UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission file number 0-16230
STRUCTURAL DYNAMICS RESEARCH CORPORATION
(Exact name of registrant as specified in its charter)
Ohio 31-0733928
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2000 Eastman Drive, Milford, Ohio 45150
(Address of principal executive offices)
(Zip Code)
(513) 576-2400
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
As of April 30, 1998 there were 36,171,163 shares of the
Registrant's Common Stock without par value issued and
outstanding.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES
Consolidated Statement of Operations
(Unaudited)
(in thousands, except per share data)
<CAPTION>
Three Months Ended
March 31,
1998 1997
<S> <C> <C>
Revenue:
Software licenses $ 41,401 $ 41,158
Software maintenance and services 49,711 39,706
Total revenue 91,112 80,864
Cost of revenue:
Cost of licenses 7,500 5,515
Cost of maintenance and services 26,987 22,445
Total cost of revenue 34,487 27,960
Gross profit 56,625 52,904
Operating expenses:
Selling and marketing 25,470 24,156
Research and development 16,054 12,400
General and administrative 4,074 4,187
Purchased in-process research
and development -- 20,850
Total operating expenses 45,598 61,593
Operating income (loss) 11,027 (8,689)
Other income (loss), net 3,646 544
Income (loss) before income taxes 14,673 (8,145)
Income tax expense 4,345 3,022
Net income (loss) $ 10,328 (11,167)
Net income (loss) per share:
Basic $ .29 (.32)
Diluted .28 (.32)
Pro forma net income (loss) and per
share data:
Income before income taxes as
reported (8,145)
Pro forma income tax expense 3,441
Pro forma net income (loss) $(11,586)
Pro forma net income (loss) per
share:
Basic $ (.33)
Diluted (.33)
Comprehensive income $ 10,169 $(12,777)
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
(in thousands)
<CAPTION>
March 31, December 31,
1998 1997
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $102,418 $ 81,056
Marketable securities 10,062 13,030
Trade accounts receivable, net 89,481 88,954
Other accounts receivable 13,018 17,815
Prepaid expenses and other current
assets 13,539 9,082
Total current assets 228,518 209,937
Marketable securities 16,922 14,925
Property and equipment, at cost:
Computer and other equipment 59,229 57,364
Office furniture and equipment 17,720 16,983
Leasehold improvements 7,051 6,685
84,000 81,032
Less accumulated depreciation and
amortization 59,155 56,405
Net property and equipment 24,845 24,627
Computer software construction
costs, net 30,184 31,610
Other assets 12,239 12,097
Total assets $312,708 $293,196
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
(in thousands, except per share data)
<CAPTION>
March 31, December 31,
1998 1997
(unaudited)
<S> <C> <C>
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 16,334 $ 12,230
Accrued expenses 31,555 39,590
Accrued income taxes 8,945 9,182
Deferred revenue 54,366 46,606
Total current liabilities 111,200 107,608
Other long-term liabilities 6,698 7,751
Shareholders' equity:
Common stock, stated value $.0069
per share Authorized 100,000 shares;
outstanding shares-
36,039 and 35,654 net of 1,514
and 1,500 shares in treasury 250 248
Capital in excess of stated value 120,934 114,132
Retained earnings 77,463 67,135
Accumulated other comprehensive
income:
Foreign currency translation
adjustment (3,827) (3,667)
Unrealized holding loss on
investments (10) (11)
Accumulated other
comprehensive income (3,837) (3,678)
Total shareholders' equity 194,810 177,837
Total liabilities and
shareholders' equity $ 312,708 $293,196
</TABLE>
<TABLE>
STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statement of Cash Flows
(Unaudited)
(in thousands)
<CAPTION>
Three Months Ended
March 31,
1998 1997
<S> <C> <C>
Net cash provided by operating
activities $ 23,206 $ 11,849
Cash flows from investing activities:
Sales (purchases) of marketable
securities, net 972 (835)
Additions to property and equipment,
net (2,856) (3,360)
Additions to computer software
construction costs (3,049) (3,865)
Acquisition of Metaphase
Technology, Inc. -- (28,050)
Net cash (used in) investing
activities (4,933) (36,110)
Cash flows from financing activities:
Stock issued under employee benefit
plans 4,210 2,086
Repayment of long term debt (894) (48)
Net cash provided by financing
activities 3,316 2,038
Effect of exchange rate changes on cash (227) (1,535)
(Decrease) increase in cash and cash
equivalents 21,362 (23,758)
Cash and cash equivalents:
Beginning of period 81,056 72,026
End of period $102,418 $ 48,268
</TABLE>
See accompanying notes to consolidated financial statements.
STRUCTURAL DYNAMICS RESEARCH CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
(in thousands except per share data)
(1) Basis of Presentation
The accompanying unaudited consolidated financial statements have
been prepared by the Company pursuant to the rules and
regulations of the Securities and Exchange Commission. As
permitted by the rules of the Securities and Exchange Commission
applicable to quarterly reports on Form 10-Q, these notes are
condensed and do not contain all disclosures required by
generally accepted accounting principles. In the opinion of
management, these financial statements contain all adjustments
(consisting of only normal recurring adjustments, unless
otherwise noted) necessary to present fairly the Company's
financial position, results of operations and cash flows as of
the dates and for the periods indicated. These financial
statements should be read in conjunction with the Consolidated
Financial Statements and related notes included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1997.
(2) Pro Forma Net Income and Pro Forma Net Income Per Share
In 1997, the Company acquired Computer Aided Systems for
Engineering ("CASE") which was an S corporation for income tax
reporting purposes prior to the acquisition. Pro forma net
income and pro forma net income per share reflect the tax expense
that would have been reported if CASE had been a C corporation.
(3) Comprehensive Income
In June 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 130
("SFAS" No. 130), "Reporting Comprehensive Income," which
establishes standards for reporting and display of comprehensive
income and its components in the consolidated financial
statements. Comprehensive income includes net income as well as
other changes in shareholder equity, except changes resulting
from shareholders' investments in the Company and distributions
to shareholders. SFAS No. 130 is effective for the Company's
reporting periods beginning in 1998 with comparative amounts for
prior years. Comprehensive income is reported on the
consolidated statement of operations.
(4) Earnings Per Share
Basic earnings per common share and dilutive earnings per share
are computed using the weighted average number of common and
dilutive common equivalent shares outstanding during the period,
respectively. Dilutive common equivalent shares are calculated
using the treasury stock method and consist of stock option
grants.
