Deferred Prosecution Agreement Regarding Yu Kai Yuan and Violations of the Exchange Act

UNITED STATES OF AMERICA 
SECURITIES AND EXCHANGE COMMISSION 
DEFERRED PROSECUTION AGREEMENT 
1. In connection with an investigation, the Division of Enforcement 
("Division") of the United States Securities and Exchange Commission ("Commission") 
alleges that Yu Kai Yuan ("Respondent"), a former employee of Parametric Technology 
(Shanghai) Software Company Limited and Parametric Technology (Hong Kong) Ltd., 
from at least 
2006 through 2011, caused violations of Sections 13(b)(2)(A) and 
13(b )(2)(B) 
of the Securities Exchange Act of 1934 ("Exchange Act"), by causing the 
company to (a) fail to make and keep books, records, and accounts, which, in reasonable 
detail, accurately and fairly reflected the transactions and dispositions 
of its assets, and 
(b) fail to devise and maintain a system 
of internal accounting controls sufficient to 
provide reasonable assurances that transactions (i) were executed in accordance with 
management's general or specific authorization and (ii) were recorded as necessary to 
permit preparation 
of financial statements in conformity with generally accepted 
accounting principles or any other criteria applicable to such statements, and to maintain 
accountability for assets 
("Investigation"). Prior to a public enforcement action being 
brought by the Commission against him, without admitting or denying these allegations, 
Respondent has offered to accept full responsibility for his conduct and to not contest or 
contradict the factual statements contained in Paragraph 6 in any future Commission 
enforcement action in the event he breaches this Agreement. Accordingly, the 
Commission and the Respondent enter into this deferred prosecution agreement 
("Agreement") on the following terms and conditions: 
ELIGIBILITY 
2. The Respondent certifies that he has never been charged or found guilty 
of 
violating the federal securities laws, or been a party to a civil action or administrative 
proceeding concerning allegations or findings 
of violations of the federal securities laws. 
TERM 
3. The Respondent understands and agrees that the provisions 
of this 
Agreement are in full force and effect from February 16, 
2016 to February 15, 2019, (the 
"Deferred Period"), unless expressly stated otherwise. 
COOPERATION 
4. The Respondent agrees to cooperate fully and truthfully in the 
Investigation and any other related enforcement litigation or proceedings to which the 
Commission is  a party (the 
"Proceedings"), regardless of the time period in which the 
cooperation is  required. In addition, the Respondent agrees to cooperate fully and 
truthfully, when directed by the Division's staff, in an official investigation or proceeding 

by any federal, state, or self-regulatory organization ("Other Proceedings"). The full, 
truthful, and continuing cooperation 
of the Respondent shall include, but not be limited 
to: 
a. producing all non-privileged documents and other materials to the 
Commission as requested by the Division's staff, wherever located, in the possession, 
custody, or control 
of the Respondent; 
b. appearing for interviews, at such times and places, as requested by 
the Division's staff; 
c. responding fully and truthfully to all inquiries, when requested to 
do 
so by the Division's staff, in connection with the Proceedings or Other Proceedings; 
d. testifying at trial and other judicial proceedings, when requested to 
do 
so by the Division's staff, in connection with the Proceedings or Other Proceedings; 
e. accepting service by mail or facsimile transmission of notices or 
subpoenas for documents or testimony at  depositions, hearings, trials or in connection 
with the Proceedings 
or-Other Proceedings; 
f. appointing his undersigned attorney as agent to receive service of 
such notices and subpoenas; 
g. waiving the territorial limits on service contained in Rule 45 of the 
Federal Rules of Civil Procedure and any applicable local rules, when requested to appear 
by the Division's staff; and 
h. entering into tolling agreements, when requested to do so by the 
Division's staff, during the period 
of cooperation. 
STATUTE OF LIMITATIONS 
5. The Respondent agrees that the running of any statute of limitations 
applicable to any action or proceeding against him authorized, instituted, or brought by or 
on behalf 
of the Commission arising out of the Investigation ("Proceeding"), including 
any sanctions or relief that may be imposed therein, is  tolled and suspended during the 
Deferred Period. 
a. The Respondent and any of his attorneys or agents shall not 
include the Deferred Period in the calculation 
of the running of any statute of limitations 
or for any other time-related defense applicable to the Proceeding, including any 
sanctions or relief that may be imposed therein, in asserting or relying upon any such 
time-related defense. 

