Exhibit
10.5


 


MSC.SOFTWARE CORPORATION


SEVERANCE COMPENSATION
AGREEMENT


 


THIS AGREEMENT, effective August 15, 2005, is between MSC.Software
Corporation, a Delaware corporation (the “Company”) and Glenn Wienkoop (the “Executive”).


 


The Company’s Compensation Committee and Board of Directors has
determined that it is appropriate to reinforce and encourage the continued
attention and dedication of members of the Company’s management to their
assigned duties without distraction in potentially disturbing circumstances
arising from the possibility of a change in control of the Company.


 


This Agreement sets forth the severance compensation which the Company
agrees it will pay to the Executive if the Executive’s employment with the
Company terminates under one of the circumstances described herein following a
Change in Control of the Company (as defined herein).


 


1.             Term.  This Agreement shall terminate, except to the
extent that any obligation of the Company hereunder remains unpaid as of such
time, upon the earliest of (i) December 31st of any year
after 2006, provided that either party has given at least 60 days prior written
notice to the other party of its or his intention to terminate this Agreement
under this paragraph 1(i); (ii) the termination of the Executive’s
employment with the Company based on death, Disability (as defined in Section 3(b)),
Retirement (as defined in Section 3(c)) or Cause (as defined in Section 3(d))
or by the Executive other than for Good Reason (as defined in Section 3(e));
and (iii) two years from the date of a Change in Control of the Company if
the Executive has not terminated his employment for Good Reason as of such
time.


 


2.             Change
in Control.  No compensation shall be
payable under this Agreement unless and until (a) there shall have been a
Change in Control of the Company, while the Executive is still an employee of
the Company and (b) the Executive’s employment by the Company thereafter
shall have been terminated in accordance with Section 3. For purposes of
this Agreement, a Change in Control of the Company shall be deemed to have
occurred if:


 


(i)            there
shall be consummated any consolidation or merger of the Company and, as a
result of such consolidation or merger (x) less than 50% of the outstanding
common shares and 50% of the voting shares of the surviving or resulting
corporation are owned, immediately after such consolidation or merger, by the
owners of the Company’s common shares immediately prior to such consolidation
or merger, or (y) any person (as such term is used in Section 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”) shall become the beneficial owner (within the meaning of Rule 13d-3
under the Exchange Act) of 20%


 


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or more of the surviving or resulting
corporation’s outstanding common shares; or


 


(ii)           any
sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all, or substantially all, of the assets of the
Company shall be consummated; or


 


(iii)          the
shareholders of the Company shall approve any plan or proposal for the
liquidation or dissolution of the Company; or


 


(iv)          any
person (as such term is used in Section 13(d) and 14(d)(2) of
the Exchange Act) shall become the beneficial owner (within the meaning of Rule 13d-3
under the Exchange Act) of 20% or more of the Company’s outstanding common
shares; or


 


(v)           during
any period of two consecutive years, individuals who at the beginning of such
period constitute the entire Board of Directors shall cease for any reason to
constitute a majority thereof unless the election or the nomination for
election by the Company’s shareholders of each new director was approved by a
vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period.


 


3.             Termination
Following Change in Control


 


(a)           If
a Change in Control of the Company shall have occurred while the Executive is
still an employee of the Company, the Executive shall be entitled to the compensation
provided in Section 4 upon the subsequent termination of the Executive’s
employment with the Company by the Executive or by the Company unless such
termination is as a result of (i) the Executive’s death; (ii) the
Executive’s Disability (as defined in Section 3(b) below); (iii) the
Executive’s Retirement (as defined in Section 3(c) below); (iv) the
Executive’s termination by the Company for Cause (as defined in Section 3(d) below);
or (v) the Executive’s decision to terminate employment other than for
Good Reason (as defined in Section 3(e) below).


 


(b)           Disability.
If, as a result of the Executive’s incapacity due to physical or mental
illness, the Executive shall have been absent from his duties with the Company
on a full-time basis for twelve months and within 30 days after written notice
of termination is thereafter given by the Company the Executive shall not have
returned to the full-time performance of the Executive’s duties, the Company
may terminate this Agreement for “Disability.”


 


(c)           Retirement.  The term “Retirement” as used in this
Agreement shall mean termination by the Company or the Executive of the
Executive’s


 


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employment based on the Executive having
reached age 65 or such other age as shall have been fixed in any written
arrangement regarding the Executive’s retirement established with the Executive’s
consent with respect to the Executive.


