As Filed with the Securities and Exchange Commission on October 28, 1994
Registration No. 33-_______
THIS DOCUMENT IS A COPY OF THE REGISTRATION STATEMENT FILED ON OCTOBER 28, 1994
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------------
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
--------------------------------
INTERGRAPH CORPORATION
(Exact name of registrant as specified in charter)
Delaware 3571 63-0573222
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification
Number)
One Madison Industrial Park
Huntsville, Alabama 35894-0001
Telephone Number: (205) 730-2000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
-------------------------------------------
John W. Wilhoite
Vice President
INTERGRAPH CORPORATION
One Madison Industrial Park
Huntsville, Alabama 35894-0001
Telephone Number: (205) 730-2000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------------------------
With copies to:
John F. Mandt Jeffrey C. Howland
Balch & Bingham Womble Carlyle Sandridge & Rice, P.L.L.C.
1901 Sixth Avenue North 1600 Southern National Financial Center
Suite 2600 200 West Second Street
Birmingham, Alabama 35203 Winston-Salem, North Carolina 27101
----------------------------------------------
Approximate date of commencement of proposed sale to the public:
At the effective time of the merger (the "Merger") of a wholly owned
subsidiary of Registrant with and into InterCAP Graphics Systems, Inc.
("InterCAP") as described in the enclosed Prospectus/Proxy Statement.
-----------------------------------------------
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. ___
------------------------------------------------
CALCULATION OF REGISTRATION FEE
===============================================================================
Title of Each Proposed Proposed
Class of Amount Maximum Maximum Amount of
Securities to to be Offering Price Aggregate Registration
be Registered Registered Per Unit Offering Price Fee
===============================================================================
Common 1,079,738(1) $8.125(2) $8,772,871.25 $3,025.13
===============================================================================
(1) Based upon the maximum number of shares issuable in the Merger.
(2) Based upon the average of the bid and asked prices for Intergraph
Common Stock on October 24, 1994.
The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date
until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
===============================================================================
INTERGRAPH CORPORATION
Cross Reference Sheet Pursuant to Item 501(b) of Regulation S-K
Prospectus/Proxy Statement Heading or
Registration Statement Item and Caption Other Location
- --------------------------------------- --------------------------------------
1. Forepart of Registration Statement
and Outside Front Cover Page of
Prospectus Facing Page; Cross Reference Sheet;
Outside Front Cover Page of
Prospectus/Proxy Statement
2. Inside Front and Outside Back Cover
Page of Prospectus Available Information; Table of
Contents
3. Risk Factors, Ratio of Earnings to
Fixed Charges, and Other Information Summary; Available Information;
Market Price Data; Selected Financial
Data; Risk Factors; Information about
Intergraph
4. Terms of the Transaction Available Information; Summary; The
Merger and Related Transactions; The
Reorganization Agreement;Stockholder
Approval of Reorganization Agreement,
the Merger and the Charter Amendment;
Proposal to Amend InterCAP's
Certificate of Incorporation;
Security Ownership of Certain
Beneficial Owners and Management of
InterCAP; Description of Intergraph
Capital Stock; Principal Differences
Between Intergraph and InterCAP
Capital Stock
5. Pro Forma Financial Information Not Applicable
6. Material Contacts with the Company
Being Acquired The Merger and Related Transactions
7. Additional Information Required for
Reoffering by Persons and Parties
Deemed to be Underwriters Not Applicable
8. Interests of Named Experts and
Counsel Experts; Legal Opinions
9. Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities Indemnification
10. Information With Respect to S-3
Registrants Available Information; Incorporation
of Certain Documents by Reference
11. Incorporation of Certain
Information by Reference Available Information; Incorporation
of Certain Documents by Reference
12. Information with Respect to S-2
or S-3 Registrants Not Applicable
13. Incorporation of Certain
Information by Reference Not Applicable
14. Information With Respect to
Registrants Other than S-3 or S-2
Registrants Not Applicable
15. Information With Respect to S-3
Companies Not Applicable
16. Information With Respect to S-2 or
S-3 Companies Not Applicable
17. Information With Respect to
Companies Other than S-2 or S-3
Companies Outside Front Cover Page of
Prospectus/Proxy Statement; Summary;
Market Price Data; Selected
Financial Data; Risk Factors;
Management's Discussion and Analysis
of Financial Condition and Results
of Operations of InterCAP; Business
of InterCAP; Security Ownership of
Certain Beneficial Owners of
InterCAP; Description of InterCAP
Capital Stock; InterCAP's Financial
Statements
18. Information if Proxies, Consents
or Authorizations are to be
Solicited Outside Front Cover Page of
Prospectus/Proxy Statement;
Available Information; Summary;
Stockholder Approval of
Reorganization Agreement, the
Merger and the Charter Amendment;
The Merger and Related Transactions;
Proposal to Amend InterCAP's
Certificate of Incorporation;
Security Ownership of Certain
Beneficial Owners and Management of
InterCAP; Proxy Solicitation
19. Information if Proxies, Consents
or Authorizations are not to be
Solicited, or in an Exchange Offer Not Applicable
INTERCAP GRAPHICS SYSTEMS, INC.
116 DEFENSE HIGHWAY, SUITE 400
ANNAPOLIS, MARYLAND 21401
November __, 1994
Dear Stockholders:
We are pleased to invite you to a Special Meeting of
Stockholders of InterCAP Graphics Systems, Inc., a Delaware
corporation ("InterCAP"), to be held on December ____, 1994, at
10:00 a.m., local time (the "Meeting"), at the offices of
InterCAP, 116 Defense Highway, Suite 400, Annapolis, Maryland
21401. The purpose of the meeting is to obtain your approval of
the acquisition of InterCAP by Intergraph Corporation, a Delaware
corporation ("Intergraph").
On September 30, 1994, InterCAP signed an Agreement and Plan
of Reorganization (the "Reorganization Agreement") with
Intergraph and Intergraph DC Corporation - Subsidiary 7, a
Delaware corporation and a wholly owned subsidiary of Intergraph
("Intergraph Sub"), providing for the merger of Intergraph Sub
with and into InterCAP (the "Merger"). As a result of the
Merger, InterCAP would become a wholly owned subsidiary of
Intergraph. Pursuant to the terms of the Reorganization
Agreement, each outstanding share of InterCAP Common Stock,
InterCAP Series B Preferred Stock, and InterCAP Series C
Preferred Stock would be converted into a fraction of a share of
Intergraph Common Stock, par value $.10 per share (the
"Intergraph Common Stock"), having a value of $0.90975693, and
each share of InterCAP Series A Preferred Stock would be
converted into a fraction of a share of Intergraph Common Stock
having a value of $1.475. At the Meeting, you will be asked to
approve the Reorganization Agreement and the transactions
contemplated thereby.
You will also be asked at the Meeting and in connection with
the Merger, to approve an amendment to the Certificate of
Incorporation of InterCAP (the "Charter Amendment"). In 1993,
the stockholders of InterCAP approved an amendment to the
Certificate of Incorporation of InterCAP that reduced the
liquidation preference of the InterCAP Series A Preferred Stock
to $1.475 per share plus (if the effective date of the
liquidation was after October 1, 1994) an amount equal to one-
half of all accrued but unpaid dividends thereon (the "Series A
Liquidation Preference"). To facilitate the Merger, the holders
of the InterCAP Series A Preferred Stock have agreed to postpone
the increase in the Series A Liquidation Preference to January
15, 1995 and thereby postpone any further increase in the
difference between the value of the InterCAP Series A Preferred
Stock and the remaining classes of InterCAP Stock. The Charter
Amendment to be voted on at the Meeting would make this change to
the Certificate of Incorporation of InterCAP.
After careful consideration, your Board of Directors has
unanimously adopted and approved the Charter Amendment, the
Reorganization Agreement and the transactions contemplated
thereby (collectively, the "Proposed Transactions"). The Board
believes that the Proposed Transactions are advisable and in the
best interests of InterCAP and its stockholders and recommends
that you vote "FOR" the proposal to adopt and approve the Charter
Amendment and "FOR" the adoption and approval of the
Reorganization Agreement and the transactions contemplated
thereby.
The accompanying Prospectus/Proxy Statement provides a
detailed description of the Proposed Transactions. We urge you
to give careful consideration to the Prospectus/Proxy Statement.
Approval of the Proposed Transactions requires (i) in the
case of the Charter Amendment, the affirmative vote of (a) a
majority of the outstanding shares of InterCAP Common Stock and
InterCAP Preferred Stock, voting as a single class; (b) a
majority of the outstanding shares of InterCAP Series A Preferred
Stock, voting separately; (c) a majority of the outstanding
shares of InterCAP Series A Preferred Stock, and InterCAP Series
B Preferred Stock, voting as a single class; and (d) a majority
of the outstanding InterCAP Series C Preferred Stock, voting
separately; and (ii) in the case of the Reorganization Agreement
and the transactions contemplated thereby, the affirmative vote
of (a) at least 66.67% of the outstanding shares of InterCAP
Common Stock and the InterCAP Preferred Stock, voting as a single
class, and (b) a majority of the outstanding shares of InterCAP
Series A Preferred Stock and InterCAP Series B Preferred Stock,
voting as a single class.
To ensure that your shares are represented, please vote,
date, sign and mail the enclosed proxy in the envelope provided,
whether or not you expect to be present at the Meeting.
Sincerely,
A.G.W. Biddle, III
President and Chief Executive Officer
INTERCAP GRAPHICS SYSTEMS, INC.
116 DEFENSE HIGHWAY, SUITE 400
ANNAPOLIS, MARYLAND 21401
-------------------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
-------------------------------------
To the Holders of Common Stock and Preferred Stock of InterCAP
Graphics Systems, Inc.:
Notice is hereby given that a Special Meeting of
Stockholders of InterCAP Graphics Systems, Inc., a Delaware
corporation ("InterCAP"), will be held at the offices of
InterCAP, 116 Defense Highway, Suite 400, Annapolis, Maryland
21401 on December ___, 1994, at 10:00 a.m. for the following
purposes:
1. To consider and vote upon a proposal to amend
the Certificate of Incorporation of InterCAP to
extend the date from October 1, 1994 to January
15, 1995 after which the liquidation preference of
the InterCAP Series A Preferred Stock would be
increased from $1.475 per share to $1.475 per
share plus one-half of all accrued but unpaid
dividends thereon;
2. To consider and vote upon a proposal to adopt
and approve the Agreement and Plan of
Reorganization (the "Reorganization Agreement"),
dated as of September 30, 1994, by and among
InterCAP, Intergraph Corporation, a Delaware
corporation ("Intergraph"), and Intergraph DC
Corporation - Subsidiary 7, a Delaware corporation
and a wholly owned subsidiary of Intergraph
("Intergraph Sub"), and the transactions
contemplated thereby, which will include, without
limitation, (a) the merger of Intergraph Sub with
and into InterCAP (the "Merger"), in which,
subject to the terms and conditions set forth in
the Reorganization Agreement, (i) each outstanding
share of InterCAP Common Stock will automatically
be converted into the right to receive a fraction
of a share of Intergraph Common Stock having a
value of $0.90975693; (ii) each outstanding share
of InterCAP Preferred Stock will automatically be
converted into a fraction of a share of Intergraph
Common Stock as follows: (A) each share of
InterCAP Series A Preferred Stock will be
automatically converted into the right to receive
a fraction of a share of Intergraph Common Stock
having a value of $1.475; (B) each share of
InterCAP Series B Preferred Stock will be
automatically converted into the right to receive
a fraction of a share of Intergraph Common Stock
having a value of $0.90975693; and (C) each share
of InterCAP Series C Preferred Stock will be
automatically converted into the right to receive
a fraction of a share of Intergraph Common Stock
having a value of $0.90975693; (b) an agreement by
all InterCAP stockholders to escrow, for ninety
days, fifteen percent (15%) of the shares of
Intergraph Common Stock to be received by them in
the Merger as security for certain post-closing
InterCAP stockholder indemnification obligations
following the Merger relating to breaches of
representations, warranties and covenants
contained in the Reorganization Agreement, and to
appoint a Stockholders' Committee relating to such
escrowed shares; and (c) the assumption by
Intergraph of outstanding options to acquire
InterCAP Common Stock and the conversion of such
options into Intergraph options; and
3. To consider and act upon such other matters as may
properly come before the meeting.
The Board of Directors of InterCAP has determined that only
those persons who were holders of record of InterCAP Common Stock
or InterCAP Preferred Stock at the close of business on
______________ ___, 1994, will be entitled to notice of, and to
vote at, the meeting and any adjournment thereof.
ANY STOCKHOLDER SHALL HAVE THE RIGHT, IN CONNECTION WITH THE
REORGANIZATION AGREEMENT, TO DEMAND AND RECEIVE PAYMENT OF THE
FAIR VALUE OF HIS OR HER SHARES OF INTERCAP COMMON STOCK AND
INTERCAP PREFERRED STOCK UPON COMPLIANCE WITH SECTION 262 OF THE
DELAWARE GENERAL CORPORATION LAW. FOR A SUMMARY OF SUCH RIGHTS,
SEE "THE MERGER AND RELATED TRANSACTIONS -- DISSENTERS' RIGHTS"
IN THE ACCOMPANYING PROSPECTUS/PROXY STATEMENT. THE FULL TEXT OF
SUCH SECTION IS SET FORTH AS APPENDIX C THERETO.
By Order of the Board of Directors
John C. Gebhardt
Secretary
Annapolis, Maryland
November ____, 1994
WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE MEETING, YOU ARE
URGED TO SIGN, DATE AND MAIL THE ENCLOSED PROXY PROMPTLY. IF YOU
ATTEND THE MEETING, YOU CAN VOTE EITHER IN PERSON OR BY YOUR
PROXY.
INTERGRAPH CORPORATION
Prospectus
Common Stock
$.10 Par Value
------------------
INTERCAP GRAPHICS SYSTEMS, INC.
Proxy Statement
Special Meeting of Stockholders
December ___, 1994
This Prospectus/Proxy Statement constitutes a prospectus of
Intergraph Corporation, a Delaware corporation ("Intergraph"), in
respect of up to 1,079,738 shares (the "Merger Shares") of common
stock, par value $.10 per share, of Intergraph ("Intergraph
Common Stock"), issuable to holders of common stock, par value
$.01 per share ("InterCAP Common Stock"), and preferred stock,
par value $.01 per share ("InterCAP Preferred Stock"), of
InterCAP Graphics Systems, Inc., a Delaware corporation
("InterCAP"), upon consummation of the proposed merger (the
"Merger"), herein described of Intergraph DC Corporation -
Subsidiary 7, a Delaware corporation ("Intergraph Sub"), into
InterCAP in accordance with the Agreement and Plan of
Reorganization dated as of September 30, 1994 among Intergraph,
Intergraph Sub and InterCAP (the "Reorganization Agreement").
For a description of the Reorganization Agreement and related
Merger, see "The Merger and Related Transactions" and "The
Reorganization Agreement."
This Prospectus/Proxy Statement also is furnished in
connection with solicitations from stockholders of InterCAP by
the InterCAP Board of Directors of proxies for the special
meeting of its stockholders to be held on December __, 1994, or
any adjournments thereof (the "Meeting"). At the Meeting, the
holders of InterCAP Common Stock and InterCAP Preferred Stock
will consider and vote upon (i) a proposal to amend the
Certificate of Incorporation of InterCAP to extend the date (from
October 1, 1994 to January 15, 1995) upon which the liquidation
preference of the InterCAP Series A Preferred Stock would be
increased from $1.475 per share to $1.475 per share plus one-half
of all accrued but unpaid dividends thereon (the "Charter
Amendment"), and (ii) a proposal to adopt and approve the
Reorganization Agreement and the transactions contemplated
thereby. See "Stockholder Approval of Reorganization Agreement,
the Merger and the Charter Amendment--Stockholder Meeting."
For a description of the Reorganization Agreement, which is
included in its entirety as Appendix A to the Prospectus/Proxy
Statement, see "The Reorganization Agreement."
FOR A DISCUSSION OF CERTAIN FACTORS WHICH SHOULD BE
CONSIDERED BY INTERCAP STOCKHOLDERS BEFORE CONSENTING TO THE
APPROVAL AND ADOPTION OF THE REORGANIZATION AGREEMENT AND THE
MERGER, SEE "RISK FACTORS."
All information herein with respect to InterCAP has been
furnished by InterCAP and all information herein with respect to
Intergraph has been furnished by Intergraph.
THE SECURITIES TO BE ISSUED PURSUANT TO THIS
PROSPECTUS/PROXY STATEMENT HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus/Proxy Statement and the accompanying form of
proxy are first being mailed to stockholders of InterCAP on or
about November ___, 1994.
NO PERSON HAS BEEN AUTHORIZED BY INTERGRAPH OR INTERCAP TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED
IN THIS PROSPECTUS/PROXY STATEMENT IN CONNECTION WITH THE
SOLICITATION OF PROXIES OR THE OFFERING OF SECURITIES MADE HEREBY
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY INTERGRAPH OR
INTERCAP. THIS PROSPECTUS/PROXY STATEMENT DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES
OFFERED BY THIS PROSPECTUS/PROXY STATEMENT OR A SOLICITATION OF A
PROXY IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT
WOULD BE UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS/PROXY STATEMENT NOR ANY
DISTRIBUTION OF THE SECURITIES TO WHICH THIS PROSPECTUS/PROXY
STATEMENT RELATES SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION
CONTAINED HEREIN SINCE THE DATE HEREOF OR THAT THE INFORMATION
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
The principal executive offices of InterCAP are at 116
Defense Highway, Suite 400, Annapolis, Maryland 21401.
The principal executive offices of Intergraph are at One
Madison Industrial Park, Huntsville, Alabama 35894-0001.
The date of this Prospectus/Proxy Statement is November ___, 1994.