b. This agreement shall not affect any applicable statute of limitations 
defense or any other time-related defense that may be available to Respondent before the 
commencement 
of the Deferred Period or be construed to revive a Proceeding that may 
be barred by any applicable statute 
of limitations or any other time-related defense before 
the commencement 
of the Deferred Period. 
c. The running of any statute of limitations applicable to the 
Proceeding shall commence again after the end of the Deferred Period, unless there is  an 
extension of the Deferred Period executed in writing by or on behalf of the parties hereto. 
d. This agreement shall not be construed as an admission by the 
Commission relating to the applicability of any statute of limitations to the Proceeding, 
including any sanctions or relief that may be imposed therein, or to the length of any 
limitations period that may apply, or to the applicability 
of any other time-related 
defense. 
STATEMENT OF FACTS
1 
6. If this case had gone to trial, the Commission would have presented 
evidence sufficient to prove the following facts: 
a. Yuan, age 47, is a Chinese citizen and who resides in Shanghai, 
China. From 1996 until 2011, Yuan was employed as a sales executive at Parametric 
Technology (Hong Kong) Ltd. and Parametric Technology (Shanghai) Software Co., Ltd. 
(collectively, 
"PTC-China"). These two entities are subsidiaries of PTC Inc., a publicly 
traded Massachusetts corporation headquartered in Needham, Massachusetts. 
b. From at  least 2006 into 2011, PTC-China provided, through 
business partners, items 
of value to employees and officers of Chinese state owned 
entities ("SOE employees and officers"), where the SOE's were PTC customers. These 
items 
of value were made to obtain or retain business from the SOEs. Specifically, PTC-
China provided, through business partners, non-business travel, primarily sightseeing and 
tourist activities, as well as improper gifts and entertainment, to the 
SOE employees and · 
officers. 
c. PTC-China provided these items of value in two primary ways: 1) 
by providing payments to third party agents, disguised as commission payments or sub-
contracting fees, which were then used to pay for non-business related foreign travel for 
SOE employees and officers; and 2) by allowing its sales staff to provide SOE employees 
and officers with gifts and excessive entertainment. 
d. For sales to Chinese SOE's, PTC-China routinely hired third 
parties -  called "business partners" -  both to find deals, for which PTC-China paid a 
The facts set forth in this section are made pursuant to settlement negotiations associated with the 
violations alleged by the Division in Paragraph 1 of this Agreement and are not binding in any other legal 
proceeding or on any other person or entity. 

commission or "success fee," as well as to provide information technology and other 
services, which 
PTC-China subcontracted to the business partner. Business partners were 
generally Chinese companies, purportedly with specific knowledge of, and relationships 
with, 
PTC-China's customers. 
e. Certain PTC employees knew that many of PTC-China's 
customers were SOEs whose employees were Chinese government officials. Certain 
business partners had long standing relationships with these 
SOE employees and officers. 
Generally, the business partners provided 
PTC-China with lobbying or "influence 
services" 
(i.e., arranging seminars and meetings with officials of the SO Es) and 
information technology services. 
Often the SOE employees and officers chose the 
business partner with whom they wished to collaborate. 
f. Senior PTC-China staff had discretion in setting the fee 
arrangements with business partners. 
PTC-China did not have a fixed success fee 
arrangement with its business partners, instead negotiating the fee for each particular 
deal. When PTC-China initially engaged the business partner, its sales team generally 
agreed to a price range for the business partners' commission 
-from as low as 15% to as 
high as 
30% of the contract price -if the deal was successful. PTC-China's senior staff 
negotiated the commission with the business partner at or about the time a deal closed. 
PTC-China' s senior staff reported to a PTC employee who had authority over the 
commission approval process. 
g. For information technology and other subcontracted services, PTC-
China relied on sign-offs provided by the SOE's officials as evidence that the agreed 
upon services had been performed. 
Once the business partner and/or the SOE employees 
and officers confirmed that the business partner had completed the services, 
PTC-China 
made the agreed-upon payments to the business partner. 
h. Beginning in 2005, PTC-China recorded the commission and 
information technology subcontracting payments to business partners as 
"Complete 
Outsourced Deals" or "COD" expenses. After 2008, PTC-China began paying 
commissions to business partners as it received customer payment on the deals. 
PTC-
China sales staff tracked the payments to business partners on spreadsheets that they kept 
on their computers, and which were separate from 
PTC-China's electronic accounting 
records. These spreadsheets were used to track and monitor the arrangements and their 
payment status. 
i. During contract negotiations with SOEs, SOE employees and 
officers, in conjunction with a business partner, often requested that 
PTC-China provide 
them with overseas 
"training," which involved primarily tourist and sightseeing visits. 
The three parties would settle on a travel budget and the 
SOE employees and officers 
would typically agree to 
"gross up" the SO E's contract price by the amount of the 
anticipated travel costs. 
PTC-China sales staff itemized the overseas travel costs in the 
initial contract documents for approval by senior 
PTC-China staff. Once approved, 
however, 
PTC-China's practice was to remove the line item for overseas travel from the 