The reconciliations of amounts used for the basic and diluted
earnings per share calculations are as follows:
Income Shares Per-Share
Three months ended (Numerator) (Denominator) Amount
March 31
1998
Basic net income
per share 10,328 35,839 .29
Effect of stock
options -- 1,591
----------------------------
Diluted net income
per share 10,328 37,430 .28
1997
Basic net income
per share (11,167) 34,861 (.32)
Effect of stock
options -- --
-----------------------------
Diluted net income
per share (11,167) 34,861 (.32)
(4) Earnings Per Share - Continued
Options to purchase 1,360 and 2,588 shares of common stock at
March 31, 1998 and 1997 respectively, were not included in the
computation of dilutive earnings per share because the options'
exercise price was greater than the average market price of
common shares.
(5) Taxes
The provision for income taxes primarily reflects taxes currently
payable. Based on the Company's historical tax position, as well
as the Company's current and anticipated mix of domestic and
foreign pre-tax accounting income, tax credits and deductions
from non-qualified stock option exercises over the next four
years, a valuation allowance is provided against deferred tax
assets when the Company believes it is more likely than not that
the deferred tax assets will not be realized. These factors
cause the effective tax rate to differ from the expected
statutory rate. Additionally, in the first quarter of 1998, the
Company and the Internal Revenue Service settled the existing
audit of the Company for the years 1987 through 1994, and agreed
that the Company was due a refund of $1,751 in tax relating to
the (previously disclosed) restatement of its 1994 and prior
financial statements. This refund has been received and was
recorded as a benefit to tax expense during the period ending
March 31, 1998.
(6) New Accounting Pronouncements
Segments of an Enterprise
In June 1997, FASB issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information," which
establishes standards for the way that public companies report
selected information about operating segments. It also includes
standards for related disclosures about products and services,
geographic areas, and major customers. SFAS No. 131 applies to
the Company's annual reporting for 1998 and quarterly reports
thereafter. The Company is evaluating the effects of this
standard on its reporting of financial information.
Revenue Recognition
In August 1997, the American Institute of Certified Public
Accountants ("AICPA") issued Statement of Position ("SOP") 97-2,
"Software Revenue Recognition," which is effective for
transactions occurring in the Company's fiscal year beginning
January 1, 1998. In March 1998, the AICPA issued SOP 98-4,
"Deferral of the effective date of a provision of SOP 97-2". SOP
98-4 allows companies to defer adoption of certain provisions of
SOP 97-2 related to vendor-specific objective evidence. The
adoption of SOP 97-2 in the quarter ended March 31, 1998 did not
have a significant impact on the Company's financial condition or
results of operations.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
(in thousands)
Structural Dynamics Research Corporation is a leading supplier of
CAD/CAM/CAE software, product data management ("PDM") software
and related services. The Company provides software tools and
related services to manufacturers worldwide to optimize the
entire product development process, reducing cost while
streamlining the development process and managing product
information. The Company markets CAD/CAM/CAE software under the
brand name I-DEAS" and PDM software under the brand name Metaphase".
Certain statements in this Form 10-Q are forward looking
statements that involve risks and uncertainties, including the
timely availability and acceptance of new products, the impact of
competitive products and pricing, the management of growth, and
the other risks detailed from time to time in the Company's
Securities and Exchange Commission reports. The Company's
results could differ from those results described herein.
Forward looking information should be evaluated in the context of
these and other factors some of which are described in more
detail in "Factors That May Affect Future Results".
Revenue
The Company's consolidated net revenue increased 13% to $91,112
for the three months ended March 31, 1998, as compared to
$80,864 for the three months ended March 31, 1997.
Software license revenue increased 1% to $41,401 for the three
months ended March 31, 1998 compared to the quarter ended March
31, 1997. I-DEAS license revenue growth was 12% compared to the
first quarter of 1997. For the second consecutive quarter I-DEAS
license revenue grew in comparison to the same period last year.
Metaphase license revenue, which is on a much smaller base than I-
DEAS revenues, declined 38% compared to the corresponding period
last year. The comparison of Metaphase license revenue to last
year is impacted by a large order of $7,200 from Ford Motor
Company which occurred in the first quarter of 1997. Excluding
that order, Metaphase license revenues increased 156% compared to
the same period of 1997. This growth is attributed to more
market presence from the merger of sales resources after the
Company acquired the remaining stock of Metaphase Technology
Inc., ("MTI") in January 1997.
Software maintenance and services revenue increased 25% to
$49,711 for the three months ended March 31, 1998 as compared to
$39,706 for the corresponding period last year. Software
maintenance and services revenue continues to grow due to a
larger customer base and overall increases in I-DEAS and
Metaphase implementation projects generated from license sales.
For the three month periods ended March 31, 1998 and 1997,
revenue in North America accounted for 44% and 52%, Europe 31%
and 27%, and Asia-Pacific 25% and 21%, respectively, of
consolidated revenues. The North American proportion of revenue
declined in 1998 due to the large Metaphase order in 1997 noted
above. European revenue growth was fueled by strong Metaphase
license sales in 1998. Revenue growth in Asia-Pacific during 1998
included a significant I-DEAS license order from the Company's
major Japanese distributor. The Company expects the
international market to continue to account for a significant
portion of total revenue.
Expenses
Cost of revenue consists principally of the staff and related
costs associated with the generation and support of software
service revenue, amortization of capitalized software
construction costs, royalty fees paid to third parties under
licensing agreements and the cost of distributing software
products. Cost of revenue increased 23% to $34,487 for the three
months ended March 31, 1998 as compared to $27,960 for the three
months ended March 31, 1997. Cost of revenue represented 38% of
revenue for the three months ended March 31, 1998, as compared to
35% for the corresponding period in 1997.
The cost of licenses, as a percentage of license revenue,
increased to 18% for the three months ended March 31, 1998,
compared to 13% for the same period of 1997. The percentage
increase was due to increased amortization of capitalized
software development cost, as well as a higher level of royalty
fees. The cost of services and maintenance for the three months
ended March 31, 1998, as a percentage of the related revenue,
declined to 54%, compared to 57% for the same period of 1997.
Compared to the same period last year, the service and
maintenance margin improved due to increased volume of software
maintenance contracts and cost improvements from the integration
of the service businesses acquired from MTI and Control Data
Systems, Inc. ("CDSI") in January 1997.