TABLE OF CONTENTS
Page
----
AVAILABLE INFORMATION 1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 1
SUMMARY 3
The Companies 3
The Merger and Related Transactions 4
The Reorganization Agreement 8
The Charter Amendment 12
Vote of Stockholders of InterCAP 12
MARKET PRICE DATA 15
SELECTED FINANCIAL DATA 16
Intergraph Corporation 16
InterCAP Graphics Systems, Inc. 16
Comparative Per Share Data 18
RISK FACTORS 18
Volatility of Share Price 18
Losses; Declining Financial Resources 19
Technological Change; Product Transition 20
Provisions Potentially Affecting Change in Control of Intergraph 20
No Dividends 20
THE MERGER AND RELATED TRANSACTIONS 20
Background of the Merger 20
Joint Reasons for the Merger 24
Intergraph's Reasons for the Merger 24
InterCAP's Reasons For The Merger 25
InterCAP Board Recommendation 28
Interests of Certain Persons in the Merger 28
Certain Federal Income Tax Considerations 30
Preferred Stock Agreement 33
Escrow Agreement 34
Options Outstanding Prior to the Merger 35
Governmental and Regulatory Approvals 37
Tax Certification 37
Employment Agreements 38
Accounting Treatment 39
Dissenters' Rights 39
THE REORGANIZATION AGREEMENT 42
Effective Date of the Merger 42
Effects of the Merger 42
Aggregate Merger Consideration 43
Manner and Basis of Converting InterCAP Stock 43
InterCAP Options 45
Representations and Warranties 45
Certain Covenants 46
Conditions to the Merger 48
Indemnification 50
Termination 50
Amendment 51
Merger Expenses and Fees 51
Termination Fee 51
PROPOSAL TO AMEND INTERCAP'S CERTIFICATE OF INCORPORATION 52
General 52
Background 52
Effect of the Charter Amendment 53
STOCKHOLDER APPROVAL OF REORGANIZATION AGREEMENT,
THE MERGER AND THE CHARTER AMENDMENT 54
Stockholder Vote 54
Stockholder Meeting 54
Record Date and Shares Entitled to Vote 54
Proxies; Quorum 55
Vote Required for Charter Amendment 55
Vote Required for Reorganization Agreement and Merger 55
Beneficial Security Ownership of Certain Persons 56
Dissenters' Rights 56
INFORMATION ABOUT INTERGRAPH 56
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF INTERCAP 57
Overview 57
Results of Operations - Years Ended June 30, 1992, 1993 and 1994 57
Results of Operations - Three Months Ended September 30, 1993 and 1994 60
BUSINESS OF INTERCAP 62
Introduction 62
Principal Products and Services 63
Competition 64
Backlog 64
Strategic Partnerships 65
Employees 65
Properties 65
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT OF INTERCAP 65
DESCRIPTION OF INTERGRAPH CAPITAL STOCK 67
Intergraph Common Stock 67
Stockholder Rights Plan 67
Delaware Law and Certain Charter and By-law Provisions 71
Transfer Agent and Registrar 73
Listing 73
DESCRIPTION OF INTERCAP CAPITAL STOCK 73
InterCAP Common Stock 73
InterCAP Preferred Stock 74
Options 77
Warrants 77
PRINCIPAL DIFFERENCES BETWEEN INTERGRAPH AND INTERCAP
CAPITAL STOCK 77
Power to Call Special Stockholders' Meetings 77
Stockholder Rights Plan 78
Vacancies on the Board of Directors 78
Stockholder Approval of Certain Business Combinations 78
Action by Consent of Stockholders 78
Stockholder Voting 78
Liquidation, Conversion, Redemption 79
EXPERTS 79
LEGAL MATTERS 79
PROXY SOLICITATION 80
INDEX TO AUDITED FINANCIAL STATEMENTS OF INTERCAP F-1
Appendix A Agreement and Plan of Reorganization A-1
Appendix B Form of Amendment to InterCAP's Certificate of Incorporation B-1
Appendix C Section 262 of the Delaware Business Corporation Act C-1
AVAILABLE INFORMATION
Intergraph is subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and in accordance therewith files reports, proxy statements and
other information with the Securities and Exchange Commission
(the "SEC"). Copies of such reports, proxy statements and other
information can be obtained, upon payment of prescribed fees,
from the SEC at Room 1024, 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549. In addition, such reports, proxy
statements and other information can be inspected at the SEC's
facilities referred to above and at the SEC's Regional Offices at
Seven World Trade Center (13th Floor), New York, New York 10048
and Northwestern Atrium Center, 500 West Madison, Suite 1400,
Chicago, Illinois 60661. The Intergraph Common Stock is listed
on the NASDAQ National Market System, and such reports, proxy
statements and other information concerning Intergraph should be
available for inspection and copying at the offices of NASDAQ
Operations, 1735 K Street N.W., Washington, D.C. 20006.
Intergraph has filed with the SEC a Registration Statement on
Form S-4 (together with any amendments thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the shares of Intergraph
Common Stock to be issued in the Merger. This Prospectus/Proxy
Statement does not contain all the information set forth in the
Registration Statement. Such additional information may be
obtained from the SEC's principal office in Washington, D.C.
Statements contained in this Prospectus/Proxy Statement or
in any document incorporated by reference in this
Prospectus/Proxy Statement as to the contents of any contract or
other document referred to herein or therein are not necessarily
complete, and in each instance, reference is made to the copy of
such contract or other document filed as an exhibit to the
Registration Statement or such other document, each such
statement being qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the SEC are incorporated
in this Prospectus/Proxy Statement by reference:
(a) Intergraph's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993;
(b) Intergraph's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1994, filed May 12, 1994;
(c) Intergraph's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994, filed August 11, 1994;
(d) Intergraph's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1994, filed October 26, 1994;
(e) The description of Intergraph's Common Stock
contained in Intergraph's Form 8-A Registration
Statement filed on May 1, 1981, as amended by the Form
8 filed by Intergraph on July 23, 1986;
(f) Intergraph's Current Report on Form 8-K filed
August 25, 1993; and
(g) Intergraph's definitive Proxy Statement for the
Annual Meeting of Stockholders held May 12, 1994.
All documents filed by Intergraph pursuant to Section 13(a),
14 or 15(d) of the Exchange Act after the date of this
Prospectus/Proxy Statement and prior to the Meeting shall be
deemed incorporated by reference in this Prospectus/Proxy
Statement and a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or
deemed incorporated herein by reference will be deemed to be
modified or superseded for the purpose of this Prospectus/Proxy
Statement to the extent that a statement contained herein or in
the other subsequently filed document which also is, or is deemed
to be, incorporated herein by reference modifies or supersedes
such statement. Any such statement so modified or superseded
will not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus/Proxy Statement.
This Prospectus/Proxy Statement incorporates by reference
certain documents relating to Intergraph which are not presented
herein or delivered herewith. Such documents, other than certain
exhibits to such documents, are available without charge upon
request made to Intergraph Corporation, One Madison Industrial
Park, Huntsville, Alabama 35894-0001 (telephone (205) 730-2000),
Attention: Shareholder Relations. In order to ensure timely
delivery of the documents, any request should be made at least 10
days prior to the Meeting.
InterCAP is not subject to filing requirements under the
Securities Act or the Exchange Act, and, accordingly, no
information or documents relating to InterCAP are incorporated
herein by reference.
SUMMARY
The following is a summary of certain information contained
elsewhere in this Prospectus/Proxy Statement. Reference is made
to, and this summary is qualified in its entirety by, the more
detailed information appearing elsewhere in this Prospectus/Proxy
Statement and the Appendices hereto. Stockholders are urged to
read this Prospectus/Proxy Statement and the Appendices hereto in
their entirety.
The Companies
Intergraph Corporation
Intergraph is a Delaware corporation engaged in the business
of developing interactive computer graphics systems for a variety
of applications. Intergraph was organized in 1969. Intergraph
develops, manufactures, sells and services computer hardware and
software, and provides a variety of third party packages that
supplement the capabilities of its own software products.
Intergraph's principal executive offices are located at One
Madison Industrial Park, Huntsville, Alabama 35894-0001 and its
telephone number is (205) 730-2000.
Intergraph DC Corporation - Subsidiary 7
Intergraph Sub is a Delaware corporation and wholly owned
subsidiary of Intergraph. Intergraph Sub was organized in 1990.
Intergraph Sub is being merged with and into InterCAP in order to
effectuate the acquisition of InterCAP by Intergraph. Intergraph
Sub conducts no business and owns no assets other than those
incidental to its formation and those necessary to effect the
Merger and related transactions. Intergraph Sub's offices are
located at One Madison Industrial Park, Huntsville, Alabama 35894-
0001 and its telephone number is (205) 730-2000.
InterCAP Graphics Systems, Inc.
InterCAP is a Delaware corporation engaged in the business
of designing and producing complex computer software systems that
assist in creating, editing, converting and presenting technical
illustrations used by large manufacturing firms. InterCAP was
organized in 1987 and has its principal office at 116 Defense
Highway, Suite 400, Annapolis, Maryland 21401. Its telephone
number is (410) 224-2926.
The Merger and Related Transactions
Aggregate Merger Consideration
Pursuant to the Reorganization Agreement, Intergraph will
pay or furnish total consideration having a value (based on the
Share Determination Market Price, as hereinafter defined) of $7.5
million for the entire equity interest of InterCAP. Such
consideration will be paid or furnished (i) by the conversion of
outstanding InterCAP Options (as defined herein) into options to
acquire Intergraph Common Stock such that the aggregate value of
all options (based upon the difference between the exchange ratio
per share of InterCAP Common Stock and the exercise price per
share of such options) so converted at the time the Merger is
consummated will be equal to $1,021,573.65 (the "Aggregate
Assumed Option Spread"), (ii) by the issuance of shares of
Intergraph Common Stock (and cash payments in respect of
fractional shares) in an amount equal to $7.5 million minus the
Aggregate Assumed Option Spread (the amount specified in this
clause (ii) is referred to as the "Closing Merger
Consideration"). The Closing Merger Consideration shall be
allocated among the classes of InterCAP Stock (as defined herein)
according to the exchange ratios described elsewhere in this
summary. See "The Reorganization Agreement--Manner and Basis of
Converting InterCAP Stock." The precise number of shares of
Intergraph Common Stock issued to each stockholder of InterCAP
shall be determined prior to consummation of the Merger based on
the applicable exchange ratio and the Share Determination Market
Price. It is expected that, upon consummation of the Merger, the
holders of InterCAP Stock will receive shares of Intergraph
Common Stock representing approximately 1.57% of the Intergraph
Common Stock outstanding as of such time.
Reasons for the Merger
In the discussions that led to the execution of the
Reorganization Agreement, Intergraph and InterCAP identified a
number of potential joint benefits resulting from the Merger,
including expanded marketing, distribution and technical
opportunities for the two companies, a more diversified
intellectual property base, and the benefits of combining the
complementary products of the two firms. In addition, Intergraph
believes that the acquisition of InterCAP will provide Intergraph
with both strategic and technical advantages by expanding
Intergraph's product mix and customer base. The InterCAP Board
of Directors believes the Merger will enhance InterCAP's
marketing and distribution capabilities as well as its financial
and technical resources for product development. In addition,
the Merger affords InterCAP investors with liquidity for their
InterCAP Common Stock and InterCAP Preferred Stock (collectively
"InterCAP Stock"). See "The Merger and Related Transactions."
Recommendation of InterCAP's Board of Directors
The Board of Directors of InterCAP has unanimously adopted
and approved the Charter Amendment, the Reorganization Agreement
and the transactions contemplated thereby (collectively, the
"Proposed Transactions"). The Board believes that the Proposed
Transactions are advisable and in the best interests of InterCAP
and its stockholders and recommends that InterCAP stockholders
vote for approval and adoption of the Proposed Transactions.
Related Agreements
Preferred Stock Agreement. Pursuant to the Preferred Stock
Agreement entered into between InterCAP and certain stockholders
of InterCAP as of September 30, 1994 (the "Preferred Stock
Agreement"), such stockholders have agreed, among other things,
(i) to vote all of their shares of InterCAP Stock in favor of
approving the Charter Amendment; (ii) in the case of holders of
InterCAP Series A Preferred Stock, to elect to take the
liquidation preference of $1.475 per share of InterCAP Series A
Preferred Stock; (iii) in the case of the remaining classes of
InterCAP Preferred Stock, to elect to convert the InterCAP Series
B Preferred Stock and InterCAP Series C Preferred Stock into
InterCAP Common Stock prior to the consummation of the Merger;
and (iv) that the receipt of a fraction of a share of Intergraph
Common Stock with a value of $1.475 per share of InterCAP Series
A Preferred Stock and the receipt of a fraction of a share of
Intergraph Common Stock with a value of $0.90975693 per share of
InterCAP Common Stock upon conversion of the InterCAP Series B
Preferred Stock and the InterCAP Series C Preferred Stock shall
be in complete and full satisfaction of all rights and
preferences attendant to such Preferred Stock. See "The Merger
and Related Transactions--Preferred Stock Agreement."
Escrow Agreement. Under the terms of the Reorganization
Agreement and the Escrow Agreement (the "Escrow Agreement") to be
entered into among Intergraph, the Stockholders' Committee (as
defined in the Reorganization Agreement) and an escrow agent to
be selected by Intergraph and InterCAP (the "Escrow Agent"), at
the consummation of the Merger, Intergraph will deliver to the
Escrow Agent one or more certificates representing a portion of
the shares of Intergraph Common Stock to be issued to the
InterCAP stockholders, equal in the aggregate to fifteen percent
(15%) of the aggregate shares of Intergraph Common Stock to be
issued to all InterCAP stockholders in the Merger (such shares
being referred to herein as the "Escrow Shares"). The Escrow
Shares will secure the InterCAP stockholders' indemnification
obligations with respect to the representations and warranties
made by InterCAP in the Reorganization Agreement. In the event a
valid indemnification claim is timely asserted by Intergraph,
some or all of the Escrow Shares will be forfeited by the
InterCAP stockholders and returned to Intergraph. The Escrow
Shares will remain in escrow until the 90th day after the
consummation of the Merger, at which time the Escrow Agent will
distribute the remaining Escrow Shares which are not then subject
to pending claims by indemnified person(s) under the Escrow Agreement,
if any, to the InterCAP stockholders in the manner described in the
Escrow Agreement. See "The Merger and Related Transactions--
Escrow Agreement."
InterCAP Incentive Stock Option Agreements
Under the terms of certain employee stock option agreements
(the "ISO Agreements") entered into from time to time between
InterCAP and various employees (each an "Optionee"), InterCAP has
granted options denominated as incentive stock options to each
Optionee in consideration of the continued employment service of
the Optionee (the "ISO's"). The options are authorized by the
InterCAP 1989 Stock Option Plan (the "InterCAP Option Plan").
Intergraph will assume such options in connection with the
Merger, following adjustment of the exercise price and number of
shares covered thereby. See "The Merger and Related Transactions-
- -Options Outstanding Prior to the Merger."
InterCAP Nonqualified Stock Option Agreements
Under the terms of Nonqualified Stock Option Agreements
between InterCAP and various Optionees, InterCAP has granted
nonqualified stock options to each Optionee in recognition of
such Optionee's past service to InterCAP and to induce the
Optionee to remain an employee of InterCAP following its merger
with Intergraph Sub (the "NQSO's"). The options are authorized
by the InterCAP 1994 Nonqualified Stock Option Program (the
"InterCAP Option Program"). Intergraph will assume such options
in connection with the Merger, following adjustment of the
exercise price and number of shares covered thereby. See "The
Merger and Related Transactions--Options Outstanding Prior to the
Merger."
Certain Federal Income Tax Considerations
Counsel to InterCAP and counsel to Intergraph have each
provided an opinion that the Merger will be treated as a tax-free
reorganization for federal income tax purposes, so that no gain
or loss will be recognized by InterCAP stockholders on the
exchange of InterCAP Stock for Intergraph Common Stock, except to
the extent that InterCAP stockholders receive cash in lieu of
fractional shares in the exchange. Such opinions are based upon
certain assumptions and subject to certain qualifications noted
therein. In addition, such opinions will assume that at the time
the Merger is consummated, the InterCAP stockholders will furnish
InterCAP and Intergraph with certificates confirming that the
InterCAP stockholders, as a group, do not then have a present
intention to sell, transfer, pledge or otherwise dispose of more
than 50% of the shares of Intergraph Common Stock to be received
in the Merger. The Reorganization Agreement does not require the
parties to obtain a ruling from the Internal Revenue Service as
to the tax consequences of the Merger. INTERCAP STOCKHOLDERS ARE
URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING SUCH TAX
CONSEQUENCES. See "The Merger and Related Transactions--Certain
Federal Income Tax Considerations."
Accounting Treatment
The Merger is expected to be treated as a purchase for
financial accounting purposes. See "The Merger and Related
Transactions--Accounting Treatment."
Governmental and Regulatory Approvals
Intergraph and InterCAP are aware of no governmental or
regulatory approvals required for consummation of the Merger,
other than compliance with the Securities Act and applicable
state securities and "blue sky" laws.
Dissenters' Rights
Under the Delaware Act (as hereinafter defined), record
holders of InterCAP Stock who or which, prior to the vote at the
Meeting, properly demand appraisal and vote against or abstain
from voting on the Reorganization Agreement and the Merger have
the right to obtain a cash payment for the "fair value" of their
shares (excluding any element of value arising from the
accomplishment or expectation of the Merger). In order to
exercise such rights, holders of InterCAP Stock must comply with
the procedural requirements of Section 262 of the Delaware Act, a
description of which is provided in "The Merger and Related
Transactions--Dissenters' Rights" and the full text of which is
attached to this Prospectus/Proxy Statement as Appendix C. Such
"fair value" would be determined in judicial proceedings, the
result of which cannot be predicted. Failure to take any of the
steps required under Section 262 on a timely basis may result in
the loss of appraisal rights. Intergraph's obligation to
consummate the Merger is subject to the condition that the
holders of no more than 5% of the shares of InterCAP Stock shall
have perfected their dissenters' rights.
Exchange of Certificates
The exchange of certificates evidencing shares of InterCAP
Stock for certificates evidencing shares of Intergraph Common
Stock will be made upon surrender of InterCAP share certificates
to the exchange agent appointed by Intergraph to act in such
capacity with respect to the Merger (the "Exchange Agent"). As
soon as practicable after the Effective Date, the Exchange Agent
will mail to each holder of record of InterCAP Stock a letter of
transmittal and written instructions for use in effecting the
surrender of InterCAP share certificates (collectively, the
"Letter of Transmittal"). CERTIFICATES SHOULD NOT BE SURRENDERED
FOR EXCHANGE BEFORE THE STOCKHOLDERS OF INTERCAP RECEIVE THE
LETTER OF TRANSMITTAL FROM THE EXCHANGE AGENT FOLLOWING
CONSUMMATION OF THE MERGER.