final contract documents that were signed by PTC and the SOEs. Instead, the funds 
budgeted for the overseas travel were disguised by PTC-China personnel as 
COD 
expenses related to success fees or subcontracting payments for business partners. 
j. Because PTC-China employees negotiated success fees with a 
business partner 
on a deal by deal basis, they were able to include the costs of the 
overseas travel as part 
of a business partner's fees without raising suspicion. In tum, the 
business partner used part 
of its success fee to pay for the overseas sightseeing trips. 
Alternatively, PTC-China employees sometimes put the overseas travel payments as a 
payment purportedly for providing information technology 
or other subcontracted 
services. The business partner (or customer) then provided PTC-China with documents 
indicating that it had performed the subcontracted services, and used a part 
of the 
subcontract fee to pay for the 
SOE employees' and officers' sightseeing trips. For certain 
more expensive trips, PTC-China employees spread the overseas travel payments over 
several contracts, each with its own 
COD budget. Because many deals with SOEs 
involved long term contracts that took several years to complete, the actual sightseeing 
trip sometimes occurred up to two to three years after the deal was negotiated. 
k. PTC-China sales staff tracked on spreadsheets kept separate from 
PTC-China's regularly maintained books and records the overseas travel payments made 
by business partners to or for the benefit 
of PTC's SOE customers. Senior PTC-China 
sales staff used the spreadsheets to understand the composition of, and negotiate, the 
success and other fees with the business partners. 
1. PTC-China employees and the business partners typically arranged 
the overseas sightseeing trips in conjunction with a visit to a PTC facility. Most often, 
PTC-China sales staff arranged for 
SOE employees and officers to visit PTC's corporate 
headquarters in Massachusetts, for PTC to market and demonstrate the company's 
products and services. The trips typically consisted 
of one day of business activities at 
PTC's facility, followed or preceded by additional days of sightseeing visits that lacked 
any business purpose, all 
of which were paid for by the business partners using funds 
from their grossed up success fees and subcontracting payments. 
Some PTC employees 
in the 
United States generally understood that SOE officials were spending additional 
days in the country, including for tourist activities. And certain PTC employees based in 
China were aware that PTC-China employees were accompanying 
SOE employees and 
officers to tourist destinations. 
m. Typical travel destinations in the 
United States included New 
York, Las Vegas, San Diego, Los Angeles, and Honolulu, and involved guided tours, 
golfing, and other leisure activities. PTC-China staff usually accompanied the 
SOE 
employees and officers on these trips. The SOE employees and officers who went on the 
trips often were signatories 
on the purchase agreements with PTC. 

PROHIBITIONS 
7. During the Deferred Period, the Respondent understands and agrees to 
comply with the following prohibitions: 
a. to refrain from violating the federal and state securities laws; and 
b. to refrain from violating the applicable rules promulgated by any 
self regulatory organization or professional licensing board. 
UNDERTAKINGS 
8. During the Deferred Period, the Respondent understands and agrees to 
perform the following undertakings: 
a. to provide written notification to the Division, within five days, if 
he has been questioned about, charged with, or convicted of an offense by any federal, 
state, or local law enforcement organization or regulatory agency; 
b. to provide written notification to the Division, within five days, 
if 
he has been questioned about, a formal or informal complaint has been made against him, 
or disciplinary action has been taken against him by any self-regulatory organization or 
professional licensing board; 
c. to provide the Division with a written certification of compliance 
with the prohibitions and undertakings in this Agreement between forty-five and sixty 
days before the end 
of the Deferred Period. 
PUBLIC STATEMENTS 
9. After the Deferred Period begins, on February 16, 2016, the Respondent 
agrees not to take any action or to make or permit any public statement through present or 
future attorneys, employees, agents, or other persons authorized to speak for him, except 
in legal proceedings in which the Commission is  not a party, denying, directly or 
indirectly, any aspect 
of this Agreement or creating the impression that the allegations 
made by the Division in 
Paragraph 6 of this Agreement are without factual basis. If it  is 
determined by the Commission that a public statement by the Respondent or any related 
person contradicts in whole or in part this Agreement, at its sole discretion, the 
Commission may bring an enforcement action in accordance with 
Paragraphs 12 through 
14. 
10. Prior to issuing a press release concerning this Agreement, the Respondent 
agrees to have the text 
of the release approved by the staff of the Division. 