Selling and marketing expenses consist of the costs associated
with the world-wide sales and marketing staff, advertising and
product localization. These expenses increased 5% to $25,470 for
the three months ended March 31, 1998 as compared to $24,156 for
the corresponding period in 1997. Selling and marketing expenses
represented 28% of revenue for the three months ended March 31,
1998 as compared to 30% for the 1997 period. While the number of
personnel in the Company's sales organization has increased 20%
since the first quarter of 1997, personnel expenses did not
increase in proportion to revenues. The selling cost associated
with increased services and maintenance revenues has been
relatively fixed. Selling and marketing expenses are expected to
increase during the remaining months of 1998 because the Company
plans to incur significant expenses for new advertising and
marketing campaigns.
Research and development expenses consist primarily of salaries,
benefits, computer equipment costs and facilities associated with
the product development staff. It excludes costs which are
capitalized in accordance with Statement of Financial Accounting
Standards No. 86. Research and development expenses increased
30% to $16,054 for the three months ended March 31, 1998 as
compared to $12,400 for the three months ended March 31, 1997.
Research and development expenses represent 18% and 15% of
revenue for the three months ended March 31, 1998 and 1997,
respectively. The increase in research and development expense
for 1998 as compared to the 1997 quarter is primarily a result of
increased headcount of product developers. Research and
development expense excluded capitalized internal software cost
of $2,924 for the three months ended March 31, 1998, compared to
$3,326 for the corresponding period in 1997. The lower level of
capitalized cost and the expiration of certain customer funded
research and development projects also resulted in higher expense
for the period ended March 31, 1998. The amount of capitalized
software development cost may vary among periods depending on the
stage of development being performed on future product releases.
General and administrative expenses consist of costs associated
with the corporate, finance, legal, human resource and
administrative staffs. These expenses slightly decreased to
$4,074 for the three months ended March 31, 1998 as compared to
$4,187 for the three months ended March 31, 1997. General and
administrative expenses represented 4% of revenue for the three
months ended March 31, 1998 and 5% for the three months ended
March 31, 1997.
Expenses - Continued
During the three months ended March 31, 1997, a one-time charge
of $20,850 was recorded to write off in-process research and
development acquired in the acquisition of MTI that did not have
an alternative future use and had not reached technological
feasibility. The Company had acquired the remaining stock of
MTI, and certain assets of CDSI's global PDM software sales and
support business in January 1997. The purchase price of
approximately $33,000 included cash and a stock warrant. The
acquisition was accounted for as a purchase.
Other Income
For the three months ended March 31, 1998, other income increased
$3,102 to $3,646 as compared to $544 for the corresponding period
in 1997. The 1998 period includes $1,390 received from an
insurance settlement and $670 of interest income received on a
federal income tax refund. Other income also increased due to
more interest earned on increased balances in interest-bearing
accounts since last year, and favorable movement of currency
exchange rates compared to the same period last year.
Taxes
The provision for income taxes primarily reflected taxes
currently payable. A substantial portion of deferred tax
benefits relating to temporary differences was offset by a
valuation allowance due to doubt as to their ultimate
realization. These factors caused the effective tax rate to
differ from the expected statutory rate.
Liquidity and Capital Resources
The Company generated $23,206 of cash from operating activities
during the three months ended March 31, 1998. At March 31, 1998,
the Company had cash and investments of $129,402 as compared to
$109,011 at December 31, 1997. The Company's working capital was
$117,318 at March 31, 1998. In addition, the Company has an
unused unsecured bank line of credit of $15,000. During 1998,
the Company paid $894 to completely extinguish a long term note
which it assumed in the acquisition of CASE. The Company does
not have any long term debt or current commitments for material
capital expenditures. The existing sources of liquidity and
funds anticipated to be generated from operations are expected to
provide adequate cash to fund the Company's projected needs for
the foreseeable future.
Factors That May Affect Future Results
The historical results of operations and financial position of
the Company are not necessarily indicative of future financial
performance. The Company's results and forward-looking
statements are subject to certain risks and uncertainties,
including but not limited to those discussed below, that could
cause future results to differ from those projected.
Product Distribution
Besides its own sales force, the Company relies on distributors,
representatives and value-added resellers to market a significant
portion of its products. The loss of a major customer or a
reduction in orders from a major customer, distributor,
representative or value-added reseller, could have a significant
impact to the results of operations in any particular quarter.
Also, future results could be impacted by a slower growth rate in
the market than anticipated. Historically, a significant portion
of the Company's revenue is generated from shipments in the last
month of a quarter. In addition, higher volumes of orders have
been experienced in the fourth quarter. The concentration of
orders makes projections of quarterly financial results
difficult. If customers
Product Distribution - Continued
delay their orders or a disruption in the Company's distribution
occurs, quarterly results of operations in any particular quarter
may be negatively impacted. The Company usually ships software
licenses within one to two weeks after receipt of a customer
order. Typically, orders exist at the end of a quarter which
have not been shipped; however, the value of such orders is not
indicative of revenue results for any future period.
Competition
The software industry is highly competitive. The entire industry
may experience pricing and margin pressure which could adversely
affect the Company's operating results and financial position.
The Company's success is dependent on its ability to continue to
develop, enhance and market new products to meet its customers'
sophisticated needs within competitive pricing structures and in
a timely manner. As product development cycles become shorter,
product quality, performance, reliability, ease of use,
functionality, breadth and integration may be impacted.
Therefore, customer preference for the Company's new products
cannot be assured. The Company's success also depends in part on
its ability to attract and retain technical and other key
employees who are in great demand, to protect the intellectual
property rights of its products and to continue key relationships
with product development partners.
International Business
A significant portion of the Company's revenues are from
international markets. As a result, the Company's financial
results could be impacted by weakened general economic
conditions, differing technological advances or preferences,
volatile foreign exchange rates and government trade restrictions
in any country in which the Company does business. The Company
has invested sizable resources in the Asia Pacific region,
particularly in Japan and South Korea. Economic instability in
this region could lead to an adverse impact on the Company's
operation results and financial position.
Expense Management
The Company continues to increase its expense levels to support
its revenue growth and to invest in product development. The
Company's expense levels are based, in part, on its future
revenue expectations. If future revenues are less than expected,
net income may be disproportionately affected because the
Company's expense levels are generally committed in advance and a
relatively small portion of the Company's expenses vary with
revenue. The Company is expanding its sales infrastructure and
investing more in marketing efforts with the objective of
increasing the distribution of license products. Future results
could be impacted by lags in sales productivity as additional
salespeople are hired or by the cost of new marketing programs.
Year 2000
The year 2000 causes concern about whether computer software
systems will appropriately recognize dates beyond the year 1999.
The Company is reviewing all of its significant internal-use
software, and does not expect any significant problems associated
with the year 2000 consequences. The Company's management
information system software is year 2000 compliant. The
Company's primary software offerings are also year 2000
compliant.