The Reorganization Agreement
If the Reorganization Agreement and the Merger are approved
and adopted by the stockholders of InterCAP and the other
conditions to the Merger are satisfied or waived, the Merger will
become effective upon the filing by InterCAP of a certificate of
merger with the Secretary of State of the State of Delaware, in
the manner provided under Section 251 of the Delaware Act (the
date of such filing being referred to herein as the "Effective
Date"). Assuming all conditions to the Merger are met or waived
prior thereto, it is anticipated that the Effective Date will
occur on or about December ___, 1994.
General
Effects of the Merger. Upon consummation of the Merger,
Intergraph Sub will be merged with and into InterCAP, with
InterCAP surviving the Merger and becoming a wholly owned
subsidiary of Intergraph (the "Surviving Corporation"). The
officers and directors of Intergraph Sub immediately prior to the
Merger will be the officers and directors of the surviving
corporation in the Merger. The stockholders of InterCAP will
become stockholders of Intergraph (as described below), and their
rights will be governed by Intergraph's Certificate of
Incorporation and Restated By-laws.
Conversion of Shares of InterCAP Stock. Upon consummation
of the Merger, (a) each then outstanding share of InterCAP Common
Stock will automatically be converted into the right to receive a
fraction of a share of Intergraph Common Stock having a value of
$0.90975693; (b) each then outstanding share of InterCAP
Preferred Stock will automatically be converted into a fraction
of a share of Intergraph Common Stock as follows: (i) each share
of InterCAP Series A Preferred Stock will be automatically
converted into the right to receive a fraction of a share of
Intergraph Common Stock having a value of $1.475; (ii) each share
of InterCAP Series B Preferred Stock, if any, will be
automatically converted into the right to receive a fraction of a
share of Intergraph Common Stock having a value of $0.90975693;
and (iii) each share of InterCAP Series C Preferred Stock, if
any, will be automatically converted into the right to receive a
fraction of a share of Intergraph Common Stock having a value of
$0.90975693. Cash will be paid in lieu of issuing fractional
shares. Each share of Intergraph Common Stock will be valued at
the average closing sale price of Intergraph Common Stock as
reported by NASDAQ for the ten (10) days of trading immediately
preceding the fifth business day prior to the Effective Date (the
"Share Determination Market Price").
Assumption of Options. Upon consummation of the Merger,
each outstanding InterCAP option denominated as an ISO and each
outstanding NQSO (each, an "InterCAP Option") will be assumed by
Intergraph and automatically converted into an option to purchase
a number of shares of Intergraph Common Stock determined by
multiplying the number of shares of InterCAP Common Stock subject
to the InterCAP Option by the fraction resulting from dividing
$0.90975693 by the Share Determination Market Price (the "Option
Conversion Fraction"). The exercise price of each assumed option
(an "Assumed Option") will be equal to the exercise price of the
InterCAP Option at the time the Merger is consummated divided by
the Option Conversion Fraction. The other terms of the Assumed
Options will remain unchanged, and, as a result, the ISO's will
be fully vested by virtue of the Merger and the NQSO's will be
50% vested upon the Effective Date, with an additional 25% to
vest on the two succeeding anniversaries of the Effective Date so
long as the Optionee remains an employee of the Surviving
Corporation. To avoid fractional shares, the number of shares of
Intergraph Common Stock subject to an Assumed Option will be
rounded up to the nearest whole share. Prior to the Effective
Date, Intergraph intends to file Registration Statements on Form
S-8 with the SEC with respect to the issuance of shares of
Intergraph Common Stock upon exercise of the Assumed Options.
At the Record Date, the number of shares of InterCAP Common
Stock subject to ISO's and NQSO's were 935,062 and 391,562,
respectively.
Conditions to the Merger
In addition to the requirement that the approval by
InterCAP's stockholders be received, consummation of the Merger
is subject to a number of other conditions that, if not satisfied
or waived, may cause the Merger not to be consummated and the
Reorganization Agreement to be terminated. Intergraph's
obligation to consummate the Merger is conditioned on, among
other things, the accuracy of InterCAP's representations, the
absence of a material adverse change in InterCAP's business,
InterCAP's performance of its covenants and each party's receipt
of favorable legal opinions (including an opinion to the effect
that the Merger will be treated for federal income tax purposes
as a tax-free reorganization). See "The Reorganization Agreement-
- -Conditions to the Merger."
Representations and Covenants
In the Reorganization Agreement, InterCAP made a number of
representations regarding its capital structure, operations,
financial condition and other matters, including its authority to
enter into the Reorganization Agreement and to consummate the
Merger. InterCAP covenanted, among other things, that, until the
consummation of the Merger or the termination of the
Reorganization Agreement, it will operate its business in the
normal and ordinary course, use its best efforts to maintain its
business and refrain from taking certain actions without
Intergraph's written consent. In addition, each party agreed to
use its best efforts to consummate the Merger. InterCAP has agreed
not to initiate, solicit or facilitate any proposals that compete
with the Merger, and that, if the Board of Directors of InterCAP
receives an unsolicited proposal from a third party, it may pursue
or accept such proposal, but only upon certification in writing to
Intergraph that the Board of Directors of InterCAP has determined
that the proposal or offer is more favorable to InterCAP and its
stockholders and that the Board of Directors of InterCAP has
determined, with the advice of counsel, that it must accept such
proposal or offer in the exercise of its fiduciary duties. See
"The Reorganization Agreement--Representations and Warranties;
Certain Covenants." Moreover, if such action results in
termination of the Reorganization Agreement, InterCAP must pay a
termination fee to Intergraph. See "The Reorganization Agreement-
- -Termination Fee."
Indemnification
By virtue of their adoption and approval of the
Reorganization Agreement, the InterCAP stockholders will have
agreed, jointly and severally, to indemnify Intergraph and
Intergraph Sub and their respective affiliates, successors and
assigns (the "Indemnified Persons") against certain losses
arising from a breach of the representations and warranties made
by InterCAP in the Reorganization Agreement. However, the
maximum liability of each InterCAP stockholder for such
indemnification will not (in the absence of fraud, willful
misrepresentation, willful omission of a material fact, or
violations of the applicable securities laws) exceed such
stockholder's pro rata share of the Escrow Shares. See "The
Merger and Related Transactions--Escrow Agreement."
Termination of the Reorganization Agreement
The Reorganization Agreement may be terminated under certain
circumstances, including termination by the mutual consent of
Intergraph, Intergraph Sub and InterCAP, termination by InterCAP
in the event the InterCAP Board of Directors determines to pursue
a superior offer concerning a merger or similar transactions, and
termination by Intergraph, Intergraph Sub or InterCAP if the
Merger is not consummated on or before December 31, 1994. See
"The Reorganization Agreement--Termination."
Amendment of the Reorganization Agreement
The Reorganization Agreement may be amended by the parties
thereto as provided therein, provided such amendment is in
writing, at any time before or after the approval and adoption of
the Reorganization Agreement and the Merger by the InterCAP
stockholders. After any such stockholder approval and adoption
has been obtained, however, no amendment of any of the agreements
executed in connection with the Merger may be made that reduces
the total Merger consideration or that materially affects the
rights of InterCAP's stockholders hereunder, without obtaining
such further approval. See "The Reorganization Agreement--
Amendment."
Expenses of the Merger; Termination Fee
Each party to the Reorganization Agreement will pay its own
costs and expenses incident to the Reorganization Agreement and
in carrying out the transactions contemplated thereby.
Notwithstanding the foregoing, the Reorganization Agreement
requires InterCAP to reimburse Intergraph for its transaction
expenses (including attorneys fees) in connection with the
Reorganization Agreement if InterCAP intentionally breaches the
covenants in the Reorganization Agreement or makes certain
knowing material misstatements to Intergraph in connection
therewith. In addition, the Reorganization Agreement requires
InterCAP to pay a termination fee to Intergraph if InterCAP
terminates the Reorganization Agreement to pursue a superior
offer, if the InterCAP Board of Directors withdraws or modifies
its recommendation to the stockholders concerning the Merger, or
if the stockholders disapprove the Merger and then pursue a
superior offer within 180 days. Such termination fee, if any,
will be equal to the greatest of (i) Intergraph's expenses (not
to exceed $300,000), (ii) $200,000 and (iii) 10% of the excess of
the total consideration received in the superior offer over
$7,500,000. See "The Reorganization Agreement--Termination Fee."
The Charter Amendment
The Board of Directors of InterCAP has adopted resolutions
recommending, and at the Meeting InterCAP stockholders will be
asked to consider and act upon, the Charter Amendment. The
Charter Amendment would extend the date (from October 1, 1994 to
January 15, 1995) upon which the liquidation preference of the
InterCAP Series A Preferred Stock would be increased from $1.475
per share to $1.475 per share plus one-half of all accrued but
unpaid dividends thereon. See "Stockholder Approval of
Reorganization Agreement, the Merger and the Charter Amendment,"
"Proposal to Amend InterCAP's Certificate of Incorporation," and
"Appendix B--Form of Amendment to InterCAP's Certificate of
Incorporation."
Vote of Stockholders of InterCAP
Stockholder Vote
The Reorganization Agreement and the transactions
contemplated thereby must be approved by the stockholders of
InterCAP. An amendment to the certificate of incorporation of
InterCAP, as amended (the "InterCAP Certificate") must be
approved prior to the consummation of the Merger. Accordingly,
both the Charter Amendment and the Reorganization Agreement must
be adopted and approved by the stockholders of InterCAP.
Stockholder Meeting
A special meeting of the InterCAP stockholders will be held
on December ___, 1994 at 10:00 a.m. at the offices of InterCAP,
116 Defense Highway, Suite 400, Annapolis, Maryland 21401, for
purposes of (i) consideration of the approval and adoption of the
Charter Amendment; and (ii) consideration of the adoption and
approval of the Reorganization Agreement (the "Meeting").
Record Date and Shares Entitled to Vote
The Board of Directors of InterCAP has fixed the close of
business on __________ ___, 1994 as the record date (the "Record
Date") for the determination of stockholders entitled to notice
of and to vote at the Meeting. Accordingly, only InterCAP
stockholders as of the close of business on the Record Date will
be entitled to vote at the Meeting. At the close of business as
of the Record Date, there were the following number of shares of
capital stock of InterCAP outstanding and entitled to vote: (i)
2,911,478 shares of InterCAP Common Stock and (ii) 3,597,155
shares of InterCAP Preferred Stock, of which (A) 927,326 shares
are designated InterCAP Series A Preferred Stock; (B) 1,716,387
shares are designated as InterCAP Series B Preferred Stock; and
(C) 953,442 shares are designated as InterCAP Series C Preferred
Stock. Each share of InterCAP Common Stock and InterCAP
Preferred Stock, respectively, is entitled to one vote per share,
except that the InterCAP Series A Preferred Stock is entitled to
1.3329 votes per share of InterCAP Series A Preferred Stock.
Proxies; Quorum
Shares of InterCAP Common Stock and InterCAP Preferred Stock
represented at the Meeting by properly executed proxies will,
unless such proxies previously have been revoked, be voted in
accordance with the instructions indicated in such proxies. If
no instructions are so indicated, such shares will be voted by
InterCAP in favor of the adoption and approval of the Charter
Amendment and adoption and approval of the Reorganization
Agreement and the transactions contemplated thereby.
The presence either in person or by properly executed proxy
of the holders of a majority of the outstanding shares of each
class of InterCAP Stock entitled to vote on the Charter Amendment
and the Reorganization Agreement is necessary to constitute a
quorum at the Meeting.
Vote Required for Charter Amendment
Under the InterCAP Certificate and the Delaware General
Corporation Law ("Delaware Act"), approval and adoption of the
Charter Amendment requires the affirmative vote of the holders of
(i) a majority of the outstanding shares of InterCAP Common Stock
and InterCAP Preferred Stock, voting as a single class; (ii) a
majority of the outstanding shares of InterCAP Series A Preferred
Stock, voting separately; (iii) a majority of the outstanding
shares of InterCAP Series A Preferred Stock and InterCAP Series B
Preferred Stock, voting as a single class; and (iv) a majority of
the outstanding InterCAP Series C Preferred Stock, voting
separately. The failure of a holder of record of InterCAP Stock
to vote in person or by proxy at the Meeting will have the same
effect as a vote against the Charter Amendment. Substantially
all the holders of the InterCAP Preferred Stock have agreed to
vote all their InterCAP Stock in favor of the Charter Amendment,
and such holders have sufficient voting power to satisfy each of
clauses (i)-(iv) above. See "Stockholder Approval of
Reorganization Agreement, the Merger and the Charter Amendment--
Vote Required for Charter Amendment." Accordingly, the Charter
Amendment will be approved and adopted by InterCAP's stockholders
at the Meeting even if no other stockholder of InterCAP votes in
favor of the Charter Amendment.
Vote Required for Reorganization Agreement and Merger
Under InterCAP's Certificate and the Delaware Act, approval
and adoption of the Reorganization Agreement and Merger requires
the affirmative vote of (i) at least 66.67% of the outstanding
shares of InterCAP Common Stock and the InterCAP Preferred Stock,
voting as a single class, and (ii) a majority of the outstanding
shares of InterCAP Series A Preferred Stock and InterCAP Series B
Preferred Stock, voting as a single class. The failure of a
holder of record of InterCAP Stock to vote in person or by proxy
at the Meeting will have the same effect as a vote against the
Reorganization Agreement. The directors of InterCAP have
indicated that they presently intend to vote all shares of
InterCAP Stock over which they exercise voting power in favor of
the Merger. See "Stockholder Approval of Reorganization
Agreement, the Merger and the Charter Amendment--Beneficial
Security Ownership of Management." Accordingly, if the directors
vote in accordance with their indication, the requisite
stockholder approval required under the Reorganization Agreement
will be obtained.
Beneficial Security Ownership of Management
The directors and executive officers of InterCAP
beneficially owned, or exercised voting control over, as of
September 30, 1994, 1,145,070 shares (representing 39.33% of the
total outstanding shares) of InterCAP Common Stock, 927,326 shares
(representing 100.00% of the total outstanding shares) of InterCAP
Series A Preferred Stock, which in turn represents 1,236,033 votes,
1,696,657 shares (representing 98.85% of the total outstanding shares)
of InterCAP Series B Preferred Stock, and 953,442 shares (representing
100.00% of the total outstanding shares) of InterCAP Series C Preferred
Stock. Insofar as the holders of InterCAP Common Stock and InterCAP
Preferred Stock are required to vote as a single class, such
directors and executive officers beneficially own or control
73.80% of the combined classes; insofar as the holders of
InterCAP Series A Preferred Stock and InterCAP Series B Preferred
Stock are required to vote as a single class, such directors and
executive officers beneficially own or control 99.33% of the
combined classes.
MARKET PRICE DATA
Since April 1981, the Intergraph Common Stock has traded in
the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") under the symbol INGR. As of
September 30, 1994, there were 44,644,003 shares of common stock
outstanding, held by 5,430 stockholders of record. The following
table sets forth, for the periods indicated, the high and low
sale prices of Intergraph Common Stock as reported on the NASDAQ
National Market System.
High Low
------- --------
1992:
First Quarter $22-3/8 $17
Second Quarter 18-3/4 12-1/2
Third Quarter 16-3/4 12-5/8
Fourth Quarter 14-1/4 11
1993:
First Quarter $13-1/2 $11-5/8
Second Quarter 12 8-7/8
Third Quarter 12-3/8 8-1/2
Fourth Quarter 11-1/8 9-1/8
1994:
First Quarter (through March 31, 1994) $11-1/4 $8-7/8
Second Quarter (through June 30, 1994) 10-1/4 8-3/4
Third Quarter (through September 30, 1994) 11 8-5/8
On September 29, 1994, the last full trading day prior to
the signing of the Reorganization Agreement, the closing price of
Intergraph Common Stock as reported on NASDAQ was $9.00 per
share. On November ___, 1994, the most recent practicable full
trading day prior to the date of mailing this Prospectus/Proxy
Statement, the closing price of Intergraph Common Stock as
reported on NASDAQ was $_______.
No established public trading market exists for InterCAP
Stock. InterCAP has not issued any shares of InterCAP Stock
since July 1, 1992, except in connection with the exercise of
employee stock options and the exercise of warrants that were
granted as an inducement for certain loan guarantees made in
connection with indebtedness of InterCAP. The exercise prices of
these options and warrants ranged from $.10 per share to $.42 per
share.
Following the Merger, Intergraph Common Stock will continue
to be traded on NASDAQ under the symbol "INGR."
Neither Intergraph or InterCAP has ever paid cash dividends
on their respective shares of capital stock, and Intergraph
anticipates that for the foreseeable future it will continue to
retain any earnings for use in the operation of its business.
SELECTED FINANCIAL DATA
Intergraph Corporation
The following selected financial data of Intergraph for each
of the five years ended December 31, 1993 are derived from the
consolidated financial statements of Intergraph Corporation,
which were audited by Ernst & Young LLP, independent auditors.
The selected financial data as of and for the nine month periods
ended September 30, 1994 and 1993 are derived from the unaudited
consolidated financial statements of Intergraph Corporation.
Operating results for the nine months ended September 30, 1994
are not necessarily indicative of the results that may be
expected for the entire year ending December 31, 1994. The
following selected financial data of Intergraph should be read in
conjunction with Intergraph's consolidated financial statements
and notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations of Intergraph"
which are incorporated by reference into this Prospectus/Proxy
Statement.
<TABLE>
INTERGRAPH CORPORATION
(In thousands except per share amounts)
<CAPTION> Nine Months Ended
Year Ended December 31, September 30,
--------------------------------------------------------- ----------------------
1989 1990 1991 1992 1993 1993 1994
--------- ---------- ---------- ---------- ---------- ---------- ----------
Statement of operations data:
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 860,062 $1,044,617 $1,195,378 $1,176,661 $1,050,277 $ 781,748 $ 744,693
Restructuring charges -- -- -- 4,418 89,806 14,092 --
Net income (loss) 79,502 62,557 71,108 8,442 (116,042) (46,119) (51,707)
Net income (loss) per share 1.48 1.28 1.47 .18 (2.51) (.99) (1.15)
</TABLE>
<TABLE>
<CAPTION>
December 31, September 30,
--------------------------------------------------------- ----------------------
1989 1990 1991 1992 1993 1994
--------- ---------- ---------- ---------- ---------- ----------------------
Summary balance sheet data:
<S> <C> <C> <C> <C> <C> <C>
Working capital $ 414,398 $ 443,272 $ 502,152 $ 430,974 $ 348,756 $ 298,131
Total assets 808,026 907,460 996,615 986,663 855,329 833,257
Long-term debt 7,069 16,891 23,413 19,759 17,541 18,890
Shareholders equity 629,759 682,272 754,994 736,863 588,710 539,650
</TABLE>
InterCAP Graphics Systems, Inc.