 


(d)           Cause.
The Company may terminate the Executive’s employment for Cause. For purposes of
this Agreement only, the Company shall have “Cause” to terminate the Executive’s
employment hereunder only on the basis of fraud, misappropriation or
embezzlement on the part of the Executive. Notwithstanding the foregoing, the
Executive shall not be deemed to have been terminated for Cause unless and
until there shall have been delivered to the Executive a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters of the
entire membership of the Company’s Board of Directors at a meeting of the Board
called and held for the purpose (after reasonable notice to the Executive and
an opportunity for the Executive, together with the Executive’s counsel, to be
heard before the Board), finding that in the good faith opinion of the Board the
Executive was guilty of conduct set forth in the second sentence of this Section 3(d) and
specifying the particulars thereof in detail.


 


(e)           Good
Reason.  The Executive may terminate
the Executive’s employment for Good Reason at any time during the term of this
Agreement. For purposes of this Agreement “Good Reason” shall mean any of the
following without the Executive’s express written consent:


 


(i)            the
assignment to the Executive by the Company of duties inconsistent with the
Executive’s position, duties, responsibilities and status with the Company
immediately prior to a Change in Control of the Company, or a change in the
Executive’s titles or offices as in effect immediately prior to a Change in
Control of the Company, or any removal of the Executive from or any failure to
reelect the Executive to any of such positions, except in connection with the
termination of his employment for Disability, Retirement or Cause or as a
result of the Executive’s death or by the Executive other than for Good Reason;


 


(ii)           a
reduction by the Company in the Executive’s base salary as in effect on the
Date of Termination;


 


(iii)          any
failure by the Company to continue in effect any benefit plan or arrangement
(including, without limitation, the Company’s retirement plan, group life
insurance plan, and medical, dental, accident and disability plans) in which
the Executive is participating at the time of a Change in Control of the
Company (or any other plans providing the Executive with substantially


 


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similar benefits) (hereinafter referred to as
“Benefit Plans”), or the taking of any action by the Company which would
adversely affect the Executive’s participation in or materially reduce the
Executive’s benefits under any such Benefit Plan or deprive the Executive of
any material fringe benefit enjoyed by the Executive at the time of a Change in
Control of the Company;


 


(iv)          any
failure by the Company to continue the Executive’s eligibility to participate
in annual executive bonus arrangements in which the Executive is participating
at the time of a Change in Control of the Company (or any plans or arrangements
providing him with substantially similar benefits) (hereinafter referred to as “Incentive
Plans”) or the taking of any action by the Company which would significantly
reduce the Executive’s opportunity to earn incentive compensation which is
related to performance results as compared to performance expectations
periodically determined by the Company;


 


(v)           a
relocation of the Company’s principal executive offices, or the Executive’s
relocation to any place other than the location at which the Executive
performed the Executive’s duties prior to a Change in Control of the Company,
except for required travel by the Executive on the Company’s business to an
extent substantially consistent with the Executive’s business travel
obligations at the time of a Change in Control of the Company;


 


(vi)          any
failure by the Company to provide the Executive with the number of paid
vacation days to which the Executive is entitled at the time of a Change in
Control of the Company;


 


(vii)         any
material breach by the Company of any provision of this Agreement;


 


(viii)        any
failure by the Company to obtain the assumption in writing of this Agreement by
any successor or assign of the Company, unless consent given by Executive;


 


(ix)           any
purported termination of the Executive’s employment, which is not effected
pursuant to a Notice of Termination satisfying the requirements of Section 3(f),
and for purposes of this Agreement, no such purported termination shall be
effective; or


 


(x)            the
failure of the Company to maintain Directors’ and Officers’ Liability Insurance
on terms not materially less favorable to the Executive than the terms of the
policy presently in effect.


 


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(f)            Notice
of Termination.  Any termination by
the Company pursuant to Section 3(b), 3(c) or 3(d) shall be
communicated by a Notice of Termination. For purposes of this Agreement, a “Notice
of Termination” shall mean a written notice which shall indicate those specific
termination provisions in this Agreement relied upon and which sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive’s employment under the provision so indicated. For
purposes of this Agreement, such purported termination by the Company shall not
be effective without such Notice of Termination.