Stock Market Volatility
The trading price of the Company's stock, like other software and
technology stocks, is subject to significant volatility. If
revenues or earnings fail to meet securities analysts'
expectations, there could be an immediate and significant adverse
impact on the trading price of the Company's stock. In addition,
the Company's stock price may be affected by broader market
factors that may be unrelated to the Company's performance.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits
10 Structural Dynamics Research Corporation Supplemental
Retirement Plan, effective January 1, 1998, filed
herewith.
27 Financial data schedule for the period ended March 31,
1998, filed herewith.
b) No report on Form 8-K was filed during the first quarter of
1998.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
STRUCTURAL DYNAMICS RESEARCH CORPORATION
Date: May 13, 1998 By: /s/ Jeffrey J. Vorholt
Jeffrey J. Vorholt,
Vice President,
Chief Financial Officer and
Treasurer
* Pursuant to the last
sentence of General Instruction
G to Form 10-Q,
Mr. Jeffrey J. Vorholt has
executed this Quarterly Report
on Form 10-Q
both on behalf of the
registrant and
in his capacity
as its principal
financial and accounting
officer.
EXHIBIT 10
STRUCTURAL DYNAMICS RESEARCH CORPORATION
SUPPLEMENTAL RETIREMENT PLAN
Effective January 1, 1998
TABLE OF CONTENTS
Page
Section 1. Definitions 1
Section 2. Participation 4
Section 3. Contributions 4
3.1. Supplemental Savings Contributions 4
3.2. Supplemental Matching Contributions 5
3.3. Supplemental Discretionary Contributions 5
3.4. Crediting of Contributions 5
Section 4. Investment of Accounts 5
4.1. Investment Direction 5
Section 5. Valuations and Crediting 6
5.1. Valuations 6
5.2. Credits to and Charges Against Accounts 6
5.3. Expenses 6
Section 6. Vesting and Separation from Service 6
6.1. Vested Percentage 6
6.2. Forfeiture 7
Section 7. Benefits 7
7.1. Forms of Benefit Payments 7
7.2. Retirement Benefit 7
7.3. Death Benefit 7
7.4. Beneficiary Designation 7
7.5. In-Service Distributions 8
7.6. Special Circumstances 8
7.7. Payments on Taxability 8
7.8. Withholding 9
Section 8. The Plan Administrator 9
8.1. Plan Administrator 9
8.2. Engagement of Assistants and Advisors 9
8.3. Compensation 9
8.4. Indemnification of the Plan Administrator 9
Section 9. Authority and Responsibilities of the Company 9
Section 10. Claims Procedures 10
10.1. Application for Benefits 10
10.2. Appeals of Denied Claims for Benefits 10
10.3. Review of Decisions 11
Section 11. Amendment, Termination, Mergers and
Consolidations 11
11.1. Amendment 11
11.2. Termination 11
11.3. Permanent Discontinuance of Contributions 11
Section 12. Participating Employers 11
12.1. Adoption by Other Corporations 11
12.2. Requirements of Participating Employers 12
12.3. Designation of Agent 12
12.4. Eligible Employee Transfers 12
12.5. Discontinuance of Participation 12
12.6. Plan Administrator's Authority 12
Section 13. Miscellaneous Provisions 12
13.1. Nonalienation of Benefits 12
13.2. No Contract of Employment 12
13.3. Severability 13
13.4. Successors 13
13.5. Captions 13
13.6. Gender and Number 13
13.7. Controlling Law 13
13.8 Title to Assets 13
13.9. Payments to Minors, Etc. 13
13.10. Acknowledgments 13
13.11. Entire Agreement; Successors 13
13.12. Tax Effects 14
STRUCTURAL DYNAMICS RESEARCH CORPORATION
SUPPLEMENTAL RETIREMENT PLAN
WHEREAS, Structural Dynamics Research Corporation (the
"Company"), maintains the Structural Dynamics Research
Corporation Tax Deferred Capital Accumulation Plan (the
"Qualified Plan") for the benefit of its eligible employees; and
WHEREAS, the Company wishes to establish the Structural Dynamics
Research Corporation Supplemental Retirement Plan (the "Plan") to
allow certain Eligible Employees who are members of a select
group of highly compensated or management employees under Title I
of ERISA to make contributions to the Plan;
NOW, THEREFORE, effective as of the Effective Date, the Company
adopts the Plan to provide as follows:
Section 1. Definitions. The following terms will have the
meanings assigned in this Section, which will be equally
applicable to the singular and plural forms of such terms, unless
the context requires otherwise, when used in the Plan;
"Account" means the account maintained for a Participant
under the Plan. A Participant's Account will consist of his or
her Supplemental Savings, Supplemental Matching and Supplemental
Discretionary Accounts, plus investment earnings, if any,
credited to those Accounts.
"Affiliate" means any Employer and any entity if such
entity, with the Employer, constitutes: (a) a controlled group of
corporations (within the meaning of Section 414(b) of the Code);
(b) a group of trades or businesses under common control (within
the meaning of Section 414(c) of the Code); (c) an affiliated
service group (within the meaning of Section 414(m) of the Code);
or (d) a group of entities required to be aggregated pursuant to
Section 414(o) of the Code and the regulations thereunder.
"Beneficiary" means the beneficiary under the Plan of any
deceased Participant.
"Board of Directors" means the board of directors of the
Company.
"Change in Control" means, a dissolution or liquidation of
the Company, a merger in which the Company is not the surviving
corporation, a transaction or series of related transactions in
which 100% of the then outstanding voting stock of the Company is
sold or otherwise transferred, or the sale of substantially all
of the assets of the Company.
"Code" means the Internal Revenue Code of 1986, as now or
hereafter existing, amended, construed, interpreted, and applied
by regulations, rulings or cases.
"Company" means Structural Dynamics Research Corporation,
and any successor thereto.
"Compensation" means amounts received by an Eligible
Employee from the Employer while the Eligible Employee is a
Participant which are basic salary or wages, overtime payments,
vacation, holiday and sick pay, disability income payments which
are paid through the Employer's payroll system, bonuses,
commissions, or any other direct current compensation
which is required to be reflected on the Participant's Form
W-2 for the Plan Year, without giving effect to any reduction of
compensation resulting from pre-tax saving contributions under
the Qualified Plan or any other salary reduction arrangement
pursuant to Section 125 of the Code, but will not include
Employer contributions to Social Security, other contributions to
this or any other deferred compensation plan or program,
severance pay, stock options, disability income payments which
are not paid through the Employer's payroll system, relocation
expense reimbursement, or the value of any other fringe benefits
provided at the expense of the Employer. The Compensation taken
into account for a Participant for a Plan Year will include
compensation in excess of the limit under Section 401(a)(17) of
the Code.