The following selected financial data of InterCAP for each
of the five years ended June 30, 1994 are derived from the
consolidated financial statements of InterCAP Graphics Systems,
Inc., which were audited by Ernst & Young LLP, independent
auditors. The selected consolidated financial data of InterCAP
as of and for the three month periods ended September 30, 1994
and 1993 are derived from the unaudited consolidated financial
statements of InterCAP. Operating results for the three months
ended September 30, 1994 are not necessarily indicative of the
results that may be expected for the entire year ending June 30,
1995. The following selected financial data of InterCAP should
be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations of InterCAP" and
the InterCAP Graphics Systems, Inc. consolidated financial
statements and notes thereto appearing elsewhere in this
Prospectus/Proxy Statement.
<TABLE>
INTERCAP GRAPHICS SYSTEMS, INC.
(In thousands except per share amounts)
<CAPTION> Three Months Ended
Year Ended June 30, September 30,
------------------------------------------- ----------------
1990 1991 1992 1993 1994 1993 1994
------- ------- ------- ------- ------- ------- -------
Statement of operations data:
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 3,491 $ 4,452 $ 4,597 $ 3,779 $ 4,490 $ 536 $ 1,110
Income (loss) before income taxes
and extraordinary item (1,775) 415 207 (515) 800 (224) 208
Charge in lieu of income taxes -- 200 157 -- -- -- --
Add extraordinary items-Reduction
of income taxes arising from
carryforwards of prior years'
operating losses -- 460 157 -- -- -- --
Add extraordinary item - Gain on
restructuring of debt (net of tax
of $260K) -- 436 -- -- -- -- --
Provision for income taxes -- -- -- -- 19 -- 14
Net income (loss) (1,175) 1,111 207 (515) 781 (224) 194
Net income (loss) per share
Primary (1.12) .43 .08 (.37) .27 (.16) .06
Fully diluted (1.12) .22 .03 (.37) .12 (.16) .03
</TABLE>
<TABLE>
<CAPTION>
June 30, September 30,
------------------------------------------- ----------------
1990 1991 1992 1993 1994 1994
------- ------- ------- ------- ------- ----------------
Summary balance sheet data:
<S> <C> <C> <C> <C> <C> <C>
Working capital (deficiency) $ (581) $ 163 $ 563 $ (39) $ 527 $ 717
Total assets 2,483 3,012 3,526 3,146 2,966 3,316
Long-term debt obligations 1,550 205 402 431 150 103
Redeemable preferred shares 1,694 2,617 2,778 2,778 2,778 2,778
Stockholders equity (net capital
deficiency) (1,942) (885) (712) (1,244) (441) (234)
</TABLE>
Comparative Per Share Data
The following table presents Intergraph's and InterCAP's
historical per share data. The information presented below
should be read in conjunction with the separate historical
financial statements of Intergraph incorporated herein by
reference and of InterCAP which are included elsewhere in the
Prospectus/Proxy Statement.
Year Nine-Months
Ended Ended
December 31, September 30,
1993 1994
-------------- ---------------
Intergraph per share of Intergraph
Common Stock:
-Book value $ 12.98 $ 12.09
-Net income (loss) (2.51) (1.15)
Three-Months
Year Ended Ended
June 30, September 30,
1994 1994
-------------- ---------------
InterCAP per share of InterCAP
Common Stock:
-Book value (deficiency) $ (0.16) $ (0.07)
-Net income
primary .27 .06
fully diluted .12 .03
RISK FACTORS
In addition to the information contained elsewhere in this
Prospectus/Proxy Statement, the following risk factors should be
considered carefully in evaluating the merits and risks of
acquiring shares of Intergraph Common Stock in the Merger.
Volatility of Share Price
Intergraph Common Stock is traded on NASDAQ, and is subject
to fluctuations in market price. See "Market Price Data".
Factors such as quarterly variations in operating results, the
announcement of technological innovations, strategic partnerships
or new product offerings by Intergraph or its competitors, and
the entrance of new competitors into the interactive computer
graphics industry each may have a significant impact on the
market price of Intergraph Common Stock. In addition, Intergraph
Common Stock may experience price and volume fluctuations
unrelated to operating performance. From the beginning of the
1994 fiscal year to the date of this Prospectus/Proxy Statement,
the market price of Intergraph Common Stock, as reported by
NASDAQ, has ranged from a low of $__________ per share to a high
of $11.25 per share. On November __, 1994, the closing sale
price of Intergraph Common Stock as reported by NASDAQ was
$_________ per share. The current market price of Intergraph
Common Stock is presently at or near the low end of its
historical price range and such market price has declined during
recent quarters. There can be no assurance that the Intergraph
Common Stock price will not experience further declines in the
future. In accordance with the Escrow Agreement, except with
respect to deposits into escrow of 30 or fewer Escrow Shares on
behalf of an InterCAP stockholder, the Escrow Shares will not be
released from escrow to InterCAP stockholders before the 90th day
after the Effective Date, and thus will remain subject to the
risk of price declines affecting the Intergraph Common Stock
during such 90-day period. Moreover, any Escrow Shares released
to Intergraph in satisfaction of the InterCAP stockholders'
indemnification obligations will be valued based on the Share
Determination Market Price as determined prior to the Effective
Date, and thus will not reflect the increase (if any) in the
price of Intergraph Common Stock, which would result in claims
for indemnification being satisfied with property having a
greater value than the amount of the claim.
Losses; Declining Financial Resources
Intergraph incurred net losses of $.39 per share in the
third quarter of 1994 and net losses of $.43 per share in the
third quarter of 1993. Net losses for the first nine months of
1994 were $1.15 per share as compared to net losses of $.99 per
share for the first nine months of 1993. Intergraph lost $2.51
per share in the full year 1993 (including a restructuring charge
of $1.34 per share) as compared to earnings of $.18 per share
(including a restructuring charge of $.06 per share) and $1.47
per share in 1992 and 1991, respectively. Intergraph's losses in
1993 were the result of a decline in systems revenue, an overall
decline in gross margin, and certain restructuring expenses from
changes in product sales and manufacturing strategies designed to make
Intergraph more competitive. These strategic changes led to
actions that resulted in an $89.8 million pretax restructuring
charge in 1993, comprised of $10.5 million for direct work force
reductions, $17.1 million for elimination of operations, $56.1
million for revaluation of assets resulting from new product
strategy, and $6.1 million for restructure of its electronics
business. The losses during the first three quarters of 1994 are
the result of a continuation of Intergraph's product transition
and resulting weak system sales. See "Risk Factors--
Technological Change; Product Transition." As a result of these
losses, Intergraph's cash balances have declined by 27% between
January 1, 1994 and September 30, 1994 and its short-term debt
has increased by $24.7 million, of which $24.4 million was
incurred in third quarter of 1994. Although Intergraph continues
to believe that its restructuring efforts and product transition
initiatives will result in reduced expenses and enhanced
competitiveness, there can be no assurance that the actions taken
by Intergraph to date will be sufficient to produce net earnings
in future periods, or to prevent further deterioration of
Intergraph's cash position.
Technological Change; Product Transition
Over the past several years, the industry in which
Intergraph competes has been characterized by a rapid move to
higher performance and lower-priced product offerings, by intense
price and performance competition (including competition from
companies possessing greater financial resources than
Intergraph), by significantly shorter product cycles due to rapid
technological change, and by development and support of software
standards that result in less specific hardware dependency by
customers. As a consequence, the operating results of Intergraph
and others in the industry have and will continue to depend on
the ability to rapidly and continuously develop and deliver new
hardware products and new software products that are
competitively priced, offer enhanced performance, and meet
customers' requirements for standardization and interoperability.
There can be no assurance that Intergraph's efforts to
restructure its operations and product offerings, when complete,
will be successful in strengthening system sales or that
Intergraph will be successful in the future in developing or
enhancing its products.
Provisions Potentially Affecting Change in Control of Intergraph
Intergraph's Certificate of Incorporation and Restated
Bylaws contain certain provisions that could have the effect of
making it more difficult for a third party to acquire, or
discouraging a third party from attempting to acquire, control of
Intergraph. In addition, during 1993, Intergraph adopted a
stockholder rights plan and distributed a dividend of one common
share purchase right for each outstanding share of Intergraph
Common Stock. See "Description of Intergraph Common Stock--
Stockholder Rights Plan." These provisions may reduce the
likelihood of an acquisition of Intergraph at a premium price by
a third party.
No Dividends
Intergraph has never paid dividends on the Intergraph Common
Stock and does not expect to pay dividends in the foreseeable
future. Intergraph currently intends to retain future earnings, if
any, to finance the operation and growth of its business.
THE MERGER AND RELATED TRANSACTIONS
Background of the Merger
Beginning in early 1993, the Board of Directors of InterCAP
and its management reached a conclusion that, based on the nature
of InterCAP's products and customer mix, InterCAP would be unable
to increase significantly its revenue base beyond historical
levels absent access to a larger and more efficient product
distribution network. Because InterCAP's relatively narrow
product line did not justify, in the Board's view, a direct
investment in InterCAP to fund expansion of InterCAP's sales
capability, InterCAP began to explore possible strategic means by
which it could grow beyond the niche markets it served.
Two fundamental factors underlying InterCAP's decision in
1993 to explore a strategic transaction were the redemption
provisions of the InterCAP Preferred Stock and the liquidation
preference of the InterCAP Series A Preferred Stock. InterCAP's
redemption obligations require it to redeem the InterCAP
Preferred Stock in three annual installments, and honoring such
obligations would result in cash redemption payments to the
holders of InterCAP Preferred Stock of approximately $1,403,000
on January 2, 1995, approximately $1,498,000 on January 2, 1996
and approximately $1,593,000 on January 2, 1997. Because of
InterCAP's market position and financial performance, certain
holders of InterCAP Preferred Stock indicated in 1993 that they
would be unwilling to waive their redemption rights and would
seek liquidity through redemption unless InterCAP could provide
liquidity through some other mechanism or could consummate a
strategic transaction that provided InterCAP with an opportunity
to increase significantly its revenues. Although the holders of
InterCAP Preferred Stock had previously agreed to limit
InterCAP's annual redemption obligations to its net income during
the preceding 12 months, InterCAP's management concluded that
redemption of the InterCAP Preferred Stock would restrict
severely its ability to attract additional capital and hinder its
ability to invest in its long-term growth.
In addition to the redemption provisions of the InterCAP
Preferred Stock, management of InterCAP believed that the
liquidation preference of the InterCAP Series A Preferred Stock
would be an impediment to attracting additional capital or
consummating a strategic transaction with, or an acquisition of
InterCAP by, a third party. In early 1993, InterCAP was
expecting to post a loss for its fiscal year ended June 30, 1993
and did eventually post a loss of approximately $515,000. In
light of this expected financial performance and its effect on
the value of InterCAP as a whole, management believed that if
InterCAP were sold or participated in a strategic combination
with one or more other companies, all or substantially all the
proceeds from such a transaction would be distributed to the
holders of InterCAP Preferred Stock in satisfaction of their
liquidation preferences and, absent adjustment to such
liquidation preferences, the amount of proceeds available for
distribution to holders of InterCAP Common Stock, including
employees who held options to acquire shares of InterCAP Common
Stock, would be nominal at best. In recognition of the
importance of incentivizing InterCAP's employees to continue to
build its business and to identify, negotiate and consummate a
strategic transaction, in May 1993, the Board of Directors of
InterCAP proposed, and thereafter InterCAP's stockholders
(including all holders of InterCAP Series A Preferred Stock)
approved, an amendment to the InterCAP Certificate that reduced
the liquidation preference of the InterCAP Series A Preferred
Stock from $1.475 per share plus all accrued but unpaid dividends
thereon to $1.475 per share plus (if the effective date of the
liquidation was after October 1, 1994) an amount equal to one-half
of all accrued but unpaid dividends thereon. The primary purpose
of this amendment was to create the potential to shift some of the
implied value of the InterCAP Series A Preferred Stock to the
InterCAP Common Stock and thereby provide incentives to
InterCAP's management to increase the value of InterCAP and
consummate a strategic transaction or sale of InterCAP by October
1, 1994.
From late 1993 through the first quarter of 1994, InterCAP
gave serious consideration to participation in a three-way merger
with two companies of a similar size to InterCAP and with
complementary businesses. Parallel to this effort, discussions
were held on how to fund the combined entity. It became apparent
that the financing requirements of the combined entity would be
significant, and that InterCAP's capital structure would be an
impediment to obtaining the necessary financing from traditional
venture capital sources because of the general unwillingness or
inability of the holders of InterCAP Preferred Stock to
participate in such financing or to subordinate their positions
to a new investor. After it became apparent that a combination
of equals could not be financed with traditional venture capital
financing, InterCAP's management conducted informal discussions
with a number of potential corporate partners, including
Intergraph. These discussions, however, were not successful.
InterCAP's management also contacted several investment banking
firms to determine whether a combined entity could be financed
through an initial public offering ("IPO"). While some interest
was expressed, the financing requirements were viewed as too
small for large investment banking firms and too large for small
investment banking firms. With no other financing alternatives,
the three-way merger transaction was abandoned.
After abandoning the three-way merger and with the
liquidation preference of the InterCAP Series A Preferred Stock
scheduled to increase on October 1, 1994, InterCAP's management,
under the direction of its Board of Directors, began to explore a
sale of the company. InterCAP first considered an IPO as a stand-
alone company, but potential underwriters indicated that because
of InterCAP's size and capital structure, an IPO would not be
feasible in the short term, would not be of a size that would
result in the automatic conversion of the InterCAP Preferred
Stock into InterCAP Common Stock, and could not be expected to
provide a reasonable return for InterCAP's stockholders. After
careful consideration, the Board of Directors concluded that an
IPO entailed greater risks and a lower probability of success
than a sale of InterCAP as a means of achieving liquidity for
InterCAP's stockholders.
InterCAP's management believed that a few companies,
including Intergraph, were the most logical acquisition
candidates for InterCAP and approached these companies early in
the second quarter of 1994 regarding their interest in a possible
acquisition of InterCAP. InterCAP also began discussions with an
investment banker, who was ultimately retained in May 1994, to
assist in identifying potential acquirors of InterCAP with whom
InterCAP did not have a prior relationship. While a number of
potential acquirors were contacted as a result of this engagement
and some interest was expressed, no company contacted made an
offer to acquire InterCAP or any proposal involving a transaction
with InterCAP, and no company was willing to move forward to
negotiate a transaction on a timely basis.
InterCAP first approached Intergraph about a possible
acquisition on April 20, 1994. On that date, management of
InterCAP telecopied a memorandum to Intergraph, advising that a
decision had been made by the Board of Directors of InterCAP to
explore selling the company and soliciting an indication of
interest on the part of Intergraph in possibly acquiring
InterCAP. A representative of Intergraph telephoned the
President of InterCAP later that day to express a positive
interest and to suggest that a meeting be held to discuss such a
transaction. At the first such meeting, held on June 17, 1994,
the parties discussed the general terms upon which they might
both agree to an acquisition of InterCAP, including that the
acquisition price would generally be in the range of
approximately 1.5 times InterCAP's annual revenues.
During the next several weeks, through the months of July
and into early August, 1994, management of Intergraph and
InterCAP spoke on a limited basis by telephone and through
correspondence about the other requirements each party would have
in a transaction and the possible benefits to each party of such
a transaction. On August 16, 1994, operational officers of
InterCAP and Intergraph met to discuss each party's products and
technology, focusing on whether InterCAP's technology would be of
benefit to Intergraph and its product offerings and on whether
Intergraph could provide a wider distribution network for
InterCAP's existing products. Following this meeting, each of
the parties considered the potential benefits to them and decided
to continue discussions on the specific terms and conditions of a
transaction.
On August 23, 1994, the Presidents of InterCAP and
Intergraph met to outline the parameters for a transaction and
reached a preliminary understanding concerning the price and
structure of a proposed acquisition. They agreed that their
understanding was subject to the negotiation of acceptable
documentation, approval by their respective boards of directors,
the completion by Intergraph of a comprehensive due diligence
review of InterCAP, and other matters. Because the liquidation
preference of the InterCAP Series A Preferred Stock was scheduled
to increase beginning on October 1, 1994, InterCAP indicated to
Intergraph a strong desire to conclude negotiations and execute a
binding agreement by the end of September, 1994 and to reach a
separate agreement with the holders of the InterCAP Series A
Preferred Stock to postpone the effectiveness of the increase in
the liquidation preference to the earliest future date by which
consummation of the Merger could be assured.
Commencing during the last week of August of 1994 and
throughout the month of September of 1994, Intergraph performed a
due diligence review of the legal, financial and technical
aspects of InterCAP's business. Intergraph also directed its
counsel to begin preparation of a draft of the Reorganization
Agreement, and on September 8, 1994, the initial draft of the
Reorganization Agreement was distributed by Intergraph's counsel
to representatives of InterCAP and InterCAP's counsel.
Thereafter, further due diligence and negotiations concerning the
Reorganization Agreement (as well as the additional agreements
contemplated thereby) proceeded simultaneously. Throughout this
time period, members of the boards of directors of InterCAP and
Intergraph were kept apprised of the status of discussions. The
InterCAP Board of Directors met on September 12, 1994 to discuss
the progress of negotiations, and met again on September 26, 1994
to approve the Reorganization Agreement in the form of the draft
furnished to the directors on September 24, 1994, with such
changes as the executive officers of InterCAP might approve.
Negotiations continued until September 30, 1994 when the
Reorganization Agreement, the Preferred Stock Agreement, and
various employment agreements contemplated thereby were executed.