SERVICE 
11. The Respondent agrees to serve by hand delivery or by next-day mail all 
writt~n notices and correspondence required by or related to this Agreement to Kara 
Brockmeyer, 
100 F Street, NE, Washington, DC 20549 (202) 551-4767, unless 
otherwise directed in writing by the staff 
of the Division. 
VIOLATION OF AGREEMENT 
12. The Respondent understands and agrees that it shall be a violation of this 
Agreement 
if he knowingly provides false or misleading information or materials in 
connection with the Proceedings or 
Other Proceedings. In the event of such misconduct, 
the Division will advise the Commission 
of the Respondent's misconduct and may make 
a criminal referral for providing false information (18 
U.S.C. § 1001), perjury (18 U.S.C. 
§ 1621), making false statements or declarations in court proceedings (18 U.S.C. § 1623), 
contempt (18 U.S.C. §§ 401-402) and/or obstructing justice (18 U.S.C. § 1503 et seq.). 
13. The Respondent understands and agrees that it shall be a violation of this 
Agreement if he violates the federal securities laws after entering into this agreement. It 
is  further understood and agreed that should the Division determine that the Respondent 
has failed to comply with any term or condition 
of this Agreement, the Division will 
notify the Respondent or his counsel 
of this fact and provide an opportunity for the 
Respondent to make a submission consistent with the procedures set forth in the 
Securities Act 
of 1933 Release No. 5310. Under these circumstances, the Division may, 
in its sole discretion and not subject to judicial review, recommend to the Commission an 
enforcement action against the Respondent for any securities law violations, including, 
but not limited to, the substantive offenses relating to the Investigation. Nothing in this 
agreement limits the Division's discretion to recommend to the Commission an 
enforcement action against the Respondent for future violations 
of the federal securities 
laws, without notice, to protect the public interest. 
14. The Respondent understands and agrees that in any future enforcement 
action resulting from his violation 
of the Agreement, any documents, statements, 
information, testimony, or evidence provided by him during the Proceedings or Other 
Proceedings, and any leads derived there from, may be used against him in future legal 
proceedings. 
15. In the event he breaches this Agreement, the Respondent agrees not to 
contest or contradict in any future Commission enforcement action the factual statements 
contained in 
Paragraph 6 above as admissions pursuant to Federal Rule of Evidence 
801(d)(2). 

COMPLIANCE WITH AGREEMENT 
16. Subject to the full, truthful, and continuing cooperation of the Respondent, 
as described in Paragraph 4, and compliance by Respondent with all obligations, 
prohibitions and undertakings in the Agreement during the Deferred Period, the 
Commission agrees not to bring any enforcement action or proceeding against the 
Respondent arising from the Investigation, after the conclusion 
of the Deferred Period. 
1 7. The Respondent understands and agrees that this Agreement does not bind 
other federal, state or self-regulatory organizations, but the Commission may, at its 
discretion, issue a letter to these organizations detailing the fact, manner, and extent 
of 
his cooperation during the Proceedings or Other Proceedings, upon the written request of 
the Respondent. 
18. The Respondent understands and agrees that the Agreement only provides 
protection against enforcement actions arising from the Investigation and does not relate 
to any other violations or any individual or entity other than the Respondent. 
VOLUNTARY AGREEMENT 
19. The Respondent's decision to enter into this Agreement is freely and 
voluntarily made and is not the result 
of force, threats, assurances, promises, or 
representations other than those contained in this Agreement. 
20. The Respondent has read and understands this Agreement. Furthermore, 
he has reviewed all legal and factual aspects 
of this matter with his attorney and is fully 
satisfied with his attorney's legal representation. The Respondent has thoroughly 
reviewed this Agreement with his attorney and has received satisfactory explanations 
concerning each paragraph 
of the Agreement. After conferring with his attorney and 
considering all available alternatives, the Respondent has made a knowing decision to 
enter into the Agreement. 
ENTIRETY 
OF AGREEMENT 
21. This Agreement constitutes the entire agreement between the Commission 
and the Respondent, and supersedes all prior understandings, 
if any, whether oral or 
written, relating to the subject matter herein. 
22. This Agreement cannot be modified except in writing, signed by the 
Respondent and a representative 
of the Commission. 

23. In the event an ambiguity or a question of intent or interpretation arises, 
this Agreement shall be construed as 
if drafted jointly by the parties hereto, and no 
presumption or burden 
of proof shall arise favoring or disfavoring the Commission or the 
Respondent by virtue 
of the authorship of any of the provisions of the Agreement. 
The signatories below acknowledge acceptance 
of the foregoing terms and conditions. 
RESPONDENT 
Date Yu 
WITNESS'S 
CERTIFICATION 
On November l/f, 2015, Yu Kai Yuan, who is  personally known to me, appeared 
before me and affirmed that he is  signing the foregoing document 
of his own free will. 
Natne of Witness printed: 
RESPONDENT'S COUNSEL 
Approved as to form: 
ii I 2-o/1~ 
bate 
Elizabeth P. Gray, 
Willkie Farr 
& Gallagher LLP 
187 5 K 
Street, NW 
Washington, D.C. 2006 
SECURITIES 
AND EXCHANGE COMMISSION 
DIVISION OF 
ENFORCEMENT 
~ 
Date 
Kara Brockmeyer 
Chief, FCPA 
Unit 

