      /s/ Thomas M. Lemberg      
 
        UGS Corp.   UGS Corp.
 
       
 
      /s/ Thomas M. Lemberg      
 
        Employee   /s/ Anthony J. Affuso           Name: Anthony J. Affuso

          Exhibit 10.12A Affuso Agreement      

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Schedule A
2005 Cash Bonus: $327,749.46*
Additional Cash Bonus $327,750.27*
 
* Subject to applicable tax withholding amounts.