Joint Reasons for the Merger
Intergraph and InterCAP have identified various potential
mutual benefits of the Merger that they believe will contribute
to the achievement by Intergraph and InterCAP of their strategic
goals and objectives, including the following:
- increased technical, marketing and distribution
resources to enable the InterCAP products to compete
more effectively in the market for technical
illustration software;
- the availability of greater research and
development resources to be applied to the development
and enhancement of InterCAP's products;
- the synergistic benefits available from combining
InterCAP's technology and presence in key markets with
Intergraph's complementary array of products and market
position;
- the enhancement of the information delivery
component of Intergraph's software products by the
addition of InterCAP's technical know-how and expertise
in that area; and
- the ability of Intergraph and InterCAP to
collaborate on future product development.
Intergraph's Reasons for the Merger
In addition to the anticipated mutual benefits described
above, the Board of Directors of Intergraph believes that the
Merger may enhance Intergraph's ability to compete in the market
for various software products, including those used to create and
maintain technical illustrations. Intergraph believes that the
Merger reasonably may be expected to:
- improve Intergraph's market position in publishing
and document management software markets by enhancing
credibility with customers, business alliances and
standards organization;
- demonstrate to customers and others Intergraph's
serious intention to enhance its product mix for
publishing, document management and technical
illustration markets;
- enhance Intergraph's marketplace credibility and
acceptance in the market for Interactive Electronic
Technical Manual ("IETM") software products more
quickly than could be accomplished without the Merger;
- afford Intergraph with access to InterCAP's
installed customer base of over 150 customers (having
an especially strong concentration of aerospace,
automotive, manufacturing and electronics customers),
many of which are not present customers of Intergraph;
- provide Intergraph with additional technical
expertise in the use of Computer Graphics Metafile
("CGM") as well as other graphic formats, the design
and development of IETM's, the integration of technical
illustration products, and the development of standards-
based publishing products;
- permit Intergraph to influence the development of
international standards relating to IETM's and CGM
technology; and
- improve Intergraph's position in the desktop
technical illustration market and support Intergraph's
effort to achieve a leading position in publishing and
document management software markets.
In the course of its deliberations concerning the Merger,
Intergraph's Board of Directors received presentations from, and
reviewed a number of additional relevant factors with,
Intergraph's management. The principal factors considered by
Intergraph's Board of Directors in determining the exchange ratio
for the Merger were InterCAP's historical and projected revenue,
the strategic benefits of the acquisition as described above, and
the complementary nature of InterCAP's product mix and customer
base with the product mix and customer base of Intergraph. The
Intergraph Board of Directors also considered the transaction
prices for certain other acquisitions in the engineering,
publishing and graphic arts software markets as a multiple of the
acquired firms' annual revenues. Applying these factors to
InterCAP, Intergraph arrived at an aggregate purchase price for
the entire equity interest in InterCAP of $7.5 million. The
exchange ratio for the InterCAP Series A Preferred Stock was
established at $1.475 based on the liquidation preference
provisions of the InterCAP Certificate, as in effect on the date
the Reorganization Agreement was executed (which provisions are
applicable in the case of a transaction such as the Merger). The
exchange ratio for the remaining InterCAP Stock of $0.90975693
per share was then determined from the aggregate $7.5 million
amount (but after reduction to reflect the value of the Assumed
Options and reduction to reflect the $1.475 liquidation
preference required to be paid in respect of the InterCAP Series
A Preferred Stock).
InterCAP's Reasons For The Merger
In addition to the anticipated mutual benefits described
above, the InterCAP Board of Directors believes that the Merger
provides InterCAP and its stockholders with liquidity, an
attractive return on their investments and a number of other
strategic benefits that would not be available if InterCAP were
to remain as a stand-alone company.
InterCAP's Board of Directors believes that the shares of
Intergraph Common Stock to be received by the stockholders of
InterCAP will enable them to realize an attractive return on
their investment compared to available alternatives. The holders
of InterCAP Series A Preferred Stock will receive shares of
Intergraph Common Stock with a value of $1.475 per share, which
is equal to the original price paid for such stock in December
1988. This price is believed to be attractive to the holders of
the InterCAP Series A Preferred Stock because it represents a
significant increase in the perceived value of the InterCAP
Series A Preferred Stock since 1990, when InterCAP was in serious
financial trouble. The holders of InterCAP Series B Preferred
Stock and InterCAP Series C Preferred Stock will receive shares
of Intergraph Common Stock with a value of approximately $.91 per
share, which is in excess of the current liquidation preferences
for both of those series of InterCAP Preferred Stock and
approximately $.41 per share and $.25 per share, respectively, in
excess of the original purchase price for such stock. Similarly,
the holders of InterCAP Common Stock will receive shares of
Intergraph Common Stock with an initial value that is attractive
and in all cases in excess of the original purchase price paid
for such shares. Although the InterCAP directors recognize that
no assurance can be given that the value of the Intergraph Common
Stock will remain at the Share Determination Market Price used in
the Merger, they believe that the value is fairly representative
of the value of InterCAP as of the date of the Reorganization
Agreement. The InterCAP Board of Directors did not, however,
seek or obtain the opinion of any investment banking firm with
respect to the fairness of the Merger, from a financial point of
view, to the InterCAP stockholders, and chose instead to rely,
among other things, on the views of management representatives on
the Board as to the proper valuation of InterCAP.
The InterCAP Board of Directors viewed the Merger as a means
by which InterCAP stockholders would be able to obtain liquidity
for their InterCAP Stock. Providing liquidity to InterCAP's
stockholders was of critical importance to InterCAP's Board of
Directors for a number of reasons. First, many holders of
InterCAP Common Stock originally invested in InterCAP in 1987,
and it was perceived that providing a route to liquidity to these
stockholders was long overdue. Second, the redemption provisions
of the InterCAP Preferred Stock and the pending adjustment to the
liquidation preference of the InterCAP Series A Preferred Stock
forced InterCAP ultimately to identify and pursue a transaction
that would provide liquidity to the holders of InterCAP Preferred
Stock. Finally, the Merger provides InterCAP's stockholders with
the only route to liquidity that is reasonably available to
InterCAP today. In this regard, the Board of Directors
considered the feasibility and prospects of alternative means to
provide liquidity for InterCAP stockholders, including other
potential business combinations and an IPO. The Board of
Directors also considered whether any other potential acquiror
might offer the same or similar benefits to InterCAP, and
concluded that no other company had the strategic fit or could
offer the benefits available from Intergraph within the same time
frame. See "The Merger and Related Transactions--Background of
the Merger."
In evaluating the proposed Merger, the InterCAP Board of
Directors discussed and considered a wide variety of factors,
including the relative value of InterCAP as reflected in the
proposed Reorganization Agreement compared with the implied
valuation of InterCAP based on comparable publicly traded
companies and comparable merger transactions, as well as the
potential dilution/accretion to InterCAP stockholders that would
result from the transaction. The Board of Directors reviewed the
history of merger discussions with Intergraph, as well as the
status of discussions with other potential corporate strategic
partners, investors and acquirors. The Board of Directors also
considered the advantages and disadvantages that the Merger would
present to InterCAP's achievement of its strategic objectives.
As part of the evaluation process, the Board of Directors
reviewed extensive information about the business, operations and
future prospects of both InterCAP and Intergraph, including
annual, quarterly and other reports and proxy statements filed by
Intergraph, and InterCAP's current business plan and projected
financial results of operations. In addition, the Board analyzed
and reviewed the proposed Reorganization Agreement.
After completing its evaluation, the Board of Directors
concluded that the proposed Merger would afford InterCAP many
advantages and a greater opportunity to accomplish its strategic
objectives, including the following:
- direct access to Intergraph's distribution
channels to distribute InterCAP's existing software
products to Intergraph's large and diversified customer
base;
- access to necessary product distribution channels
not presently available to InterCAP through which it
may market and sell its new products, including native
CGM architecture products and products based on
Microsoft or Intel (as opposed to UNIX) operating
systems;
- access to significant research and development
resources to help diversify InterCAP's traditional
products and services; and
- minimal, if any, disruption to InterCAP's
employees and existing customers.
The Board also evaluated the effect of the proposed merger
on InterCAP's stockholders and concluded that the proposed Merger
offered many advantages to them as well, including the following:
- converting an illiquid investment into a liquid
investment;
- providing InterCAP's investors with an attractive
return on their InterCAP investment;
- providing InterCAP's stockholders with an
opportunity to be investors in a combined graphics
company with greater resources and potential than
InterCAP as a stand-alone company; and
- providing a tax-free exchange of InterCAP Stock
for Intergraph Common Stock.
After considering the foregoing factors, the Board of
Directors unanimously approved the Reorganization Agreement and
the transactions contemplated thereby, including the Merger, and
recommended that the stockholders of InterCAP approve and adopt
the Reorganization Agreement and the Merger. In view of the wide
variety of factors considered, both positive and negative,
InterCAP's Board of Directors did not find it practicable to, and
did not, quantify or otherwise assign relative weights to the
specific factors considered.
InterCAP Board Recommendation
THE BOARD OF DIRECTORS OF INTERCAP BELIEVES THAT THE MERGER
IS FAIR TO AND IN THE BEST INTERESTS OF INTERCAP AND ITS
STOCKHOLDERS AND THEREFORE UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE FOR THE APPROVAL AND ADOPTION OF THE
REORGANIZATION AGREEMENT AND THE MERGER.
Interests of Certain Persons in the Merger
In assessing the terms and conditions of the proposed
Reorganization Agreement and the Merger, the Board of Directors
of InterCAP was aware that the Reorganization Agreement and the
Merger would have various consequences in which certain executive
officers and directors of InterCAP would have an interest. In
considering the recommendations of InterCAP's Board of Directors
with respect to the Merger, InterCAP stockholders should be aware
that certain executive officers and directors of InterCAP have
interests in the Merger discussed below that are in addition to
the interests of InterCAP stockholders generally.
In accordance with the terms of the existing employment
agreement dated September 10, 1990 by and between InterCAP and
A.G.W Biddle, III ("Biddle"), the President and Chief Executive
Officer and a director of InterCAP, the Merger will constitute a
"change in control" of InterCAP as defined in such agreement.
Under that agreement, a change in control will result in a
payment to Biddle following the Merger of $167,000. In addition,
Biddle may elect to continue certain employee benefits under
InterCAP policies and practices for a period of one year
following the change in control. These aspects of Biddle's 1990
employment agreement, among other matters, are confirmed in a new
employment agreement between Biddle and Intergraph Sub, the
effectiveness of which is conditioned upon consummation of the
Merger (the "Biddle-Intergraph Employment Agreement").
Intergraph has required that certain employees, including
executive officers, of InterCAP enter into employment agreements
with Intergraph Sub which will become binding upon InterCAP as
the Surviving Corporation in the Merger. Persons executing such
employment agreements include (but are not limited to) Biddle,
John C. Gebhardt ("Gebhardt"), a director and officer of
InterCAP, and Thomas O. Mills ("Mills"), also a director and
officer of InterCAP. Such agreements would become effective only
upon the consummation of the Merger and would continue, unless
otherwise terminated in accordance with the terms of such
agreements, in the case of Messrs. Mills and Gebhardt for a
period of two years from the Effective Date, and in the case of
Biddle for a period of three months from the Effective Date. The
employment agreements provide that the contracting employees will
be paid generally at a rate equal to their cash compensation in
effect at the time the Merger is consummated. For a discussion of
certain additional aspects of the Biddle-Intergraph Employment
Agreement, see "The Merger and Related Transactions--Employment
Agreements."
Also under the terms of the employment agreements, certain
loans made by InterCAP in 1993 to Messrs. Gebhardt and Mills for
the purpose of exercising ISO's, in the principal amounts of
$35,640.00 and $14,872.50, respectively, would be forgiven by
InterCAP provided that the employees remain in the employ of
InterCAP until the second anniversary of the Effective Date.
Under the terms of the Biddle-Intergraph Employment Agreement, a
similar loan previously made by InterCAP to Biddle in the
principal amount of $30,000.00 will not be forgiven and will be
required to be repaid within thirty months following the
Effective Date.
On September 26, 1994, the Board of Directors of InterCAP
adopted the InterCAP Option Program to implement a prior Board
resolution which had reserved for the benefit of InterCAP's
employees the value, if any, of authorized options available for
grant under the InterCAP Option Plan in the event of a change in
control or sale of InterCAP. The result was to grant an
equivalent number of nonqualified stock options remaining under
the InterCAP Option Plan to optionholders pro rata effective upon
the Merger. See "The Merger and Related Transactions--Options
Outstanding Prior to the Merger." Upon the consummation of the
Merger, by virtue of resolutions adopted by the InterCAP Board of
Directors on September 26, 1994, each of Messrs. Biddle, Gebhardt
and Mills will receive NQSO's to acquire, respectively, 80,724,
95,920 and 43,450 additional shares of InterCAP Common Stock
under the InterCAP Option Program at the weighted average
exercise prices per share of $.10, $.10, and $.13, respectively.
Accordingly, the aggregate difference, as of the Effective Date,
between the applicable exchange ratio in the Merger and the
exercise price for these options will be $65,366.82 in the case
of Mr. Biddle, $77,671.89 in the case of Mr. Gebhardt and
$33,880.04 in the case of Mr. Mills. All of the NQSO's granted
under the InterCAP Option Program will be 50% vested when granted
with an additional 25% to vest on each of the first and second
anniversaries of the Effective Date, except for NQSO's issued to
Biddle, which will be vested in full upon issuance and will be
exercisable up to five years following the Effective Date in
accordance with his 1990 employment agreement with InterCAP. See
"Security Ownership of Certain Beneficial Owners and Management
of InterCAP."
Under the terms of certain option agreements issued by
InterCAP under the InterCAP Option Plan and denominated as
incentive stock options, all such outstanding options which are
not vested will become immediately vested in full upon a
transaction such as the Merger. As a result of the acceleration
of vesting of such options and upon consummation of the Merger,
Mr. Mills will become entitled to exercise ISO's to acquire up to
an additional 17,000 presently unvested shares of InterCAP Common
Stock at the exercise price of $.42 per share, which ISO's will
be assumed by Intergraph pursuant to the Reorganization Agreement
and converted into options to purchase shares of Intergraph
Common Stock. See "The Merger and Related Transactions--Options
Outstanding Prior to the Merger."
Finally, the Reorganization Agreement provides that all
employees of InterCAP will be credited for their years of service
at InterCAP for purposes of employee welfare and pension benefit
plans maintained for employees of Intergraph and its affiliates,
including the Surviving Corporation. This provision is
applicable to all employees continuing in their employment with
InterCAP following the Merger, including Messrs. Biddle, Gebhardt
and Mills.
Certain Federal Income Tax Considerations
The following discussion summarizes certain federal income
tax consequences of the Merger to Intergraph, Intergraph Sub,
InterCAP and the InterCAP stockholders relating to the Merger.
This discussion does not address other federal income tax
considerations that may be relevant to particular InterCAP
stockholders in light of their particular circumstances, such as
dealers in securities, stockholders who do not hold their
InterCAP Stock as capital assets, foreign persons or persons who
acquired their shares in compensatory transactions.
In addition, the following discussion does not address the
tax consequences of transactions effectuated prior or subsequent
to, or concurrently with, the Merger (whether or not any such
transactions are undertaken in connection with the Merger).
Without limiting the generality of the immediately preceding
sentence, the following discussion does not address the tax
consequences of the assumption by Intergraph of the outstanding
InterCAP Options, the award or exercise of any InterCAP Options,
the federal income tax characterization of the InterCAP Options
as nonqualified or qualified incentive stock options, or the
issuance or exercise of the InterCAP Warrants.
ACCORDINGLY, INTERCAP STOCKHOLDERS ARE URGED TO CONSULT
THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES OF THE
MERGER, INCLUDING THE APPLICABILITY OF FEDERAL, STATE, LOCAL, AND
FOREIGN TAX LAWS.
No party to the Merger has requested a ruling from the
Internal Revenue Service (the "Service") with regard to the
federal income tax consequences of the Merger. This discussion
reflects, and is supported by, opinions of Balch & Bingham,
special counsel to Intergraph, and Womble Carlyle Sandridge &
Rice, P.L.L.C., counsel to InterCAP (collectively, the "Exhibit
Opinions"). The Exhibit Opinions, which are attached as Exhibit
8(a) and Exhibit 8(b), respectively, to the Registration
Statement of which this Prospectus/Proxy Statement is a part, are
based on and subject to certain qualifications and assumptions as
noted therein. InterCAP stockholders should be aware that this
discussion and the Exhibit Opinions are based upon counsel's
interpretation of the Internal Revenue Code of 1986, as amended
(the "Code"), applicable United States Department of Treasury
("Treasury") regulations, judicial authority and administrative
rulings and practice, all as of the date thereof. The opinions
are not binding on the Service and there can be no assurance that
future legislative, judicial or administrative changes or
interpretations will not adversely affect the accuracy of the
statements and conclusions set forth herein. Any such changes or
interpretations could be applied retroactively and could affect
the tax consequences of the Merger.
Consequences to Intergraph, Intergraph Sub and InterCAP
The Merger as described in the Reorganization Agreement will
constitute a reorganization as defined in Section 368(a)(1)(A) of the
Code by virtue of the application of Section 368(a)(2)(E) of the Code.
No gain or loss will be recognized by Intergraph, Intergraph Sub
or InterCAP upon Intergraph's issuance of Intergraph Common Stock
solely in exchange for InterCAP Stock and the transfer by
operation of law of Intergraph Sub's assets and liabilities to
InterCAP upon consummation of the Merger.
InterCAP's taxable year will end for federal income tax
purposes on the date of the Merger, and InterCAP will be required
to file a federal income tax return for its short taxable year
ending on the date of the Merger.
As a result of the Merger, InterCAP will experience an
ownership change as defined in Section 382(g) of the Code with the
result that any InterCAP tax credit carryforwards, net operating
loss carryforwards, capital loss carryforwards or built-in deductions
will become subject to the limitations on use provided by Sections 382 and 383
of the Code. In addition, Intergraph's acquisition of InterCAP in the
Merger will result in the imposition of certain consolidated return
limitations on the ability of the Intergraph consolidated return
group to utilize any InterCAP tax credit carryforwards, net
operating loss carryforwards, capital loss carryforwards or built-
in deductions pursuant to the Treasury regulations under Section 1502
of the Code.
Consequences to InterCAP Stockholders
No gain or loss will be recognized by holders of InterCAP
Stock upon their receipt in the Merger of Intergraph Common Stock
in exchange therefor (except to the extent of cash received in
lieu of a fractional share of Intergraph Common Stock).