UNITED STATES OF AMERICA 
SECURITIES AND EXCHANGE COMMISSION 

DEFERRED PROSECUTION AGREEMENT 

1. In connection with an investigation, the Division of Enforcement 
("Division") of the United States Securities and Exchange Commission ("Commission") 
alleges that Yu Kai Yuan ("Respondent"), a former employee of Parametric Technology 
(Shanghai) Software Company Limited and Parametric Technology (Hong Kong) Ltd., 
from at least 2006 through 2011, caused violations of Sections 13(b)(2)(A) and 
13(b )(2)(B) of the Securities Exchange Act of 1934 ("Exchange Act"), by causing the 
company to (a) fail to make and keep books, records, and accounts, which, in reasonable 
detail, accurately and fairly reflected the transactions and dispositions of its assets, and 
(b) fail to devise and maintain a system of internal accounting controls sufficient to 
provide reasonable assurances that transactions (i) were executed in accordance with 
management's general or specific authorization and (ii) were recorded as necessary to 
permit preparation of financial statements in conformity with generally accepted 
accounting principles or any other criteria applicable to such statements, and to maintain 
accountability for assets ("Investigation"). Prior to a public enforcement action being 
brought by the Commission against him, without admitting or denying these allegations, 
Respondent has offered to accept full responsibility for his conduct and to not contest or 
contradict the factual statements contained in Paragraph 6 in any future Commission 
enforcement action in the event he breaches this Agreement. Accordingly, the 
Commission and the Respondent enter into this deferred prosecution agreement 
("Agreement") on the following terms and conditions: 

ELIGIBILITY 

2. The Respondent certifies that he has never been charged or found guilty of 
violating the federal securities laws, or been a party to a civil action or administrative 
proceeding concerning allegations or findings of violations of the federal securities laws. 

TERM 

3. The Respondent understands and agrees that the provisions of this 
Agreement are in full force and effect from February 16, 2016 to February 15, 2019, (the 
"Deferred Period"), unless expressly stated otherwise. 

COOPERATION 

4. The Respondent agrees to cooperate fully and truthfully in the 
Investigation and any other related enforcement litigation or proceedings to which the 
Commission is a party (the "Proceedings"), regardless of the time period in which the 
cooperation is required. In addition, the Respondent agrees to cooperate fully and 
truthfully, when directed by the Division's staff, in an official investigation or proceeding 



by any federal, state, or self-regulatory organization ("Other Proceedings"). The full, 
truthful, and continuing cooperation of the Respondent shall include, but not be limited 
to: 

a. producing all non-privileged documents and other materials to the 
Commission as requested by the Division's staff, wherever located, in the possession, 
custody, or control of the Respondent; 

b. appearing for interviews, at such times and places, as requested by 
the Division's staff; 

c. responding fully and truthfully to all inquiries, when requested to 
do so by the Division's staff, in connection with the Proceedings or Other Proceedings; 

d. testifying at trial and other judicial proceedings, when requested to 
do so by the Division's staff, in connection with the Proceedings or Other Proceedings; 

e. accepting service by mail or facsimile transmission of notices or 
subpoenas for documents or testimony at depositions, hearings, trials or in connection 
with the Proceedings or-Other Proceedings; 

f. appointing his undersigned attorney as agent to receive service of 
such notices and subpoenas; 

g. waiving the territorial limits on service contained in Rule 45 of the 
Federal Rules of Civil Procedure and any applicable local rules, when requested to appear 
by the Division's staff; and 

h. entering into tolling agreements, when requested to do so by the 
Division's staff, during the period of cooperation. 

STATUTE OF LIMITATIONS 

5. The Respondent agrees that the running of any statute of limitations 
applicable to any action or proceeding against him authorized, instituted, or brought by or 
on behalf of the Commission arising out of the Investigation ("Proceeding"), including 
any sanctions or relief that may be imposed therein, is tolled and suspended during the 
Deferred Period. 

a. The Respondent and any of his attorneys or agents shall not 
include the Deferred Period in the calculation of the running of any statute of limitations 
or for any other time-related defense applicable to the Proceeding, including any 
sanctions or relief that may be imposed therein, in asserting or relying upon any such 
time-related defense. 



b. This agreement shall not affect any applicable statute of limitations 
defense or any other time-related defense that may be available to Respondent before the 
commencement of the Deferred Period or be construed to revive a Proceeding that may 
be barred by any applicable statute of limitations or any other time-related defense before 
the commencement of the Deferred Period. 

c. The running of any statute of limitations applicable to the 
Proceeding shall commence again after the end of the Deferred Period, unless there is an 
extension of the Deferred Period executed in writing by or on behalf of the parties hereto. 

d. This agreement shall not be construed as an admission by the 
Commission relating to the applicability of any statute of limitations to the Proceeding, 
including any sanctions or relief that may be imposed therein, or to the length of any 
limitations period that may apply, or to the applicability of any other time-related 
defense. 

