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                                                                    EXHIBIT 10.1

                     FIFTH AMENDMENT TO EMPLOYMENT AGREEMENT


         THIS FIFTH AMENDMENT, made as of the 1st day of March, 1999, by and
between MECHANICAL DYNAMICS, INC., a Michigan corporation (the "Company"),
having offices located at 2301 Commonwealth Blvd., Ann Arbor, Michigan 48105,
and MICHAEL E. KORYBALSKI, of Ann Arbor, Michigan ("Employee"), for the purpose
of amending that certain Employment Agreement between the Company and Employee
dated as of April 1, 1994, and amended by agreements dated as of March 1, 1995,
as of March 1, 1996, as of March 1, 1997, and as of March 1, 1998 (collectively,
the "Employment Agreement").


                                   WITNESSETH:

         WHEREAS, the Company and Employee desire to extend the Employment
Agreement and to confirm certain modifications to the terms of said Agreement
herein.

         NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants contained herein and in the Employment Agreement, the parties hereto
agree as follows:

         A.   Section 2 of the Employment Agreement is hereby amended to extend
the term of said Agreement through March 31, 2002.

         B.   Section 6 of the Employment Agreement is hereby deleted in its
entirety and there is substituted therefor a new Section 6 as follows:

              "6. CHANGE OF DUTIES; RELOCATION. In the event that during the
         term of this Agreement, the Company's Board of Directors chooses to
         change the Employee's title as Chairman and Chief Executive Officer of
         the Company and/or his duties hereunder, or directs Employee to
         relocate away from Ann Arbor, Michigan, then Employee shall be entitled
         to resign and to receive as severance compensation, his entire base
         salary, bonus (calculated as provided in Section 7.4 hereof), vacation
         and fringe benefits in the amounts and payable as provided herein for a
         period equal to the then remaining term of this Agreement. Further, if
         the remaining term of this Agreement is less than one (1) year from the
         date of Employee's resignation, then the term of this Agreement shall
         be automatically extended through a date one (1) year from the date of
         such resignation."

         C.   Section 7.4 of the Employment Agreement is hereby deleted in its
entirety and there is substituted therefor a new Section 7.4 as follows:

                   "7.4 Change of Control. In the event of a change in control
         (as hereinafter defined) of the Company, then the term of this
         Agreement shall be automatically extended through a date three (3)
         years from the effective date of such change in




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         control. Further, if, after the effective date of the change in
         control, Employee resigns for any reason or is terminated with or
         without "Cause", then, in any such event, the Company shall (a)
         continue to pay Employee's base salary on a monthly basis and provide
         all fringe benefits, in each case as in effect at the date of
         Employee's resignation or termination, for a period (the "Contract
         Period") equal to the greater of the remaining term of this Agreement
         or one (1) year from the date of resignation or termination and (b) pay
         Employee a bonus for the Contract Period equal to the highest bonus
         paid to Employee during the last three (3) calendar years preceding his
         resignation or termination multiplied by the number of months from the
         beginning of the calendar year in which resignation or termination
         occurs to the end of the Contract Period divided by twelve (12), said
         bonus to be paid in equal monthly installments during the Contract
         Period. Such payment and benefits shall be in lieu of all other
         payments and benefits to which Employee might otherwise be entitled
         under the Company's employee policies and procedures and/or under this
         Agreement. For purposes of this Section 7.4, the term "change of
         control" shall mean the sale of fifty percent (50%) or more of (i) the
         Company's outstanding capital stock or (ii) the assets of the Company."

         D.   Except as expressly modified herein, the Employment Agreement
shall remain in full force and effect in accordance with its terms.

         IN WITNESS WHEREOF, the parties hereto have duly executed this Fifth
Amendment as of the day and year first above written.


WITNESS:                                            COMPANY

                                            MECHANICAL DYNAMICS, INC.

/s/ Linda K. Moore                               /s/ Robert R. Ryan
_________________________                   By:_________________________________
                                                Robert R. Ryan, President


                                                     EMPLOYEE

/s/ Linda K. Moore                           /s/  Michael E. Korybalski
_________________________                   ____________________________________
                                                Michael E. Korybalski






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