The aggregate tax basis of Intergraph Common Stock received
in the Merger (including any fractional share deemed received)
will be the same as the aggregate tax basis of the InterCAP Stock
surrendered in exchange therefor.
The holding period for federal income tax purposes of each
share of Intergraph Common Stock received by each InterCAP
stockholder in the Merger will include the period during which
such stockholder held his or her InterCAP Stock surrendered in
exchange therefor, provided that the InterCAP Stock is held as a
capital asset at the time of the Merger.
Cash payments in lieu of a fractional share will be treated
as if a fractional share of Intergraph Common Stock had been
issued in the Merger and then redeemed by Intergraph. An
InterCAP stockholder receiving such cash will recognize gain or
loss upon such payment equal to the difference (if any) between
such stockholder's basis in the fractional share (which will be a
pro rata portion of the stockholder's basis in the Intergraph
Common Stock received in the Merger) and the amount of cash
received.
A recipient of shares of Intergraph Common Stock could
recognize income to the extent that such shares were considered
by the Service to be received in exchange for consideration other
than InterCAP Stock, such as dividends accrued on such InterCAP
Stock. All or a portion of such income may be taxable as
ordinary income.
Limitations on Opinions and Discussions
As a condition to the Merger, each of Intergraph and
InterCAP will receive an opinion from its respective counsel
dated as of the closing of the Merger to the effect that the
Merger will constitute a reorganization as defined in Section 368(a) of
the Code. Such opinions (the "Closing Opinions") will also be
based on certain assumptions and subject to certain
qualifications similar to those contained in the Exhibit
Opinions. InterCAP stockholders should be aware that neither the
Exhibit Opinions nor the Closing Opinions bind the Service and
the Service is therefore not precluded from successfully
asserting a contrary opinion. In addition, as noted earlier, all
the tax opinions are subject to certain assumptions, including,
but not limited to, the truth and accuracy of certain
representations made by Intergraph, InterCAP and certain
stockholders of InterCAP. Of particular importance to the
opinion that the Merger will be treated as a tax-free
reorganization for federal income tax purposes are certain
assumptions and representations relating to the Code's
"continuity of interest" requirement. See "The Merger and
Related Transactions--Tax Certification."
In order to satisfy the continuity of interest requirement,
InterCAP stockholders must not, pursuant to a plan or intent
existing at or prior to the Merger, sell, transfer, pledge or
otherwise dispose of an aggregate amount of (i) their InterCAP
Stock in anticipation of the Merger and (ii) Intergraph Common
Stock to be received in the Merger (collectively, "Planned
Dispositions"), such that InterCAP stockholders, as a group,
would no longer have a meaningful equity interest in the InterCAP
business being conducted by Intergraph after the Merger.
InterCAP stockholders generally will be regarded as having a
meaningful equity interest as long as the number of shares of
Intergraph Common Stock received in the Merger less the number of
shares subject to Planned Dispositions (if any) represents, in
the aggregate, a continuing interest through stock ownership in
Intergraph that is equal in value, as of the Effective Date, to
more than 50% of the value of all of the formerly outstanding
InterCAP Stock as of the same date. The consummation of the
Merger therefore is conditioned upon receipt by Intergraph and
InterCAP of Continuity Certificates (as hereinafter defined),
which cover at least 50% of the Intergraph Common Stock to be
issued in the Merger. The Continuity Certificates require
stockholders of InterCAP immediately prior to the Merger to
confirm that, as of the Effective Date of the Merger, they have
no present plan or intent to engage in a Planned Disposition of
all or a specified portion of the shares of Intergraph Common
Stock received in the Merger. The form of the Continuity
Certificate to be executed by an entity stockholder of InterCAP
permits such entity to distribute shares of Intergraph Common
Stock to the partners, stockholders or other beneficial owners of
the entity if such distribution is required under the entity's
partnership agreement, certificate or articles of incorporation
or other governing instrument. See "The Merger and Related
Transactions--Tax Certification."
Two of the InterCAP stockholders hold approximately 98.6% of
the InterCAP Preferred Stock, and 54.7% of the outstanding
InterCAP Preferred Stock and InterCAP Common Stock taken
together, and will receive approximately 58.8% of the Closing
Merger Consideration. These two InterCAP stockholders are
limited partnerships, and they may be required under their
partnership agreements to distribute to their partners the shares
of Intergraph Common Stock to be received by such entities in the
Merger (the "Required Distributions"). Although the matter is
not entirely free from doubt, the Required Distributions should
not be construed as Planned Dispositions, such that the InterCAP
stockholders, as a group, would no longer have a meaningful
continuing equity interest in the InterCAP business being
conducted by Intergraph after the Merger.
A successful challenge by the Service to the tax-free
reorganization status of the Merger (as a result of a failure of
the continuity of interest requirement or otherwise) would result
in InterCAP stockholders recognizing taxable gain or loss with
respect to each share of InterCAP Stock surrendered equal to the
difference between the stockholder's basis in such share and the
fair market value, as of the Effective Date, of the Intergraph
Common Stock and Intergraph Rights received in exchange therefor.
In such event, a stockholder's aggregate basis in Intergraph
Common Stock so received would equal its fair market value at the
Effective Date and the holding period for such stock would begin
on the day after the Effective Date.
Preferred Stock Agreement
In connection with the execution of the Reorganization
Agreement and as a condition to its obligation to consummate the
Merger, Intergraph required that the Preferred Stock Agreement be
executed by the holders of all of the InterCAP Series A Preferred
Stock, all of the InterCAP Series C Preferred Stock, and 98.85%
of the InterCAP Series B Preferred Stock (collectively, the
"Specified Preferred Stockholders"). Pursuant to the Preferred
Stock Agreement, the Specified Preferred Stockholders have agreed
(i) to vote all of their shares of InterCAP Stock in favor of
approving the Charter Amendment, (ii) in the case of holders of
InterCAP Series A Preferred Stock, to elect to take the
liquidation preference of $1.475 per share of InterCAP Series A
Preferred Stock, (iii) to exercise the Warrant (as defined
herein) in full immediately prior to the Effective Date in the
manner contemplated by the Preferred Stock Agreement, (iv) in the
case of the holders of the remaining classes of InterCAP
Preferred Stock, to elect to convert all of such InterCAP Series
B Preferred Stock and InterCAP Series C Preferred Stock into
InterCAP Common Stock prior to the consummation of the Merger,
and (v) that the receipt of a fraction of a share of Intergraph
Common Stock with a value of $1.475 per share of InterCAP Series
A Preferred Stock and the receipt of a fraction of a share of
Intergraph Common Stock with a value of $0.90975693 per share of
InterCAP Common Stock upon the conversion of the InterCAP Series
B Preferred Stock and InterCAP Series C Preferred Stock shall be
in complete and full satisfaction of all rights and preferences
attendant to such InterCAP Preferred Stock.
In the absence of the adoption and approval of the Charter
Amendment contemplated by the Preferred Stock Agreement, the
liquidation preference of $1.475 for each share of InterCAP
Series A Preferred Stock would have adjusted as of October 1,
1994 to approximately $1.91 for each share of InterCAP Series A
Preferred Stock and would increase thereafter on a daily basis at
an annual rate per share of $.07375. Under the terms of the
InterCAP Certificate, a consolidation or merger of InterCAP of
the kind contemplated by the Reorganization Agreement constitutes
a "liquidation, dissolution or winding up" that triggers the
right of the holders of InterCAP Series A Preferred Stock to
receive the foregoing liquidation preference. The effect of the
Charter Amendment is to modify the date (by changing such date
from October 1, 1994 to January 15, 1995) upon which the
foregoing adjustment to the liquidation preference otherwise
would occur. See "Proposal to Amend InterCAP's Certificate of
Incorporation."
As of the Record Date, the 408,586 shares of InterCAP Common
Stock and 3,886,835 shares of InterCAP Preferred Stock subject to
the Preferred Stock Agreement represented approximately 63.00% of
the voting power outstanding of InterCAP Common Stock and
InterCAP Preferred Stock, taken together as a single class, and
99.5% of the outstanding InterCAP Preferred Stock. Accordingly,
the Charter Amendment will be approved and adopted by InterCAP's
stockholders at the Meeting even if no other stockholder of
InterCAP votes in favor of the Charter Amendment.
Escrow Agreement
Under the terms of the Reorganization Agreement and the
Escrow Agreement, at the Effective Date, Intergraph will deliver
to the Escrow Agent one or more certificates representing the
Escrow Shares. By virtue of InterCAP stockholder approval of the
Reorganization Agreement, a committee of three persons, initially
represented by A.G.W. Biddle, III, John C. Gebhardt and Joy E.
Binford, will be appointed to represent the InterCAP stockholders
(the "Stockholders' Committee"). The Escrow Shares will secure
the InterCAP stockholders' indemnification obligations with
respect to the representations and warranties made by InterCAP in
the Reorganization Agreement. The Escrow Shares will remain in
escrow until the ninetieth day after the Effective Date, at which
time the Escrow Agent will distribute the remaining Escrow Shares
which are not then subject to pending or disputed claims by
indemnified person(s) under the Escrow Agreement, if any, to the
InterCAP stockholders in the manner described in the Escrow
Agreement. No distribution to the InterCAP stockholders will be
made, however, if there has been a claim delivered to the Escrow
Agent by an indemnified person(s), the claim has not been settled
or discharged, and the balance of the Escrow Shares after
distribution, if the indemnified person(s) prevailed on such
claim, would be insufficient to discharge the claim. At the
request of the Stockholders' Committee at any time prior to the
end of the ninety day escrow period, the Escrow Agent is required
to distribute the portion of the Escrow Fund that is attributable
to each InterCAP stockholder on whose behalf 30 or fewer shares
of Intergraph Common Stock were initially contributed to the
Escrow.
The InterCAP stockholders have the right to vote the Escrow
Shares while such shares are in escrow, but they will not have
the right to sell the Escrow Shares while in escrow, regardless
of any changes in the stock price of the Escrow Shares.
Dividends or other distributions with respect to the Escrow
Shares, if any, would be placed in the escrow account and
distributed together with such Escrow Shares in accordance with
the terms of the Escrow Agreement. The Escrow Agreement may be
terminated at any time upon receipt by the Escrow Agent of 10
days' prior written notice of termination executed by Intergraph
and the Stockholders' Committee directing the distribution of all
property then held by the Escrow Agent. See "Risk Factors."
Options Outstanding Prior to the Merger
InterCAP Option Plan
On March 2, 1989, InterCAP adopted the InterCAP 1989 Stock
Option Plan (the "InterCAP Option Plan"). The InterCAP Option
Plan authorized the issuance of incentive stock options within
the meaning of Section 422 of the Code, as well as options not
qualifying as incentive stock options. Options under the
InterCAP Option Plan could be issued to employees or officers of
or consultants to InterCAP or its subsidiaries. As of September
30, 1994, the Board of Directors of InterCAP had granted
outstanding options denominated as incentive stock options to
acquire 935,062 shares of InterCAP Common Stock, and options to
acquire 1,173,376 shares of InterCAP Common Stock had been
exercised or terminated.
InterCAP Option Program
The Board of Directors of InterCAP, pursuant to a resolution
adopted on March 1, 1991, authorized the grant of options for
shares of InterCAP Common Stock remaining for grant under the
InterCAP Option Plan in the event of a change of control or sale
of InterCAP, such grant to be made on a pro rata basis to the
holders of outstanding options under the InterCAP Option Plan at
the weighted average exercise price of options then outstanding
under the InterCAP Option Plan. In adopting this resolution, the
Board of Directors of InterCAP determined that the value, if any,
of the authorized options available for grant under the InterCAP
Option Plan should inure to the benefit of InterCAP's employees
in the event of a change in control or sale of InterCAP. Because
the InterCAP Option Plan prohibits the issuance thereunder of
options (including nonqualified options) at exercise prices that
are below the fair market value of a share of InterCAP Common
Stock at the date of grant, the Board of Directors of InterCAP
determined that the March 1, 1991 resolution could not be
implemented through use of the InterCAP Option Plan. As a
result, by resolution adopted on September 26, 1994, the InterCAP
Board of Directors rescinded the March 1, 1991 resolution and
released from reservation under the InterCAP Option Plan the
391,562 shares that remained available for option grants
thereunder. Concurrent with this action, the InterCAP Board of
Directors, by resolution approved on September 26, 1994, adopted
the InterCAP 1994 Nonqualified Stock Option Program (the
"InterCAP Option Program") and reserved up to a maximum of
391,562 shares of InterCAP Common Stock for issuance upon
exercise of NQSO's issued under the InterCAP Option Program.
Finally, on September 26, 1994, all available options under the
InterCAP Option Program were granted to various employees and
officers of InterCAP in a manner consistent with the original
March 1, 1991 resolution, conditioned upon consummation of the
Merger. The InterCAP ISO's and NQSO's are collectively referred
to as the "InterCAP Options."
ISO Agreements
To evidence option grants made under the InterCAP Option
Plan, InterCAP has entered into agreements denominated as
incentive stock option agreements (the "ISO Agreements") with
various employees (each, an "Optionee"). Under the terms of each
ISO Agreement, InterCAP has granted ISO's to each Optionee in
consideration of the continued service of the Optionee. Under
the InterCAP Option Plan, the ISO's are periodically exercisable
at the option price specified in the ISO Agreement, but they must
be exercised within ten years from the date of issue. The ISO's
generally are only exercisable, however, if the Optionee has
remained in continuous employment with InterCAP from the date of
grant until the date of the proposed exercise. The shares of
InterCAP Common Stock acquired upon the exercise of the ISO are
not covered by a registration statement under the Securities Act
or under any state securities laws. In general, the ISO's
terminate upon the termination of service of the Optionee as an
officer or employee of InterCAP. If the Optionee ceases to be an
employee of InterCAP within three years after the date of grant,
InterCAP has the right to repurchase all shares of InterCAP
Common Stock acquired by the Optionee pursuant to the ISO
Agreements, under the terms and conditions as specified in such
ISO Agreement.
Although the ISO Agreements generally provide for
incremental vesting of each ISO, the ISO Agreements also provide
for accelerated vesting in the event of certain change-in-control
transactions affecting InterCAP. The Merger constitutes such a
transaction, and accordingly, all ISO's, whether or not then
fully vested, will be fully vested by virtue of the Merger.
The Reorganization Agreement provides for the assumption by
Intergraph of each ISO upon the terms set forth in the ISO
Agreements, except for (i) the deletion of provisions which by
their nature are not applicable to Intergraph or the Intergraph
Common Stock, or provisions which have been rendered inapplicable
by the passage of time, and (ii) adjustment of the number of
shares covered by the ISO and the exercise price as discussed
under "The Reorganization Agreement--InterCAP Options."
Nonqualified Stock Option Agreements
Under the terms of the InterCAP Option Program and the
Nonqualified Stock Option Agreements entered into in connection
with the grant of NQSO's thereunder (the "NQSO Agreements"),
InterCAP has granted to certain Optionees NQSO's in recognition
of past service to InterCAP and to induce the Optionees to remain
in the employ of InterCAP following the Merger. The
effectiveness of the grant is conditional on and subject to the
consummation of the Merger. If the Merger is consummated
pursuant to the Reorganization Agreement, the grant shall be
deemed to have been made immediately before the consummation of
the Merger. The NQSO's are periodically exercisable at the
exercise price specified in each NQSO Agreement, but they must be
exercised within ten years from the date of issue. The NQSO's
generally are only exercisable, however, if the Optionee has
remained in continuous employment with InterCAP from the date of
the NQSO Agreement until the date of the proposed exercise.
The NQSO Agreements provide that each NQSO will be 50%
vested upon consummation of the Merger, and that an additional
25% of each such NQSO will vest annually on the two succeeding
anniversaries of the Effective Date. The NQSO Agreements also
provide for (i) accelerated vesting of each NQSO and a ninety day
exercise window in the event the Optionee's employment by the
Surviving Corporation is terminated for a reason other than cause,
and (ii) accelerated vesting of each NQSO and a one year exercise
window in the event of death of the Optionee. As required by Biddle's
1990 employment agreement with InterCAP, the NQSO granted to Biddle
under the InterCAP Option Program with respect to 80,724 shares
of InterCAP Common Stock will be fully vested at the Effective Date
and Biddle will be permitted to exercise such NQSO for a period of
five years from the Effective Date, whether or not Biddle is then
an employee of the Surviving Corporation.
The Reorganization Agreement provides for the assumption by
Intergraph of each NQSO upon the terms set forth in the NQSO
Agreements, except for adjustment of the number of shares covered
by the option and the exercise price as discussed under "The
Reorganization Agreement--InterCAP Options."
Governmental and Regulatory Approvals
Intergraph and InterCAP are aware of no governmental or
regulatory approvals required for consummation of the Merger,
other than compliance with the Securities Act and applicable
state securities and "blue sky" laws.
Tax Certification
Consummation of the Merger is conditioned upon receipt by
Intergraph and InterCAP of certificates executed by holders of
the InterCAP Stock, and covering at least 50% of the Intergraph
Common Stock to be issued in the Merger (the "Continuity
Certificates"). The Continuity Certificates require the
stockholders of InterCAP immediately prior to the Merger to
confirm that, as of the Effective Date, they have no present plan
or intent to engage in a sale, exchange, transfer, pledge or
other disposition of all or a specified portion of the shares of
Intergraph Common Stock received in the Merger. The specified
portion referred to in the certificates may vary, but the
obligations of InterCAP and Intergraph to consummate the Merger
are conditioned upon the receipt of Continuity Certificates
confirming as of the Effective Date that the holders of InterCAP
Stock do not, when viewed as a group, have a present plan or
intent to sell, exchange, transfer, pledge or otherwise dispose
of more than 50% of the Intergraph Common Stock received in the
Merger. The form of the Continuity Certificate to be executed by
an entity stockholder of InterCAP permits such entity to
distribute shares of Intergraph Common Stock to the partners,
shareholders or other beneficial owners of the entity if such
distribution is required under the entity's partnership
agreement, certificate or articles of incorporation or other
governing instrument. However, the entity is required to confirm
as of the Effective Date that, to the best knowledge of the
entity after due inquiry, there is no present plan or intent on
the part of the recipients of the required distribution to engage
in a sale, exchange, transfer, pledge or other disposition of the
portion of the shares of Intergraph Common Stock to be received
by the recipients as specified in the Continuity Certificate.
Among other assumptions, the Exhibit Opinions and the Closing
Opinions concerning the tax consequences of the Merger will rely
on, and assume the accuracy of, the Continuity Certificates.