STATEMENT OF FACTS1 

6. If this case had gone to trial, the Commission would have presented 
evidence sufficient to prove the following facts: 

a. Yuan, age 47, is a Chinese citizen and who resides in Shanghai, 
China. From 1996 until 2011, Yuan was employed as a sales executive at Parametric 
Technology (Hong Kong) Ltd. and Parametric Technology (Shanghai) Software Co., Ltd. 
(collectively, "PTC-China"). These two entities are subsidiaries of PTC Inc., a publicly 
traded Massachusetts corporation headquartered in Needham, Massachusetts. 

b. From at least 2006 into 2011, PTC-China provided, through 
business partners, items of value to employees and officers of Chinese state owned 
entities ("SOE employees and officers"), where the SOE's were PTC customers. These 
items of value were made to obtain or retain business from the SOEs. Specifically, PTC­
China provided, through business partners, non-business travel, primarily sightseeing and 
tourist activities, as well as improper gifts and entertainment, to the SOE employees and · 
officers. 

c. PTC-China provided these items of value in two primary ways: 1) 
by providing payments to third party agents, disguised as commission payments or sub­
contracting fees, which were then used to pay for non-business related foreign travel for 
SOE employees and officers; and 2) by allowing its sales staff to provide SOE employees 
and officers with gifts and excessive entertainment. 

d. For sales to Chinese SOE's, PTC-China routinely hired third 
parties - called "business partners" - both to find deals, for which PTC-China paid a 

The facts set forth in this section are made pursuant to settlement negotiations associated with the 
violations alleged by the Division in Paragraph 1 of this Agreement and are not binding in any other legal 
proceeding or on any other person or entity. 



commission or "success fee," as well as to provide information technology and other 
services, which PTC-China subcontracted to the business partner. Business partners were 
generally Chinese companies, purportedly with specific knowledge of, and relationships 
with, PTC-China's customers. 

e. Certain PTC employees knew that many of PTC-China's 
customers were SOEs whose employees were Chinese government officials. Certain 
business partners had long standing relationships with these SOE employees and officers. 
Generally, the business partners provided PTC-China with lobbying or "influence 
services" (i.e., arranging seminars and meetings with officials of the SO Es) and 
information technology services. Often the SOE employees and officers chose the 
business partner with whom they wished to collaborate. 

f. Senior PTC-China staff had discretion in setting the fee 
arrangements with business partners. PTC-China did not have a fixed success fee 
arrangement with its business partners, instead negotiating the fee for each particular 
deal. When PTC-China initially engaged the business partner, its sales team generally 
agreed to a price range for the business partners' commission - from as low as 15% to as 
high as 30% of the contract price - if the deal was successful. PTC-China's senior staff 
negotiated the commission with the business partner at or about the time a deal closed. 
PTC-China' s senior staff reported to a PTC employee who had authority over the 
commission approval process. 

g. For information technology and other subcontracted services, PTC-
China relied on sign-offs provided by the SOE's officials as evidence that the agreed 
upon services had been performed. Once the business partner and/or the SOE employees 
and officers confirmed that the business partner had completed the services, PTC-China 
made the agreed-upon payments to the business partner. 

h. Beginning in 2005, PTC-China recorded the commission and 
information technology subcontracting payments to business partners as "Complete 
Outsourced Deals" or "COD" expenses. After 2008, PTC-China began paying 
commissions to business partners as it received customer payment on the deals. PTC­
China sales staff tracked the payments to business partners on spreadsheets that they kept 
on their computers, and which were separate from PTC-China's electronic accounting 
records. These spreadsheets were used to track and monitor the arrangements and their 
payment status. 

i. During contract negotiations with SOEs, SOE employees and 
officers, in conjunction with a business partner, often requested that PTC-China provide 
them with overseas "training," which involved primarily tourist and sightseeing visits. 
The three parties would settle on a travel budget and the SOE employees and officers 
would typically agree to "gross up" the SO E's contract price by the amount of the 
anticipated travel costs. PTC-China sales staff itemized the overseas travel costs in the 
initial contract documents for approval by senior PTC-China staff. Once approved, 
however, PTC-China's practice was to remove the line item for overseas travel from the 



final contract documents that were signed by PTC and the SOEs. Instead, the funds 
budgeted for the overseas travel were disguised by PTC-China personnel as COD 
expenses related to success fees or subcontracting payments for business partners. 