"Effective Date" means August 1, 1997.
"Election Date" shall mean, for calendar year 1997, the 30th
day after the Effective Date. For subsequent calendar years, the
Election Date shall mean January 1.
"Eligible Employee" means any person: (a) who is a member of
a select group of management or highly compensated employees; (b)
who is employed by the Employer in a category of employment
designated by the Employer as eligible for participation in the
Plan; and (c) who elected to make before-tax contributions to the
Qualified Plan which exceed the maximum amount permissible under
Section 402(g) of the Code for the Plan Year.
"Employer" means the Company and any Affiliate which, with
the consent of the Board of Directors, adopts the Plan and joins
in the Trust Agreement.
"Employer Stock" means any share or shares of the capital
stock of the Company.
"Enrollment and Change Designation" means an agreement, on a
form or by a method prescribed by the Plan Administrator, between
a Participant and his or her Employer providing for reduction of
the Participant's Compensation and the crediting of Supplemental
Savings Contributions by the Employer to the Participant's
Supplemental Savings Account and for designation of one or more
Investment Funds.
"ERISA" means the Employee Retirement Income Security Act of
1974, as now or hereafter existing, amended, construed,
interpreted, and applied by regulations, rulings or cases.
"Investment Fund" means a segregated fund managed by one or
more investment managers, including a regulated investment
company, or any other investments designated by the Company from
time to time.
"Normal Retirement Date" means the date a Participant
attains age 65.
"Participant" means any Eligible Employee who has been
admitted to participation in the Plan by filing an Enrollment and
Change Designation with the Plan Administrator, and who has not
ceased participation in the Plan.
"Plan" means the Structural Dynamics Research Corporation
Supplemental Retirement Plan, as set forth herein and as the same
may from time to time be amended.
"Plan Administrator" means the person, committee or other
entity appointed by the Company to administer the Plan or, in the
absence of such appointment, the Company.
"Plan Year" means the calendar year.
"Qualified Plan" means the Structural Dynamics Research
Corporation Tax Deferred Capital Accumulation Plan, a profit
sharing plan with a cash or deferred feature, as the same may
from time to time be amended.
"Separation Date" means the date a person is no longer
employed by any Affiliate.
"Supplemental Discretionary Account" means the portion of
the Account of a Participant consisting of Supplemental
Discretionary Contributions and investment earnings, if any,
credited on those contributions, as adjusted under the Plan.
"Supplemental Discretionary Contribution" means the amount
contributed by the Employer under Section 3.3.
"Supplemental Matching Account" means the portion of the
Account of a Participant consisting of Supplemental Matching
Contributions and investment earnings, if any, credited on those
contributions, as adjusted under the Plan.
"Supplemental Matching Contribution" means the amount
contributed by the Employer under Section 3.2.
"Supplemental Savings Account" means the portion of the
Account of a Participant consisting of Supplemental Savings
Contributions and investment earnings, if any, credited on those
contributions, as adjusted under the Plan.
"Supplement Savings Contribution" means the amount credited
by the Employer as a result of a Participant's election on an
Enrollment and Change Designation to reduce his or her
Compensation.
"Totally and Permanently Disabled" means suffering from a
physical or mental condition which, in the opinion of the Plan
Administrator based upon appropriate medical advice and
examination and in accordance with uniform rules, totally and
permanently prevents the Participant from performing the
customary duties of his regular job with the Company.
"Trust Agreement" means the trust agreement entered into
between the Company and the Trustee in connection with the Plan,
as the same presently exists and as it may from time to time
hereafter be amended.
"Trustee" means the party or parties acting as such under
the Trust Agreement.
"Trust Fund" means all of the assets of the Plan held by the
Trustee at any time under the Trust Agreement.
"Unforeseeable Emergency" means a severe financial hardship
to the Participant resulting from a sudden and unexpected illness
or accident of the Participant or of a dependent (as defined in
Section 152(a) of the Code) of a Participant, loss of the
Participant's property due to casualty, or other similar
extraordinary and unforeseeable circumstances arising as a result
of events beyond the control of the Participant. The
circumstances that will constitute an Unforeseeable Emergency
will be determined by the Plan Administrator depending upon the
facts of each case.
"Valuation Date" means the last day of each Plan Year and
each other interim date on which the Plan Administrator directs
the allocation of distributions, contributions and earnings on
Participants' Accounts.
"Year of Vesting Service" means a 12 month period of
continuous employment by the Company as an Eligible Employee.
Section 2. Participation. An Eligible Employee may
become a Participant for a calendar year and elect to make
Supplemental Savings Contributions for such calendar year by
filing with the Plan Administrator an Enrollment and Change
Designation on or before the Election Date for that calendar
year.
Section 3. Contributions.
3.1. Supplemental Savings Contributions. The Employer
will credit the Participant's Supplemental Savings Account
with, and contribute to the Trust Fund, a Supplemental
Savings Contribution on behalf of the Participant. The
amount of a Participant's Supplemental Savings Contribution
for a Plan Year will be equal to the Participant's total
elective contributions to the Plan and the Qualified Plan,
as designated on an Enrollment and Change Designation
reduced by the lesser of:
(a) the Code Section 402(g) limitation for the Plan
Year; or
(b) the maximum before-tax contribution permitted.
Such maximum before-tax contribution is established for each
Plan Year by the Plan Administrator for each Participant
based on historical contribution data and the application of
Treasury Regulation Section 1.401(k)-1(b)(2).
3.2. Supplemental Matching Contributions. The Employer
may credit the Participant's Supplemental Matching Account
with, and contribute to the Trust Fund, a Supplemental
Matching Contribution on behalf of the Participant equal to
50% of the Participant's Supplemental Savings Contributions
under the Plan. Such contributions may be made in the form
of Employer Stock or in cash.
3.3. Supplemental Discretionary Contributions. The
Employer may credit the Participant's Supplemental
Discretionary Account with, and contribute to the Trust
Fund, a Supplemental Discretionary Contribution on behalf of
the Participant equal to an amount determined by the
Employer.