 


(g)           Date
of Termination.  “Date of Termination”
shall mean (a) if this Agreement is terminated by the Company for
Disability, 30 days Notice of Termination is given to the Executive (provided
that the Executive shall not have returned to the performance of the Executive’s
duties on a full-time basis during such 30-day period) or (b) if the
Executive’s employment is terminated by the Company for any other reason, the
date on which a Notice of Termination is given; provided that if within 30 days
after any Notice of Termination is given to the Executive by the Company the Executive
notifies the Company that a dispute exists concerning the termination, the Date
of Termination shall be the date the dispute is finally determined, whether by
mutual agreement by the parties or upon final judgment, order or decree of a
court of competent jurisdiction (the time for appeal therefrom having expired
and no appeal having been perfected.)


 


4.             Compensation
Under this Agreement


 


(a)           If
within two years after a Change in Control of the Company, a Notice of
Termination is given either by the Company to the Executive or by the Executive
to the Company, and if such termination is not by reason of the Executive’s
death, Disability or Retirement, or by the Company for Cause, or by the
Executive other than for Good Reason, the Company shall make the following
payments to the Executive:


 


(i)            the
full base salary to which the Executive is entitled through the Date of
Termination;


 


(ii)           credit
for unused vacation calculated at Executive’s then current base salary rate;


 


(iii)          An
amount equal to the Executive’s current Annual Bonus Award under any Company
annual incentive plan for the fiscal year in which the Notice of Termination is
given, multiplied by the percentage determined by dividing the number of days
in the Company’s fiscal year that have elapsed prior to the date on which the
Notice of Termination is given by the total number of days in such fiscal year.
As used in this clause (iii) the Executive’s Annual


 


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Bonus Award means the dollar amount which
would have been paid to Executive for the fiscal year in which the Notice of
Termination is given under the then current Company executive incentive
compensation plan, based on the assumption that the Target Level of performance
would be reached by the Company and the Executive.


 


(iv)          an
amount equal to two and one-half (2.5) times the sum of the Executive’s
annualized base salary and Annual Bonus Award (as defined in clause (iii) above)
for the year in which the Notice of Termination is given, provided, however,
that the amounts to be paid to the Executive under this clause (iv) shall
be reduced by the amount payable to the Executive under clause (iii) of
this Section 4(a).


 


(b)           Upon
a Change in Control, all stock options granted to Executive will be immediately
vested and exerciseable.


 


(c)         (i)               If
any payment or distribution by the Company to or for the benefit of the
Executive, whether pursuant to the terms of this Agreement or otherwise (a “Payment”),
is subject to the excise tax imposed by Section 4999 of the Internal
Revenue Code or any interest or penalties are incurred by the Executive with
respect to such excise tax (such excise tax, together with any such interest
and penalties, are hereinafter collectively referred to as the “Excise Tax”),
the Company shall make an additional payment (a “Gross-Up Payment”) to the
Executive in an amount such that, after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes)
including, without limitation, any federal, state, or local income and
employment taxes and Excise Tax imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed on the Payment.


 


(ii)           Subject
to the provisions of paragraph 4c(iii) hereof, all determinations under
this paragraph 4(c), including whether a Gross-Up Payment is required and the
amount of the Gross-Up Payment, shall be made by a certified public accounting
firm immediately before the Change in Control occurs (the “Accounting Firm”),
which shall provide detailed supporting calculations to both the Company and
the Executive within 15 business days after the Change in Control (or any other
change in ownership or effective control that triggers application of the
Excise Tax) and, if a termination for Good Reason occurs, within 15 days after
the termination for Good Reason. All fees and expenses of the Accounting Firm
shall be borne solely by the Company. The initial


 


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Gross-Up Payment determined pursuant to this
paragraph 4(c)(ii) shall be paid by the Company to the Executive, or tax
authority, whichever is required, within five days after it receives the
Accounting Firm’s determination. If the Accounting Firm determines that no
Excise Tax is payable by the Executive, it shall furnish the Executive with a
written opinion that failure to report the Excise Tax on the Executive’s
applicable federal tax return will not result in the imposition of a negligence
or similar penalty. Any determination by the Accounting Firm shall be binding
on the Company and the Executive. Notwithstanding the foregoing, as a result of
uncertainty in applying Section 4999 of the Internal Revenue Code, it is
possible that the Company will not have made Gross-Up Payments that it should
have made hereunder (an “Underpayment”). If the Company exhausts its remedies
pursuant to paragraph 4(c)(iii) hereof and the Executive thereafter is
required to pay any Excise Tax, the Accounting Firm shall determine the amount
of the Underpayment, inform the Company and the Executive of the Underpayment
in writing, and, within five days of receiving such written report, the Company
shall pay the amount of such Underpayment to or for the benefit of the
Executive.