j. Because PTC-China employees negotiated success fees with a 
business partner on a deal by deal basis, they were able to include the costs of the 
overseas travel as part of a business partner's fees without raising suspicion. In tum, the 
business partner used part of its success fee to pay for the overseas sightseeing trips. 
Alternatively, PTC-China employees sometimes put the overseas travel payments as a 
payment purportedly for providing information technology or other subcontracted 
services. The business partner (or customer) then provided PTC-China with documents 
indicating that it had performed the subcontracted services, and used a part of the 
subcontract fee to pay for the SOE employees' and officers' sightseeing trips. For certain 
more expensive trips, PTC-China employees spread the overseas travel payments over 
several contracts, each with its own COD budget. Because many deals with SOEs 
involved long term contracts that took several years to complete, the actual sightseeing 
trip sometimes occurred up to two to three years after the deal was negotiated. 

k. PTC-China sales staff tracked on spreadsheets kept separate from 
PTC-China's regularly maintained books and records the overseas travel payments made 
by business partners to or for the benefit of PTC's SOE customers. Senior PTC-China 
sales staff used the spreadsheets to understand the composition of, and negotiate, the 
success and other fees with the business partners. 

1. PTC-China employees and the business partners typically arranged 
the overseas sightseeing trips in conjunction with a visit to a PTC facility. Most often, 
PTC-China sales staff arranged for SOE employees and officers to visit PTC's corporate 
headquarters in Massachusetts, for PTC to market and demonstrate the company's 
products and services. The trips typically consisted of one day of business activities at 
PTC's facility, followed or preceded by additional days of sightseeing visits that lacked 
any business purpose, all of which were paid for by the business partners using funds 
from their grossed up success fees and subcontracting payments. Some PTC employees 
in the United States generally understood that SOE officials were spending additional 
days in the country, including for tourist activities. And certain PTC employees based in 
China were aware that PTC-China employees were accompanying SOE employees and 
officers to tourist destinations. 

m. Typical travel destinations in the United States included New 
York, Las Vegas, San Diego, Los Angeles, and Honolulu, and involved guided tours, 
golfing, and other leisure activities. PTC-China staff usually accompanied the SOE 
employees and officers on these trips. The SOE employees and officers who went on the 
trips often were signatories on the purchase agreements with PTC. 



PROHIBITIONS 

7. During the Deferred Period, the Respondent understands and agrees to 
comply with the following prohibitions: 

a. to refrain from violating the federal and state securities laws; and 

b. to refrain from violating the applicable rules promulgated by any 
self regulatory organization or professional licensing board. 

UNDERTAKINGS 

8. During the Deferred Period, the Respondent understands and agrees to 
perform the following undertakings: 

a. to provide written notification to the Division, within five days, if 
he has been questioned about, charged with, or convicted of an offense by any federal, 
state, or local law enforcement organization or regulatory agency; 

b. to provide written notification to the Division, within five days, if 
he has been questioned about, a formal or informal complaint has been made against him, 
or disciplinary action has been taken against him by any self-regulatory organization or 
professional licensing board; 

c. to provide the Division with a written certification of compliance 
with the prohibitions and undertakings in this Agreement between forty-five and sixty 
days before the end of the Deferred Period. 

PUBLIC STATEMENTS 

9. After the Deferred Period begins, on February 16, 2016, the Respondent 
agrees not to take any action or to make or permit any public statement through present or 
future attorneys, employees, agents, or other persons authorized to speak for him, except 
in legal proceedings in which the Commission is not a party, denying, directly or 
indirectly, any aspect of this Agreement or creating the impression that the allegations 
made by the Division in Paragraph 6 of this Agreement are without factual basis. If it is 
determined by the Commission that a public statement by the Respondent or any related 
person contradicts in whole or in part this Agreement, at its sole discretion, the 
Commission may bring an enforcement action in accordance with Paragraphs 12 through 
14. 

10. Prior to issuing a press release concerning this Agreement, the Respondent 
agrees to have the text of the release approved by the staff of the Division. 



SERVICE 

11. The Respondent agrees to serve by hand delivery or by next-day mail all 
writt~n notices and correspondence required by or related to this Agreement to Kara 
Brockmeyer, 100 F Street, NE, Washington, DC 20549 (202) 551-4767, unless 
otherwise directed in writing by the staff of the Division. 