Employment Agreements
Intergraph Sub has entered into employment agreements with
ten key employees of InterCAP. The effectiveness of these
agreements is conditioned upon consummation of the Merger. In general,
these agreements provide, among other things, for the continued
employment of the employees at their pre-Merger salary, bonus and
benefit levels for a period of two years from the Effective Date
(unless the agreements are terminated under particular circumstances),
and obligate the employees under non-competition agreements for a
period of one year following termination of employment. In the
case of the Biddle-Intergraph Employment Agreement, Biddle's
employment by the Surviving Corporation would continue at his pre-
Merger salary, bonus and benefit levels for a period of three
months from the Effective Date (unless the agreement is
terminated under particular circumstances), and Biddle would be
obligated under a non-competition agreement for a period of two
years following termination of employment. The Biddle-Intergraph
Employment Agreement also reaffirms the change-in-control payment
of $167,000 due to Biddle following the Merger in accordance with
his 1990 employment agreement with InterCAP. See "The Merger and
Related Transactions--Interests of Certain Persons in the
Merger."
In addition, Intergraph has agreed in the Reorganization
Agreement that for so long as InterCAP remains profitable (but in
no event for a period longer than one year from the Effective
Date), (i) the salaries of InterCAP employees will not be
generally reduced as part of any Intergraph-wide reduction of
employee compensation, and (ii) the employees of InterCAP will
not be subject to any Intergraph-wide layoffs or reductions in
force. Nonetheless, all InterCAP employees will remain employees
at will (unless otherwise agreed in writing by Intergraph), and
Intergraph may generally reduce the InterCAP work force
(otherwise than as part of an Intergraph-wide layoff or reduction
in force) if it determines in its sole discretion to do so based
on the business conditions, cost structure and results of
operations of InterCAP. See "The Merger and Related Transactions-
- -Interests of Certain Persons in the Merger."
Accounting Treatment
The Merger is expected to be accounted for by the purchase
method for financial accounting purposes. Under this method of
accounting, the assets and liabilities of InterCAP will be
accounted for at cost. Cost is determined by reference to the
fair value of the net assets acquired or the fair value of the
consideration given. Accordingly, the assets of InterCAP will be
recorded at the fair value of the Intergraph Common Stock
received in the Merger and the Assumed Option Spread (a total of
$7.5 million). Income of the combined company will include
income of InterCAP from the date of the Merger forward and income
of Intergraph for the entire fiscal year in which the combination
occurs. See "The Reorganization Agreement--Conditions to the
Merger."
Dissenters' Rights
Holders of InterCAP Stock are entitled to appraisal rights
under Section 262 of the Delaware Act. A person having a
beneficial interest in shares of InterCAP Stock held of record in
the name of another person, such as a broker or nominee, must act
promptly to cause the record holder to follow the steps
summarized below properly and in a timely manner to perfect
whatever appraisal rights the beneficial owner may have.
The following discussion is not a complete statement of the
law pertaining to appraisal rights under the Delaware Act and is
qualified in its entirety by the full text of Section 262 which
is reprinted in its entirety as Appendix C to this
Prospectus/Proxy Statement. All references in Section 262 and in
this summary to a "stockholder" are to the record holder of the
shares of InterCAP Stock as to which appraisal rights are
asserted.
Under the Delaware Act, holders of shares of InterCAP Stock
who follow the procedures set forth in Section 262 will be
entitled to have their shares of InterCAP Stock appraised by the
Delaware Court of Chancery and to receive payment of the "fair
value" of such shares, exclusive of any element of value arising
from the accomplishment or expectation of the Merger, together
with a fair rate of interest, as determined by such court.
Under Section 262, at least 20 days prior to the Meeting (as
hereinafter defined), InterCAP must notify each of its
stockholders entitled to appraisal rights that such appraisal
rights are available and include in such notice a copy of Section
262. This Prospectus/Proxy Statement shall constitute such
notice to the holders of shares of InterCAP Stock and a copy of
Section 262 is attached to this Prospectus/Proxy Statement as
Appendix C. Any InterCAP stockholder who or which wishes to
exercise such appraisal rights or who or which wishes to preserve
his or its right to do so should review the following discussion
and Appendix C carefully because failure to comply timely and
properly with the procedures specified will result in the loss of
appraisal rights under the Delaware Act.
A holder of shares of InterCAP Stock wishing to exercise his
or its appraisal rights must deliver to InterCAP, prior to the
taking of the vote on the Merger at the Meeting, a written demand
for appraisal of his or its shares of InterCAP Stock and must not
vote in favor of the approval and adoption of the Reorganization
Agreement and the Merger at the Meeting. The failure to vote in
favor of the Reorganization Agreement and the Merger, or a vote
in person or by proxy against the Merger, will not in and of
itself constitute a written demand for appraisal satisfying the
requirements of Section 262. In addition, a holder of shares of
InterCAP Stock wishing to exercise his or its appraisal rights
must hold of record such shares on the date the written demand
for appraisal is made and must continue to hold such shares until
the Effective Date.
Only a holder of record of shares of InterCAP Stock is
entitled to assert appraisal rights for the shares of InterCAP
Stock registered in that holder's name. A demand for appraisal
should be executed by or on behalf of the holder of record, fully
and correctly, as his or its name appears on his or its stock
certificates. If the shares of InterCAP Stock are owned of
record in a fiduciary capacity, such as by a trustee, guardian or
custodian, execution of the demand should be made in that
capacity, and if the shares of InterCAP Stock are owned of record
by more than one person, as in a joint tenancy and tenancy in
common, the demand should be executed by or on behalf of all
joint owners. An authorized agent, including one or more joint
owners, may execute a demand for appraisal on behalf of a holder
of record; however, the agent must identify the record owner or
owners and expressly disclose the fact that, in executing the
demand, the agent is agent for such owner or owners. All written
demands for appraisal should be sent or delivered to InterCAP at
116 Defense Highway, Suite 400, Annapolis, Maryland 21401.
Within ten days after the Effective Date, InterCAP will
notify each holder of InterCAP Stock who has complied with
Section 262 and who has not voted in favor of the Merger of the
date the Merger became effective.
Within 120 days after the Effective Date, but not
thereafter, InterCAP or any stockholder entitled to appraisal
rights under Section 262 may file a petition in the Delaware
Court of Chancery demanding a determination of the fair value of
the shares of InterCAP Stock held by any such stockholders.
InterCAP is under no obligation to and has no present intention
to file a petition with respect to the appraisal of the fair
value of the shares of InterCAP Stock. Accordingly, it is the
obligation of the stockholders of InterCAP to initiate all
necessary action to perfect their appraisal rights within the
time prescribed in Section 262.
Within 120 days after the Effective Date, any stockholder of
InterCAP who has complied with the requirement for exercise of
appraisal rights will be entitled, upon written request, to
receive from InterCAP a statement setting forth the aggregate
number of shares of InterCAP Stock not voted in favor of the
approval and adoption of the Reorganization Agreement and the
Merger and with respect to which demands for appraisal have been
received and the aggregate number of holders of such shares.
Such statement must be mailed to such stockholder within ten days
after a written request therefor has been received by InterCAP or
within ten days after the expiration of the period for delivery
of demands for appraisal by stockholders outlined above,
whichever is later.
If a petition for an appraisal is timely filed, after a
hearing on such petition, the Delaware Court of Chancery will
determine the stockholders entitled to appraisal rights and will
appraise the "fair value" of their shares of InterCAP Stock,
exclusive of any element of value arising from the accomplishment
or expectation of the Merger, together with a fair rate of
interest, if any, to be paid upon the amount determined to be the
fair value. Stockholders considering seeking appraisal should be
aware that the fair value of their shares of InterCAP Stock as
determined under Section 262 could be more than, the same as or
less than the consideration they would receive pursuant to the
Reorganization Agreement if they did not seek appraisal of their
shares of InterCAP Stock. The Delaware Supreme Court has stated
that "proof of value by any techniques or methods which are
generally considered acceptable in the financial community and
otherwise admissible in court" should be considered in the
appraisal proceedings. In addition, Delaware courts have decided
that the statutory appraisal remedy, depending on factual
circumstances, may or may not be a dissenter's exclusive remedy.
The costs of the action may be determined by the court and taxed
upon the parties as the court deems equitable. The court may
also order that all or a portion of the expenses incurred by any
stockholder in connection with an appraisal, including, without
limitation, reasonable attorneys' fees and the fees and expenses
of experts utilized in the appraisal proceeding, be charged pro
rata against the value of all of the shares of InterCAP Stock
entitled to appraisal.
Any holder of shares of InterCAP Stock who has duly demanded
an appraisal in compliance with Section 262 will not, after the
Effective Date, be entitled to vote the shares of InterCAP Stock
subject to such demand for any purpose or be entitled to the
payment of dividends or other distributions on those shares
(except dividends or other distributions payable to holders of
record of shares of InterCAP Stock as of a date prior to the
Effective Date).
If any stockholder who demands appraisal of his or its
shares of InterCAP Stock under Section 262 fails to perfect, or
effectively withdraws or loses, his or its right to appraisal, as
provided in the Delaware Act, the shares of InterCAP Stock of
such stockholder will be converted into the right to receive
shares of Intergraph Common Stock in accordance with the
Reorganization Agreement. A stockholder will fail to perfect, or
effectively lose or withdraw, his or its right to appraisal if no
petition for appraisal is filed within 120 days after the
Effective Date, or if the stockholder delivers to InterCAP a
written withdrawal of his or its demand for appraisal and
acceptance of the Merger, except that any such attempt to
withdraw made more than 60 days after the Effective Date will
require the written approval of InterCAP.
Failure to follow the steps required by Section 262 of the
Delaware Act for perfecting appraisal rights may result in the
loss of such rights, in which event an InterCAP stockholder will
be entitled to receive a fraction of a share of Intergraph Common
Stock for each share of InterCAP Stock owned by him or it as
follows: (a) each share of InterCAP Common Stock will be
converted into the right to receive a fraction of a share of
Intergraph Common Stock having a value of (determined prior to
the Closing Date using the Share Determination Market Price)
$0.90975693, (b) each share of InterCAP Series A Preferred Stock
will be converted into the right to receive a fraction of a share
of Intergraph Common Stock having a value of $1.475, and (c) each
share of InterCAP Series B Preferred Stock and each share of
InterCAP Series C Preferred Stock will be converted into the
right to receive a fraction of a share of Intergraph Common Stock
having a value of $0.90975693.
STOCKHOLDERS ELECTING TO EXERCISE THEIR APPRAISAL RIGHTS
UNDER SECTION 262 MUST NOT VOTE FOR APPROVAL OF THE MERGER. A
VOTE BY A STOCKHOLDER AGAINST APPROVAL OF THE MERGER IS NOT
REQUIRED IN ORDER FOR THAT STOCKHOLDER TO EXERCISE APPRAISAL
RIGHTS. HOWEVER, IF A STOCKHOLDER RETURNS A SIGNED PROXY BUT
DOES NOT SPECIFY A VOTE AGAINST APPROVAL OF THE MERGER OR A
DIRECTION TO ABSTAIN, THE PROXY, IF NOT REVOKED, WILL BE VOTED
FOR APPROVAL OF THE MERGER, WHICH WILL HAVE THE EFFECT OF WAIVING
THAT STOCKHOLDER'S APPRAISAL RIGHTS.
THE REORGANIZATION AGREEMENT
The following is a brief summary of the Reorganization
Agreement, which (with the exhibits thereto) is attached as
Appendix A to this Prospectus/Proxy Statement and is incorporated
herein by reference in its entirety. Such summary is qualified
in its entirety by reference to the Reorganization Agreement.
Effective Date of the Merger
If the Merger is approved by the stockholders of InterCAP
and the other conditions to the Merger are satisfied or waived,
the Merger will become effective upon the filing by Intergraph
Sub and InterCAP of the Certificate of Merger with the Secretary
of State of the State of Delaware, in the manner provided under
Section 251 of the Delaware Act. Assuming all conditions to the
Merger are met or waived prior thereto, it is anticipated that
the Effective Date will occur on or about December 15, 1994.
Effects of the Merger
Upon consummation of the Merger, Intergraph Sub will be
merged with and into InterCAP, with InterCAP surviving the Merger
and becoming a wholly owned subsidiary of Intergraph (the
"Surviving Corporation"). The directors and executive officers
of Intergraph will remain unchanged as a result of the Merger.
Upon consummation of the Merger, the members of the Surviving
Corporation's Board of Directors will be James W. Meadlock (Chief
Executive Officer and Chairman of the Board of Intergraph),
Stephen J. Phillips (an Executive Vice President of Intergraph)
and Tommy D. Steele (an Executive Vice President of Intergraph).
The officers of InterCAP in office immediately prior to the
Effective Date will no longer serve in such capacity and the
officers of the Surviving Corporation will be the officers of
Intergraph Sub prior to the Merger. The officers of Intergraph
Sub prior to the Merger will be James W. Meadlock (Chief
Executive Officer), Stephen J. Phillips (Executive Vice President
and Secretary), and Tommy D. Steele (Executive Vice President).
The stockholders of InterCAP will become stockholders of
Intergraph (as described below), and their rights will be
governed by Intergraph's Certificate of Incorporation, Restated
By-laws and the Stockholder Rights Plan. See "Description of
Intergraph Capital Stock" and "Principal Differences Between
Intergraph and InterCAP Capital Stock."
Aggregate Merger Consideration
Pursuant to the Reorganization Agreement, Intergraph will
pay or furnish total consideration having a value (based on the
Share Determination Market Price) of $7.5 million for the entire
equity interest of InterCAP. Such consideration will be paid or
furnished (i) by the conversion of the InterCAP Options into
options to acquire Intergraph Common Stock such that the
Aggregate Assumed Option Spread of all options so converted will
be equal to $1,021,573.65, (ii) in the amount of the Closing
Merger Consideration by the issuance of shares of Intergraph
Common Stock (and cash payments in respect of fractional shares)
in an amount equal to $7.5 million minus the Aggregate Assumed
Option Spread. The Closing Merger Consideration will be
allocated among the classes of InterCAP Stock according to the
exchange ratios described below. See "The Reorganization
Agreement--Manner and Basis of Converting InterCAP Stock." The
precise number of shares of Intergraph Common Stock issued to
each stockholder of InterCAP will be determined prior to the
Effective Date based on the applicable exchange ratio and the
Share Determination Market Price. It is expected (assuming the
Share Determination Market Price were determined as of September
30, 1994 rather than the Effective Date) that, upon consummation
of the Merger, the holders of InterCAP Stock will receive shares
of Intergraph Common Stock representing approximately 1.57% of
the Intergraph Common Stock outstanding as of such time.
Manner and Basis of Converting InterCAP Stock
Upon the consummation of the Merger, (a) each issued and
outstanding share of common stock of Intergraph Sub will be
converted into one share of common stock of the Surviving
Corporation, (b) each share of InterCAP Stock that is either, (i)
authorized but unissued, (ii) owned by InterCAP as treasury
stock, or (iii) owned by any subsidiary of InterCAP will be
cancelled, (c) each then outstanding share of InterCAP Common
Stock (other than shares held by dissenting stockholders) will
automatically be converted into the right to receive a fraction
of a share of Intergraph Common Stock having a value (determined
prior to the Closing Date using the Share Determination Market
Price) of $0.90975693, and (d) each then outstanding share of
InterCAP Preferred Stock (other than shares held by the
dissenting stockholders) will be automatically converted into the
right to receive a fraction of a share of Intergraph Common Stock
as follows: (i) each share of InterCAP Series A Preferred Stock
will be converted into the right to receive a fraction of a share
of Intergraph Common Stock having a value (determined prior to
the Closing Date using the Share Determination Market Price) of
$1.475, (ii) each share of InterCAP Series B Preferred Stock, if
any, will be exchanged and converted into the right to receive a
fraction of a share of Intergraph Common Stock having a value
(determined prior to the Closing Date using the Share
Determination Market Price) of $0.90975693, (iii) each share of
InterCAP Series C Preferred Stock, if any, will be exchanged and
converted into the right to receive a fraction of a share of
Intergraph Common Stock having a value (determined prior to the
Closing Date using the Share Determination Market Price) of
$0.90975693. Additionally, each share of Intergraph Common Stock
to be issued upon conversion of shares of InterCAP Stock in
accordance with the Reorganization Agreement will include the
corresponding percentage of a right (the "Intergraph Rights") to
purchase "Common Shares" pursuant to and as defined in the Rights
Agreement dated August 25, 1993 by and between Intergraph and
Harris Trust and Savings Bank, an Illinois banking corporation
(the "Intergraph Rights Agreement"). See "Description of
Intergraph Capital Stock--Stockholder Rights Plan."
If upon a consummation of the Merger, any holder of InterCAP
Stock would be entitled to receive a number of shares of
Intergraph Common Stock that includes a fraction, then in lieu of
a fractional share, such holder will be entitled to receive cash
equal to $0.90975693 multiplied by the fraction of a share of
Intergraph Common Stock to which the stockholder would otherwise
be entitled.
Based upon the capitalization of InterCAP and Intergraph as
of September 30, 1994, and the exchange ratios set forth above
(and assuming the Share Determination Market Price were
determined as of September 30, 1994 rather than at the Effective
Date), the stockholders of InterCAP will own Intergraph Common
Stock representing approximately 1.57% of the Intergraph Common
Stock outstanding immediately after consummation of the Merger.
As promptly as practicable after the Effective Date, the
Exchange Agent will mail the Letter of Transmittal to each holder
of record of InterCAP Stock as of the Effective Date. The Letter
of Transmittal will contain information and instructions with
respect to the surrender of InterCAP share certificates in
exchange for new certificates representing shares of Intergraph
Common Stock (other than the Escrow Shares to be delivered into
escrow on behalf of such holder pursuant to the terms of the
Reorganization Agreement) (each, an "Intergraph Certificate") and
cash payment for any fractional shares resulting from the
exchange. INTERCAP SHARE CERTIFICATES SHOULD NOT BE SURRENDERED
UNTIL THE LETTER OF TRANSMITTAL IS RECEIVED.