 


(iii)          The
Executive shall notify the Company in writing of any claim by the Internal
Revenue Service that, if successful, would require the payment by the Company
of the Gross-Up Payment. Such notification shall be given as soon as
practicable but not later than ten business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is required to be paid. The
Executive shall not pay such claim before the expiration of 30 days following
the date on which he gives such notice to the Company (or such shorter period
ending on the date that any payment of taxes with respect to such is due). If
the Company notifies the Executive in writing before the expiration of such 30-day
period that it desires to contest such claim, the Executive shall (1) give
the Company any information reasonably requested by the Company relating to
such claim, and (2) take such action in connection with contesting such
claim as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect to
such claim by an attorney selected by the Company, provided that the Company
shall pay directly all costs and expenses (including additional interest and
penalties) incurred in connection with such contest and shall indemnify and
hold the Executive harmless, on an after-tax basis, for any tax, including
interest and penalties, imposed as a result of such representation and payment of
costs and expenses. The


 


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Company shall control all proceedings in
connection with such contest and may, at its sole option, either direct the
Executive to pay the tax claimed and sue for a refund or to contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest
to a determination before any appropriate administrative tribunal or court, as
the Company shall determine; provided, that if the Company directs the
Executive to pay such claim and sue for a refund, the Company shall advance the
amount of such payment to the Executive, on an interest-free basis, and shall
indemnify and hold the Executive harmless, on an after-tax basis, from any tax,
including interest or penalties, imposed with respect to such advance. The
Company’s control of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder, and the Executive shall be
entitled to settle or contest any other issue.


 


(iv)          If,
after the Executive receives an advance by the Company pursuant to paragraph
4(c)(iii) hereof, the Executive becomes entitled to receive a refund
claimed pursuant to such paragraph 4(c)(iii), the Executive shall (subject to
the Company’s complying with the requirements of such paragraph 4(c)(iii) promptly
pay to the Company the amount of such refund (together with any interest
thereon, after taxes applicable thereto). If, after the Executive receives an
amount advanced by the Company pursuant to paragraph 4(c)(iii) hereof, a
determination is made that the Executive shall not be entitled to any refund
claimed pursuant to such paragraph 4(c)(iii), and the Company does not notify
the Executive in writing of its intent to contest such denial of refund before
the expiration of 30 days after such determination, the Executive shall not be
required to repay such advance, and the amount of such advance shall offset, to
the extent thereof, the amount of the required Gross-Up Payment.


 


(v)           Any
payments otherwise required by this paragraph 4(C) shall be made
regardless of whether a termination for Good Reason occurs.


 


(d)           The
amounts required to be paid under Section 4(a) shall be paid by the
Company to the Executive in cash in a lump sum on the 10th day after
the Date of Termination. All payments made to the Executive pursuant to this
Agreement or any other agreement or plan of or with the Company shall be made
within the time periods described herein, however, if it is determined by the
parties or in the opinion of counsel reasonably acceptable to the Executive and
the Company, such determination to be made or opinion provided to the Company
no later than thirty (30) days after the Date of Termination, that payment (or
payments) is or reasonably may be treated as deferred compensation within the
meaning of Section 409A


 


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of the Internal Revenue Code of 1986, as
amended (the “Code”), except in the case of the Executive’s death, the payment
(or payments) shall be delayed (without interest) to a date no earlier than,
and shall be paid as soon as administratively practicable after, six (6) months
after the Executive’s “separation from service,” as that term is defined in Section 409A
of the Code.


 


(e)           Any
payments required under this Section 4 shall be paid net of applicable
federal, state and local tax withholding.


 


(f)            If
the Company is required to make payments to the Executive under Section 4(a),
the Company, until the earlier of (i) two and one-half (2.5) years after
the Date of Termination or (ii) commencement of full-time employment by
the Executive with a new employer, shall maintain in full force and effect, for
the continued benefit of the Executive, medical and dental programs or
arrangements in which the Executive was entitled to participate immediately
prior to the Date of Termination, provided that continued participation by the
Executive is possible under the general terms and provisions of such plans and
programs.


 


(g)           Except
for the payment referred to in clause (i) of Section 4(a) none
of the payments to the Executive under this Section 4 shall be counted for
the purpose of computing the Executive’s benefits under any pension, profit
sharing, deferred compensation or other employee benefit plan maintained by the
Company.