3.4. Crediting of Contributions.
(a) The Employer will establish a Trust Fund which
shall consist of assets which the Employer may use to offset
its liability for payments due to Participants under the
Plan. The Trust Fund will, at all times, be subject to the
claims of judgment creditors of the Employer and will
otherwise be on such terms and conditions as will prevent
taxation to Participants and Beneficiaries of any amounts
held in the Trust Fund or credited to Participant's Accounts
prior to the time payments are made to them. Rights to
payments will not be limited to assets held in the Trust
Fund. The Plan constitutes a mere promise by the Employer
to make benefit payments in the future. It is the intention
of the Employer and the Participants that the Plan be
unfunded for tax purposes and for purposes of Title I of
ERISA.
(b) Subject to the provisions of subsection (a), the
Employer will contribute to the Trust Fund an amount equal
to all Supplemental Savings Contributions for a quarter
within a reasonable time after the end of the quarter in
which Participants' Compensation is reduced.
Section 4. Investment of Accounts.
4.1. Investment Direction. For the purposes of
crediting investment gains or losses to a Participant's
account, the balance in a Participant's Supplemental Savings
Account, Supplemental Discretionary Account and Supplemental
Matching Account shall be deemed to be invested in the
Investment Funds designated from time to time by the
Participant. The Plan Administrator may establish
procedures which require that a Participant's Account be
deemed to be allocated among Investment Funds in the same
manner and in the same proportions as the Participant's
account under the Qualified Plan.
Section 5. Valuations and Crediting.
5.1. Valuations. The amount credited to each
Participant's Accounts will be determined by the Plan
Administrator as of the close of business on each Valuation
Date.
5.2. Credits to and Charges Against Accounts. All
crediting to and charging against Accounts will be made as
follows:
(a) First, there will be determined the net adjusted
Account by: (i) charging all distributions and withdrawals
made during the period from the previous Valuation Date to
the current Valuation Date; (ii) crediting contributions to
the Account since the preceding Valuation Date; and (iii) at
the option of the Plan Administrator, charging specifically
against the Accounts of Participants all or a portion of
administrative expenses relating to the maintenance of such
Accounts;
(b) Second, all deemed earnings or losses of the
Investment Funds will be allocated by the Plan Administrator
in its discretion among the Participants' Accounts according
to the balance of their net adjusted Accounts and the
relative portions of such Accounts which are deemed by the
Plan Administrator to be invested in each Investment Fund.
All earnings of the Trust Fund arising out of the investment
of Trust Fund assets in investment vehicles other than the
Investment Funds may be allocated by the Plan Administrator
in its discretion to and among the Participants' Accounts
according to their net adjusted Accounts.
5.3 Expenses. All brokerage fees, transfer taxes, and
other expenses incurred in connection with the investment of
the Trust Fund will be added to the cost of such investments
or deducted from the proceeds thereof, as the case may be.
All other costs and expenses of administering the Plan will
be paid from the Trust Fund, except to the extent that such
costs and expenses are paid by the Employer.
Section 6. Vesting and Separation from Service.
6.1 Vested Percentage.
(a) Except as provided in Section 7 in the event of
certain withdrawals by Participants, a Participant will at
all times be fully vested in the Supplemental Savings
Account and the Supplemental Matching Account.
(b) A Participant will become fully vested in the
Supplemental Discretionary Account (except as provided in
Section 7 in the event of certain withdrawals by
Participants) if, while actively employed by the Company,
any of the following events occur: (i) the Participant
reaches his Normal Retirement Date; (ii) the Participant
dies; (iii) the Participant becomes Totally and Permanently
Disabled; (iv) the Company undergoes a Change in Control; or
(v) the Plan is terminated.
(c) Subject to subsection (b) and except as provided
in Section 7 in the event of certain withdrawals by
Participants, a Participant's vested interest in the
Participant's Supplemental Discretionary Account will be
determined under the following table:
Years of Vesting Service Vested Percentage
less than 5 0%
5 or more 100%
6.2. Forfeiture. The nonvested portion of the Account
of a Participant who has incurred a Separation Date prior to
the Participant's death or Normal Retirement Date will be
forfeited.
Section 7. Benefits.
7.1. Forms of Benefit Payments. Any benefit payable
hereunder to a Participant or Beneficiary will be paid in
the form of a single sum distribution, in cash, Employer
Stock or both.
7.2. Retirement Benefit. Upon incurring a Separation
Date, the Participant will receive a retirement benefit in
an amount equal to the undistributed vested portion of the
Participant's Account. The Participant's Account shall be
valued as of the Valuation Date coinciding with or as soon
as administratively practicable preceding the date of the
distribution. Notwithstanding the foregoing, if a
Participant dies before receiving a distribution of his or
her vested Account, his or her Beneficiary will receive a
death benefit, as determined under Section 7.3.
7.3. Death Benefit. If a Participant dies before
receiving a distribution of his or her vested Account, the
Participant's Beneficiary will receive a death benefit, in
lieu of the retirement benefit, equal to the undistributed
balance in the Participant's Account. The Participant's
Account shall be valued as of the Valuation Date coinciding
with or as soon as administratively practicable preceding
the date of the distribution.
7.4. Beneficiary Designation.
(a) A Participant's death benefit will be paid to the
Beneficiary designated by the Participant under the
Qualified Plan unless the Participant makes a separate
Beneficiary designation under the Plan. A Participant may
designate and from time to
time change the designation of one or more
Beneficiaries or contingent Beneficiaries to receive any
death benefit. The designation and consent will be on a
form supplied by the Plan Administrator. All records of
Beneficiary designations will be maintained by the Plan
Administrator.
(b) In the event that the Participant fails to
designate a Beneficiary under both the Qualified Plan and
this Plan, or in the event that the Participant is
predeceased by all designated primary and contingent
Beneficiaries under the Qualified Plan and this Plan: (i) if
the Participant is survived by a spouse, the death benefit
will be payable to the Participant's surviving spouse who
will be deemed to be the Participant's designated
Beneficiary for all purposes under this Plan; or (ii) if the
Participant is not survived by a spouse, the death benefit
will be payable to the Participant's estate.
7.5. In-Service Distributions.
(a) A Participant may apply for and receive an early
payment of any or all vested amounts held in the Account of
such Participant if the Participant demonstrates to the Plan
Administrator, in a manner acceptable to the Plan
Administrator in its sole discretion, that the Participant
has incurred an Unforeseeable Emergency, to the extent
needed to satisfy the need caused by such Unforeseeable
Emergency. Payment may not be made to the extent that the
need caused by the Unforeseeable Emergency is or may be
relieved through reimbursement or compensation by insurance
or otherwise, by liquidation of the Participant's assets, to
the extent the liquidation of such assets would not itself
cause severe financial hardship, or by cessation of
deferrals under this Plan and the Qualified Plan.