VIOLATION OF AGREEMENT 

12. The Respondent understands and agrees that it shall be a violation of this 
Agreement if he knowingly provides false or misleading information or materials in 
connection with the Proceedings or Other Proceedings. In the event of such misconduct, 
the Division will advise the Commission of the Respondent's misconduct and may make 
a criminal referral for providing false information (18 U.S.C. § 1001), perjury (18 U.S.C. 
§ 1621), making false statements or declarations in court proceedings (18 U.S.C. § 1623), 
contempt (18 U.S.C. §§ 401-402) and/or obstructing justice (18 U.S.C. § 1503 et seq.). 

13. The Respondent understands and agrees that it shall be a violation of this 
Agreement if he violates the federal securities laws after entering into this agreement. It 
is further understood and agreed that should the Division determine that the Respondent 
has failed to comply with any term or condition of this Agreement, the Division will 
notify the Respondent or his counsel of this fact and provide an opportunity for the 
Respondent to make a submission consistent with the procedures set forth in the 
Securities Act of 1933 Release No. 5310. Under these circumstances, the Division may, 
in its sole discretion and not subject to judicial review, recommend to the Commission an 
enforcement action against the Respondent for any securities law violations, including, 
but not limited to, the substantive offenses relating to the Investigation. Nothing in this 
agreement limits the Division's discretion to recommend to the Commission an 
enforcement action against the Respondent for future violations of the federal securities 
laws, without notice, to protect the public interest. 

14. The Respondent understands and agrees that in any future enforcement 
action resulting from his violation of the Agreement, any documents, statements, 
information, testimony, or evidence provided by him during the Proceedings or Other 
Proceedings, and any leads derived there from, may be used against him in future legal 
proceedings. 

15. In the event he breaches this Agreement, the Respondent agrees not to 
contest or contradict in any future Commission enforcement action the factual statements 
contained in Paragraph 6 above as admissions pursuant to Federal Rule of Evidence 
801(d)(2). 



COMPLIANCE WITH AGREEMENT 

16. Subject to the full, truthful, and continuing cooperation of the Respondent, 
as described in Paragraph 4, and compliance by Respondent with all obligations, 
prohibitions and undertakings in the Agreement during the Deferred Period, the 
Commission agrees not to bring any enforcement action or proceeding against the 
Respondent arising from the Investigation, after the conclusion of the Deferred Period. 

1 7. The Respondent understands and agrees that this Agreement does not bind 
other federal, state or self-regulatory organizations, but the Commission may, at its 
discretion, issue a letter to these organizations detailing the fact, manner, and extent of 
his cooperation during the Proceedings or Other Proceedings, upon the written request of 
the Respondent. 

18. The Respondent understands and agrees that the Agreement only provides 
protection against enforcement actions arising from the Investigation and does not relate 
to any other violations or any individual or entity other than the Respondent. 

VOLUNTARY AGREEMENT 

19. The Respondent's decision to enter into this Agreement is freely and 
voluntarily made and is not the result of force, threats, assurances, promises, or 
representations other than those contained in this Agreement. 

20. The Respondent has read and understands this Agreement. Furthermore, 
he has reviewed all legal and factual aspects of this matter with his attorney and is fully 
satisfied with his attorney's legal representation. The Respondent has thoroughly 
reviewed this Agreement with his attorney and has received satisfactory explanations 
concerning each paragraph of the Agreement. After conferring with his attorney and 
considering all available alternatives, the Respondent has made a knowing decision to 
enter into the Agreement. 

ENTIRETY OF AGREEMENT 

21. This Agreement constitutes the entire agreement between the Commission 
and the Respondent, and supersedes all prior understandings, if any, whether oral or 
written, relating to the subject matter herein. 

22. This Agreement cannot be modified except in writing, signed by the 
Respondent and a representative of the Commission. 



23. In the event an ambiguity or a question of intent or interpretation arises, 
this Agreement shall be construed as if drafted jointly by the parties hereto, and no 
presumption or burden of proof shall arise favoring or disfavoring the Commission or the 
Respondent by virtue of the authorship of any of the provisions of the Agreement. 

The signatories below acknowledge acceptance of the foregoing terms and conditions. 

RESPONDENT 

Date Yu 

WITNESS'S CERTIFICATION 

On November l/f, 2015, Yu Kai Yuan, who is personally known to me, appeared 
before me and affirmed that he is signing the foregoing document of his own free will. 

Natne of Witness printed: 

RESPONDENT'S COUNSEL 
Approved as to form: 

ii I 2-o/1~ 
bate Elizabeth P. Gray, 

Willkie Farr & Gallagher LLP 
187 5 K Street, NW 
Washington, D.C. 2006 

SECURITIES AND EXCHANGE COMMISSION 
DIVISION OF ENFORCEMENT 

~ 
Date Kara Brockmeyer 

Chief, FCPA Unit