 


5.             No
Obligation to Mitigate Damages; No Effect on Other Contractual Rights.


 


The provisions of this Agreement, and any
payment provided for hereunder, shall not reduce any amounts otherwise payable,
or in any way diminish the Executive’s existing rights, or rights which would
accrue solely as a result of the passage of time, under any Benefit Plan,
Incentive Plan or Securities Plan, employment agreement or other contract, plan
or arrangement.


 


6.             Successor
to the Company.


 


(a)           The
Company will require any successor or assign (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company, by agreement in form and substance
satisfactory to the Executive, expressly, absolutely and unconditionally to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if such succession or
assignment had not taken place. Any failure of the Company to obtain such
agreement prior to the effectiveness of any such succession or assignment shall
be a material breach of this Agreement and shall entitle the Executive to
terminate the


 


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Executive’s employment for Good Reason. As
used in this Agreement, “Company” shall mean the Company as herein before
defined and any successor or assign to its business and/or assets as aforesaid
which executes and delivers the agreement provided for in this Section 6
or which otherwise becomes bound by all the terms and provisions of this
Agreement by operation of law. If at any time during the term of this Agreement
the Executive is employed by any corporation, a majority of the voting
securities of which is then owned by the Company, “Company” as used in Section 3,
4, 12 and 13 hereof shall in addition include such employer. In such event, the
Company agrees that it shall pay or shall cause such employer to pay any
amounts owed to the Executive pursuant to Section 4 of this Agreement.


 


(b)           This
Agreement shall inure to the benefit of and be enforceable by the Executive’s
personal and legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If the Executive should die while
any amounts are still payable to him hereunder, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to the Executive’s devisee, legatee, or other designee or, if there
be no such designee, to the Executive’s estate.


 


7.             Non-compete.  Without the consent in writing of the Board,
Executive will not, at any time during employment with the Company and for a
period of two and one-half (2.5) years following termination of Executive’s
employment for any reason (except as stated below), engage in the management or
control of, or serve as an employee, consultant, agent, proprietor, principal,
partner, major shareholder, corporate officer or director of, any person, firm,
corporation or business (collectively, as “Competing Entity”) that directly and
substantially competes with the products and services of the Company. For
purposes of this Agreement, a Competing Entity is limited to an entity that
derives a significant amount or percentage of its total annual revenue from the
sale of virtual product development software and related services and competes
in one or more of the same geographic markets as the Company. It is agreed that
the ownership of not more than two percent (2%) of the equity securities of any
company having securities listed on an exchange or regularly traded in the
over-the-counter market shall not, of itself, be deemed inconsistent with this Section 7.


 


8.             Notice.  For purposes of this Agreement, notices and
all other communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States certified or registered mail, return receipt requested, postage prepaid,
as follows:


 


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  If to the Company:

  	
   

  	
  MSC.Software Corporation

  
	
   

  	
   

  	
  SVP Business Administration, General
  Counsel

  
	
   

  	
   

  	
  and
  Secretary

  
	
   

  	
   

  	
  2 MacArthur Place

  
	
   

  	
   

  	
  Santa Ana, CA 92707

  
	
   

  	
   

  	
   

  
	
  If to the Executive:

  	
   

  	
  (Appropriate Name and Address)

  



 


or such other address as either party may
have furnished to the other in writing in accordance herewith, except that
notices of change of address shall be effective only upon receipt.


 


9.             Miscellaneous.  No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Executive and Company. No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions
or conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party, which are not set forth
expressly in this Agreement. This Agreement shall be governed by and construed
in accordance with the laws of the State of California.


 


10.           Validity.  The invalidity or unenforceability of any
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.


 


11.           Counterparts.  This agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.


 


12.           Legal
Fees and Expenses.  The Company shall
pay all legal fees and expenses, which the Executive may incur as a result of
the Company’s contesting the validity, enforceability or the Executive’s
interpretation of, or determinations under, this Agreement.


 


13.           Confidentiality.  The Executive shall retain in confidence any
and all confidential information known to the Executive concerning the Company
and its business so long as such information is not otherwise publicly
disclosed.


 


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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.


 


	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Glenn R. WIENKOOP

  	
   

  
	
   

  	
  Glenn R.Wienkoop

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ JOHN A. MONGELLUZZO

  	
   

  
	
   

  	
  John A. Mongelluzzo,

  
	
   

  	
  Sr. Vice President, Business

  
	
   

  	
  Administration, Corporate Secretary

  
	
   

  	
  & General Counsel

  
						



 


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