Distributions under this Section will be deemed to be made
as of the Valuation Date coinciding with or as soon as
administratively practicable preceding the date of
distribution and will be charged against a Participant's
Account in such manner as the Plan Administrator determines.
(b) Notwithstanding anything in the Plan to the
contrary, a Participant who has received a distribution from
the Plan under subsection (a) will not be eligible to make
any Supplemental Savings Contributions or be credited with
any Supplemental Matching Contributions for 12 months after
the distribution.
7.6 Special Circumstances. Notwithstanding anything
in the Plan to the contrary, in the event the Company
undergoes a Change in Control or the Plan terminates (as
provided in Section 11.2), the Participant will receive, as
soon as administratively practicable thereafter, a single
lump sum payment equal to the undistributed vested portion
of the Participant's Account. The Participant's Account
shall be valued as of the Valuation Date coinciding with or
as soon as administratively practicable preceding the date
of the distribution.
7.7. Payments on Taxability. If it is ever determined
that any amount credited to a Participant's Account under
the Plan was income and taxable to him or her, such taxable
amounts or any portions thereof will be paid to the
Participant upon written request and be charged against the
Participant's Account.
7.8. Withholding. The Employer may withhold from
payments due under the Plan any and all taxes of any nature
required by any government to be withheld.
Section 8. The Plan Administrator.
8.1. Plan Administrator. The Plan Administrator will
interpret the Plan and determine in its sole and absolute
discretion all questions arising in the administration,
interpretation and application of the Plan and the amount of
benefits payable thereunder. The Plan Administrator's
interpretations and determinations will be final and binding
on all persons absent fraud or the arbitrary and capricious
abuse of the wide discretion granted to the Plan
Administrator. The Plan Administrator will provide the
Trustee with directions to the Trustee with respect to
valuations at dates other than Valuation Dates and all other
matters when called for in the Plan or requested by the
Trustee. The Plan Administrator may waive any period of
notice required under the Plan. The Plan Administrator
will provide procedures for the determination of claims for
benefits.
8.2. Engagement of Assistants and Advisors. The Plan
Administrator will have the right to hire such professional
assistants and consultants as it, in its sole discretion,
deems necessary or advisable. To the extent that the costs
for such assistants and advisors are not paid by the
Employer, they will be paid from the Trust Fund as an
expense of the Trust Fund at the direction of the Plan
Administrator.
8.3. Compensation. All expenses of the Plan
Administrator will be paid or reimbursed by the Employer,
and if not so paid or reimbursed will be paid from the Trust
Fund.
8.4. Indemnification of the Plan Administrator. The
Plan Administrator will be indemnified by the Employer
against costs, expenses and liabilities (including
reasonable attorneys' fees but excluding amounts paid in
settlements to which the Employer does not consent)
reasonably incurred by the Plan Administrator in connection
with any action or investigation to which the Plan
Administrator may be a party by reason of the Plan
Administrator's service as Plan Administrator except in
relation to matters as to which the Plan Administrator may
be adjudged in such action to be personally guilty of
willful misconduct in the performance of the Plan
Administrator's duties. The foregoing right to
indemnification will be in addition to such other rights as
the Plan Administrator may enjoy as a matter of law, under
the Company's certificate of incorporation, by-laws, by
reason of insurance coverage of any kind, or otherwise.
Service as Plan Administrator will be deemed in partial
fulfillment of the individual's function as an Eligible
Employee, officer and/or director of the Employer, if he or
she serves in such capacity as well. No amendment of this
Section diminishing the right to indemnification provided
herein will apply to any action or investigation commenced
prior to the adoption of such amendment.
Section 9. Authority and Responsibilities of the
Company. The Board of Directors of the Company will have
the following authority and responsibility:
(a) To appoint the Trustee and the Plan Administrator
and to monitor each of their performances;
(b) To communicate such information to the Plan
Administrator and to the Trustee as each needs for the
proper performance of its duties;
(c) To provide mechanisms through which the Plan
Administrator and the Trustee can communicate with
Participants and Beneficiaries; and
(d) To perform such duties as imposed by applicable
law and to serve as the Plan Administrator in the absence of
an appointed Plan Administrator.
Section 10. Claims Procedures.
10.1. Application for Benefits. Each Participant
or Beneficiary believing himself or herself eligible for
benefits under the Plan may apply for such benefits by
completing and filing with the Plan Administrator an
application for benefits in writing. Before the date on
which benefit payments commence, each such application must
be supported by such information and data as the Plan
Administrator deems relevant and appropriate.
10.2. Appeals of Denied Claims for Benefits. In
the event that any claim for benefits is denied, in whole or
in part, the claimant will be notified of such denial in
writing by the Plan Administrator within 90 days after the
Plan Administrator receives the claim. The notice advising
of the denial will specify the reason or reasons for denial,
make specific reference to pertinent Plan provisions,
describe any additional material or information necessary
for the claimant to perfect the claim (explaining why such
material or information is needed), and will advise the
claimant of the procedure for the appeal of such denial.
Appeals may be made only by the following procedure:
(a) The claimant may file with the Plan Administrator
a written notice of appeal of the denial within 60 days of
notification by the Plan Administrator of claim denial,
setting forth all of the facts upon which the appeal is
based;
(b) The Plan Administrator may, within 30 days of
receipt of the notice of appeal, establish a hearing date on
which the claimant may make an oral presentation to the Plan
Administrator in support of his or her appeal and the
claimant will be given not less than 10 days' notice of the
date set for the hearing;
(c) The Plan Administrator will consider the
claimant's written and oral presentations, any facts or
evidence in support of the denial of benefits, and such
other facts and circumstances as the Plan Administrator may
deem relevant. If the claimant elects not to make an oral
presentation, the Plan Administrator will proceed as set
forth below as though an oral presentation of the contents
of the claimant's written presentation had been made; and
(d) The Plan Administrator will render a determination
upon the appealed claim accompanied by a written statement
as to the reasons therefor within 60 days after the Plan
Administrator receives the notice of appeal, unless special
circumstances or the need to hold a hearing requires an
extension of up to 60 additional days. The determination so
rendered will be final and binding upon all parties.
10.3. Review of Decisions. Any final decision of
the Plan Administrator may be reviewed by a court of
competent jurisdiction only if an appeal has been made under
Section 10.2.
Section 11. Amendment, Termination, Mergers and
Consolidations.
11.1. Amendment. The provisions of the Plan may be
amended at any time and from time to time by the Company;
provided, however, that:
(a) No amendment will increase the duties or
liabilities of the Trustee without the consent of the
Trustee;
(b) No amendment will decrease the balance in any
Account;
(c) No amendment shall adversely impact the
Participants' rights to receive payment under the Plan
with respect to existing Participant Accounts; and
(d) No amendment will decrease any Participant's
vested percentage of his or her Account.
11.2. Termination. While it is the Company's
intention to continue the Plan indefinitely in operation,
the Company nevertheless reserves the right to terminate the
Plan. Termination of the Plan will result in full and
immediate vesting in each Participant of his or her Account,
and none of the provisions of any termination shall
adversely impact the Participant's rights to benefits
accrued under the Plan as of the date of termination. On
termination of the Plan, the Trustee will pay over to each
Participant (and deferred vested former Participant) the
value of his or her vested interest, and thereupon dissolve
the Trust Fund.
11.3. Permanent Discontinuance of Contributions.
The Company reserves the right at any time to permanently
suspend or discontinue all Employer contributions.
Section 12. Participating Employers.
12.1. Adoption by Other Corporations. With the
consent of the Board of Directors, any Affiliate may adopt
the Plan and all of the provisions hereof as to all or any
category of its Eligible Employees, as a participating
Employer, by a properly executed document evidencing the
intent and will of the board of directors of the other
corporation.
12.2. Requirements of Participating Employers.
Each participating Employer will be required to use the same
Trustee and Trust Agreement as provided in the Plan, and the
Trustee will commingle, hold and invest as the Trust Fund
all contributions made by participating Employers, as well
as all increments thereof.
12.3. Designation of Agent. With respect to all
relations with the Trustee and Plan Administrator, each
participating Employer will be deemed to have irrevocably
designated the Company as its agent.
12.4. Eligible Employee Transfers. If an Eligible
Employee is transferred between Employers, the Eligible
Employee involved will carry with him or her the Eligible
Employee's accumulated service and eligibility, no such
transfer will effect a termination of employment hereunder,
and the participating Employer to which the Eligible
Employee is transferred will thereupon become obligated with
respect to such Eligible Employee in the same manner as was
the participating Employer from whom the Eligible Employee
was transferred.
12.5. Discontinuance of Participation. Any
participating Employer may discontinue or revoke its
participation in the Plan. At the time of any such
discontinuance or revocation, satisfactory evidence thereof
and of any applicable conditions imposed will be delivered
to the Trustee.
12.6. Plan Administrator's Authority. The Plan
Administrator will have authority to make any and all
necessary rules or regulations, binding upon all
participating Employers and all Participants, to effectuate
the purposes of the Plan.
Section 13. Miscellaneous Provisions.
13.1 Nonalienation of Benefits. None of the payments,
benefits, or rights of any Participant or Beneficiary will
be subject to any claim of any creditor of such Participant
or Beneficiary, and, to the fullest extent permitted by law,
all such payments, benefits, and rights will be free from
attachment, garnishment, or any other legal or equitable
process available to any creditor of such Participant or
Beneficiary. No Participant or Beneficiary will have the
right to alienate, anticipate, commute, pledge, encumber, or
assign any of the benefits or payments which he or she may
expect to receive, contingently or otherwise, under the
Plan, except the right to designate a Beneficiary.
13.2. No Contract of Employment. All benefits
created by the Plan constitute a voluntary act on the part
of the Employer and are not to be deemed or construed to be
a part of any contract of employment. Neither the action of
the Employer in establishing the Plan nor any action
hereafter taken by the Employer or the Plan Administrator
will be construed as giving to any Eligible Employee a right
to be retained in the service of the Employer or any right
or claim to any benefits under the Plan except as expressly
provided in the Plan.
13.3 Severability. If any provision of the Plan is
held invalid or unenforceable, such invalidity or
unenforceability will not affect any other provision hereof,
and the Plan will be construed and enforced as if such
invalid or unenforceable provision had not been included.
13.4 Successors. The Plan will be binding upon the
heirs, executors, administrators, personal representatives,
successors, and assigns of the parties, including each
Participant and Beneficiary, present and future.
13.5 Captions. The headings and captions herein are
provided for convenience only, will not be considered a part
of the Plan, and will not be employed in the construction of
the Plan.
13.6. Gender and Number. Except where otherwise
clearly indicated by context, the masculine gender will
include the feminine gender, the singular will include the
plural, and vice versa.
13.7. Controlling Law. The Plan will be construed
and enforced according to the laws of the State of Ohio to
the extent not preempted by federal law, which will
otherwise control.
13.8. Title to Assets. No Participant or
Beneficiary will have any right to, or interest in, any
assets of the Trust Fund, upon termination of his or her
employment or otherwise, except to the extent of the
benefits payable under the Plan to such Participant out of
the assets of the Trust Fund. The Employer will remain
primarily liable to pay benefits under the Plan. However,
the Employer's liability under the Plan will be reduced or
offset to the extent benefit payments are made from the
Trust Fund. The provisions of the Trust Fund are
incorporated by reference.
13.9. Payments to Minors, Etc. Any benefit payable
to or for the benefit of a minor, an incompetent person or
other person incapable of receipting therefor will be deemed
paid when paid to such person's guardian, to a trustee
holding assets for such person or to the party providing, or
reasonably appearing to provide, for the care of such
person, and such payments will fully discharge the Trustee,
the Plan Administrator, the Employer and all other parties
with respect thereto.
13.10. Acknowledgments. By filing an Enrollment and
Change Designation, each Participant specifically
acknowledges that the value of the Accounts may increase or
decrease and that any such decrease will reduce the benefits
payable under the Plan.
13.11. Entire Agreement; Successors. The Plan,
including any election agreements and any amendments
thereto, will constitute the entire agreement between the
Company and the Participant with respect to the amounts
payable under the Plan. No oral statement regarding the
Plan may be relied upon by the Participant. The Plan and
any amendment will be binding on the parties thereto and
their respective heirs, administrators, trustees, successors
and assigns, and on all Beneficiaries. By becoming a
Participant, each Eligible Employee will be conclusively
deemed to have assented to the provisions of the Plan and
the Trust Agreement and to any amendments thereto.
13.12. Tax Effects. None of the Employer, the Plan
Administrator, and any firm, person, or corporation,
represents or guarantees that any particular federal, state
or local tax consequences will occur as a result of any
Participant's participation in the Plan. Each Participant
should consult with his or her own advisors regarding the
tax consequences of participation in the Plan.
Structural Dynamics Research Corporation
By: /s/Bryan M. Valentine
Title: Vice President - Human Resources
204691.06
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