In the event of a transfer of ownership of shares of
InterCAP Stock which is not registered on the transfer records of
InterCAP, an Intergraph Certificate representing the proper
number of shares of Intergraph Common Stock may be issued to a
transferee if the InterCAP Certificate representing such InterCAP
Stock is presented to Intergraph, accompanied by all documents
required to evidence and effect such transfer and by evidence
that any applicable stock transfer taxes have been paid. Until
surrendered to Intergraph, each InterCAP Certificate will be
deemed, on and after the Effective Date, to represent only the
right to receive upon such surrender Intergraph Certificates
representing shares of Intergraph Common Stock (other than the
Escrow Shares) and cash, if any, in lieu of a fractional share of
Intergraph Common Stock to which such holder has become entitled.
INTERCAP CERTIFICATES SHOULD NOT BE SURRENDERED BY THE HOLDERS OF
INTERCAP STOCK TO INTERGRAPH UNTIL A LETTER OF TRANSMITTAL IS
RECEIVED AFTER THE EFFECTIVE DATE OF THE MERGER.
InterCAP Options
Pursuant to the Reorganization Agreement, each outstanding
InterCAP Option will be assumed by Intergraph and automatically
converted into an option to purchase shares of Intergraph Common
Stock (the "Assumed Options"). Each InterCAP Option so assumed
by Intergraph will be exercisable for a number of shares of
Intergraph Common Stock determined by multiplying the number of
shares of InterCAP Common Stock subject to the InterCAP Option by
the fraction resulting from (i) dividing $0.90975693 by (ii) the
Share Determination Market Price (the resulting fraction of which
is the "Option Conversion Fraction"), at an exercise price equal
to the exercise price of the InterCAP Option at the time of the
Merger divided by the Option Conversion Fraction. Each Assumed
Option will have the same terms and conditions, including the
same term, status as an "incentive stock option" under the Code
(if such InterCAP Option had been an "incentive stock option")
and vesting schedules, which in the case of the ISO's provides
for full vesting at the Effective Date. To avoid fractional
shares, the number of shares of Intergraph Common Stock subject to
an Assumed Option will be rounded up to the nearest whole share and
the exercise price will be rounded up to the nearest cent. Prior
to the Effective Date, Intergraph intends to file Registration
Statements on Form S-8 with the SEC with respect to the issuance
of shares of Intergraph Common Stock upon exercise of the Assumed
Options.
At the Effective Date, it is expected that 1,326,624
InterCAP Options will be outstanding, of which 935,062 are ISO's
and 391,562 are NQSO's.
Representations and Warranties
Each of InterCAP, Intergraph and Intergraph Sub made various
customary representations and warranties in the Reorganization
Agreement relating to, among other things, (a) the organization
and similar corporate matters of each of Intergraph, Intergraph
Sub and InterCAP, (b) the ownership of other entities by each of
Intergraph and InterCAP, including the ownership of Intergraph
Sub by Intergraph, (c) the capital structure of each of
Intergraph and InterCAP, (d) the authorization, execution,
delivery, performance and enforceability of the Reorganization
Agreement and related matters, and (e) the accuracy of
information supplied by each of Intergraph and InterCAP in
connection with this Prospectus/Proxy Statement.
In addition, InterCAP made various customary representations
and warranties relating to, among other things, (a) conflicting
agreements or commitments; (b) its financial statements; (c)
certain changes or events; (d) absence of undisclosed
liabilities; (e) taxes and regulatory filings; (f) environmental
matters; (g) intellectual property rights; (h) employee benefit
plans; (i) employment agreements; (j) labor matters; (k)
compliance with applicable laws; (l) litigation; (m) title to
assets, properties and rights; (n) insurance; (o) bankruptcy; (p)
customer orders and warranties; (q) the InterCAP stockholder vote
required to approve the Reorganization Agreement, the Merger and
the Charter Amendment; and (r) post-merger stockholder
continuity.
Intergraph and Intergraph Sub also made various additional
customary representations and warranties relating to, among other
things, the documents filed by Intergraph with the SEC, the
accuracy of information contained therein and the absence of any
material adverse changes.
All of the representations and warranties of Intergraph made
in the Reorganization Agreement terminate at the Effective Date;
all of the representations and warranties of InterCAP made in the
Reorganization Agreement shall survive the termination of the
Effective Date until the 90th day after the Closing Date and
certain other representations and warranties made by the parties
for the benefit of counsel relating to the opinions delivered by
such counsel in connection with the closing under the
Reorganization Agreement and the Registration Statement of which
this Prospectus/Proxy Statement forms a part shall survive the
Effective Date.
Certain Covenants
Under the Reorganization Agreement, InterCAP has agreed that
until the Effective Date or the earlier termination of the
Reorganization Agreement pursuant to the terms thereof, it will
conduct its operations in the ordinary course of business and
will use its best efforts, subject to the foregoing, and
consistent with such operation, to maintain and preserve its
business organization, officers and key employees and business
relationships. Among other limitations relating to the conduct
of its business, InterCAP has agreed that it will, unless it
obtains the prior written consent of Intergraph, (a) comply with
all applicable contractual obligations; (b) maintain all
properties in good repair, order and condition and maintain
appropriate insurance coverages; (c) comply with applicable laws;
(d) promptly notify Intergraph of the occurrence of any event of
default or conditional events of default under any loan document,
(e) promptly give written notice to Intergraph upon obtaining
knowledge that the representations or warranties of InterCAP in
the Reorganization Agreement are untrue or misleading in any
material respect; (f) deliver to Intergraph a list, dated as of
the Effective Date, showing all liabilities and obligations of
InterCAP, except those arising in the ordinary course of
business; (g) promptly notify Intergraph of any material change
or inaccuracy in any data previously given to Intergraph; (h)
provide access to Intergraph, to the extent InterCAP has the
right, to any or all property which InterCAP currently or has in
the past leased, operated, owned or managed in any manner; (i)
use its best efforts to collect all amounts due to InterCAP as
the result of the exercise of any stock option or warrants; (k)
use its best efforts to retain all of its existing employees; (l)
promptly notify Intergraph upon receipt of any document
identifying InterCAP as a party to any litigation or adversarial
proceeding; and (m) cause that certain Promissory Note, dated
September 13, 1993 and made by Biddle in the principal amount of
$30,000 (the "Biddle Note"), to be replaced by a new note in
equal principal amount and otherwise on substantially similar
terms.
InterCAP has further agreed that it will not, without the
prior written consent of Intergraph or as permitted by the
Reorganization Agreement, (a) amend or change its Certificate of
Incorporation or by-laws; (b) change the methods used in
allocating and charging costs or recognizing revenues, except as
may be required by applicable law; (c) make or permit any change
in the number of shares of its capital stock issued and
outstanding, or issue, reserve for issuance, grant, sell or
authorize the issuance of any shares of its capital stock or
subscriptions, options, warrants, calls, rights or commitments of
any kind relating to such issuances or sale of or conversion into
shares of its capital stock (except for (i) the conversion of the
InterCAP Series B Preferred Stock and InterCAP Series C Preferred
Stock to InterCAP Common Stock as contemplated by the Preferred
Stock Agreement; (ii) the exercise of the Warrants in accordance
with the Preferred Stock Agreement; and (iii) the conversion of
the ISO's in accordance with their terms); (d) create, amend or
renew any debt arrangement or other obligation or liability; (e)
mortgage, pledge, hypothecate or otherwise encumber any material
asset or permit any lien to be filed against any assets of
InterCAP; (f) pay, discharge or satisfy any material encumbrance
or liability or cancel any material debts or claims or amend,
terminate or waive any rights of material value; (g) license,
sell, transfer, pledge, mortgage or otherwise dispose of any
material intellectual property rights; (h) grant any increase in
compensation or pay or agree to pay or accrue any bonus,
incentive or like benefit to or for the credit of any director,
officer, employee or other person except as provided in the
Reorganization Agreement; (i) enter into, terminate or modify any
employment, consulting or service agreement; (j) adopt, amend,
terminate or modify any benefit plan; (k) declare, set aside, or
pay any dividend or other distribution of any assets of any kind
whatsoever with respect to any shares of its capital stock,
including without limitation, any accrued but unpaid dividends on
the InterCAP Preferred Stock; (l) acquire the capital stock or
equity securities of any other entity; (m) make any capital
expenditures in excess of $100,000 in the aggregate; (n) make any
tax election or settle or compromise any tax liability; (o) adopt
a plan of complete or partial liquidation, dissolution, merger,
or similar reorganization (except as contemplated or permitted by
the Reorganization Agreement); (p) enter into, renew or amend any
real property or equipment leases (except as otherwise permitted
by the Reorganization Agreement); (q) initiate or settle any
legal or other adversarial proceedings; or (r) enter into any
agreement, understanding or commitment which is inconsistent with
the obligations of InterCAP or its directors under the Reorganization
Agreement.
InterCAP has further agreed that, unless and until the
Reorganization Agreement is terminated pursuant to its terms, it
will not directly or indirectly solicit, initiate discussions or
engage in negotiations with any persons other than Intergraph, or
take any other actions to facilitate the efforts of any person
other than Intergraph, provide information with respect to
InterCAP to any person other than Intergraph, enter into an
agreement with any person other than Intergraph, or, except as
required by law, make or authorize any statement, recommendation
or solicitation, in each case, relating to the acquisition of
InterCAP by merger, purchase or capital stock purchase of assets
or otherwise. Notwithstanding the foregoing, if the Board of
Directors of InterCAP receives an unsolicited proposal from a
third party, it may respond to such proposal if the Board first
certifies to Intergraph that it has determined that it must do so
in the exercise of its fiduciary duties.
Each of InterCAP and Intergraph has further agreed, among
other things: (a) to promptly apply for and use its best efforts
to obtain all consents and approvals required with respect to it
for the consummation of the Merger; (b) to use its best efforts
to effectuate the transactions contemplated by the Reorganization
Agreements and to fulfill the conditions to close the Merger; and
(c) that neither party will disclose without the consent of the
other party, (i) the fact the discussions are taking place; (ii)
the content of the Reorganization Agreement; or (iii) any terms,
conditions or other facts discussed or proposed by the parties
with respect to the Reorganization Agreement (except as required
by law or pursuant to the Reorganization Agreement).
Conditions to the Merger
The respective obligations of InterCAP and Intergraph and
Intergraph Sub to consummate the Merger are subject to the
satisfaction of a number of conditions, including, but not
limited to, the following: (a) the Proposed Transactions shall
have been performed and the Reorganization Agreement, the Merger
and the Charter Amendment shall have been approved and adopted by
the requisite vote of the stockholders of InterCAP; (b) all
authorizations, consents, orders, approvals of, or declarations
or filings with, any governmental entity necessary for the
consummation of the transactions contemplated by the
Reorganization Agreement shall have been filed, occurred or been
obtained; (c) no temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation
of the Merger shall have been issued and remain in effect; (d)
the Registration Statement containing the Prospectus/Proxy
Statement shall have become effective under the Securities Act
and shall not be the subject of any stop order or proceeding
seeking a stop order; (e) holders of in excess of fifty percent
(50%) of the aggregate fair market value, immediately prior to
the Merger, of all outstanding InterCAP Stock and the recipients
in excess of fifty percent (50%) of the Intergraph Shares in the
Merger shall have executed and delivered Continuity Certificates
to Intergraph and InterCAP; (f) the receipt of an opinion of
counsel, in form and substance satisfactory to each opinion
recipient to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code;
(g) the InterCAP Certificate shall have been amended in the
manner contemplated by the Preferred Stock Agreement following
approval of such amendment by all requisite action of the Board
of Directors and stockholders of InterCAP; and (h) the closing
sale price of the Intergraph Common Stock as reported by NASDAQ
on the business day immediately prior to the Closing Date shall
be not less than $6.00 per share nor more than $14.00 per share
(in each case, as adjusted to reflect any changes in the capital
structure of Intergraph, as described in the Reorganization
Agreement).
In addition, the obligations of Intergraph and Intergraph
Sub to consummate the Merger are further subject to the
satisfaction of a number of conditions, unless waived in writing
by Intergraph, including (a) the truth and accuracy in all
material respects of the representations and warranties of
InterCAP set forth in the Reorganization Agreement; (b) the
performance by InterCAP of all obligations required to be
performed by it under the Reorganization Agreement; (c) the
absence of any material adverse change in the business,
properties, liabilities, assets, operations, results of
operations, condition (financial and otherwise), prospects or
affairs of InterCAP; (d) the execution of releases by the
officers and directors of InterCAP releasing InterCAP from any
and all claims; (e) the receipt by Intergraph of an opinion of
counsel to InterCAP in form and substance satisfactory to
Intergraph; (f) all corporate and other proceedings contemplated
by the Reorganization Agreement and all documents and instruments
incident thereto shall have been completed to the satisfaction of
Intergraph; (g) the Board of Directors and Stockholders of
InterCAP shall have approved the Merger and holders of no more
than 5% of the issued and outstanding shares of InterCAP Stock
shall have preserved their right to exercise dissenter's rights;
(h) all necessary regulatory approvals shall have been obtained;
(i) Intergraph shall have received certificates from an
appropriate officer of InterCAP, in form and substance
satisfactory to Intergraph, certifying that certain closing
conditions were satisfied; (j) InterCAP shall have working
capital immediately prior to the Closing Date (but before the
payment of transaction expenses relating to the Merger and
payments to Biddle under his employment agreement with InterCAP)
of at least $450,000, and InterCAP's aggregate indebtedness for
borrowed money shall not exceed $210,000; (k) all of the Warrants
shall have been exercised; (l) all of the InterCAP Series B
Preferred Stock and the InterCAP Series C Preferred Stock shall
have been converted into InterCAP Common Stock in accordance with
the Preferred Stock Agreement, (m) the Preferred Stock Agreement
shall have been executed, delivered and performed, (n) the Escrow
Agreement shall have been executed by Intergraph, InterCAP,
Intergraph Sub and members of the Stockholders' Committee; and
(o) Intergraph Sub shall have entered into employment agreements
with certain InterCAP employees.
The obligation of InterCAP to consummate the Merger is also
further subject to the satisfaction of a number of conditions,
unless waived in writing by InterCAP, including (a) the truth and
accuracy in all material respects of the representations and
warranties of Intergraph and Intergraph Sub set forth in the
Reorganization Agreement; (b) the performance by Intergraph and
Intergraph Sub of all obligations required to be performed by
them under the Reorganization Agreement; (c) the receipt by
InterCAP of an opinion of counsel of Intergraph, in a form and
substance satisfactory to InterCAP; and (d) the receipt by
InterCAP of certificates from an appropriate officer of
Intergraph, in form and substance satisfactory to InterCAP.
The obligations of InterCAP to consummate the Merger are
collectively referred to as "InterCAP's Closing Conditions" and
the obligations of Intergraph to consummate the Merger are
collectively referred to as "Intergraph's Closing Conditions."
Indemnification
Pursuant to the Reorganization Agreement, the InterCAP
stockholders have agreed, jointly and severally, to indemnify
Intergraph and Intergraph Sub and their respective affiliates,
successors and assigns (the "Indemnified Persons") against certain
losses arising from a breach of the representations and warranties
made by InterCAP in the Reorganization Agreement. However, the
maximum liability of each InterCAP stockholder for such indemnification
will not (in the absence of fraud, willful misrepresentation, willful
omission of a material fact, or violation of the applicable securities
laws) exceed such stockholder's pro rata share of the Escrow
Shares. See "The Merger and Related Transactions--Escrow
Agreement."
Termination
The Reorganization Agreement provides that it may be
terminated at any time prior to the Effective Date, whether
before or after approval of the Merger by the InterCAP
stockholders, by:
(i) Mutual written consent duly authorized by the
Boards of Directors of Intergraph and InterCAP;
(ii) Intergraph, if any of Intergraph's Closing
Conditions are not satisfied or waived in writing by Intergraph;
(iii) InterCAP, if any of InterCAP's Closing
Conditions are not satisfied or waived in writing by InterCAP;
(iv) Intergraph or InterCAP, if the Effective Date
shall not have occurred on or before December 31, 1994, or such
later date agreed to in writing by Intergraph and InterCAP;
(v) Intergraph or InterCAP, if any court of competent
jurisdiction in the United States or other United States (federal
or state) governmental body shall have issued an order, decree or
ruling or taken any other action restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling
or other action shall have been final and nonappealable; or
(vi) InterCAP, if the InterCAP Board of Directors
determines to pursue or accept a bona fide proposal or offer from
a third party concerning any merger, sale of assets, sale of
additional securities or any similar transaction and the Board of
Directors has determined that the proposal or offer is more
favorable to InterCAP and its stockholders than the Merger and
that it must accept such proposal or offer in exercise of its
fiduciary duties (any such offer or proposal is referred to as a
"Superior Offer," and termination in respect of any Superior
Offer is referred to as a "Superior Offer Termination"). See
"The Reorganization Agreement--Certain Covenants" and "--
Conditions to the Merger."
Amendment
The Reorganization Agreement may be amended in writing by
InterCAP and Intergraph at any time before or after approval of
InterCAP's stockholders of the Reorganization Agreement and the
Merger, except that, after such stockholder approval, no
amendment may be made which reduces the total consideration paid
by Intergraph to the InterCAP stockholders or which materially
and adversely affects the rights of InterCAP's stockholders
without the approval of such stockholders.
Merger Expenses and Fees
The Reorganization Agreement provides that, except under
certain circumstances, each of InterCAP and Intergraph will pay
its own expenses incurred in preparing for, entering into and
carrying out the transactions contemplated by the Reorganization
Agreement. Under certain circumstances, however, if (i) neither
Intergraph nor Intergraph Sub is then in material breach of the
Reorganization Agreement, and (ii) if the Reorganization
Agreement is terminated by Intergraph following any intentional
breach by InterCAP of its covenants contained in Article IV of
the Reorganization Agreement or any intentional or reckless
material misstatement or omission by InterCAP contained in the
representations in Article III of the Reorganization Agreement,
then in any such case, InterCAP must reimburse Intergraph for all
reasonable, actual documented out-of-pocket fees or expenses
(including but not limited to reasonable fees and expenses of
counsel, accounting fees, travel expenses, registration or filing
fees and the like) actually incurred in good faith by Intergraph
or on its behalf in connection with the proposed Merger or the
negotiation, structuring, evaluation or consummation of the
transactions contemplated by the Reorganization Agreement
(collectively, the "Designated Expenses"). Any such
reimbursement must be made not later than three business days
after the submission by Intergraph of a statement therefor.
Termination Fee
The Reorganization Agreement also provides for the payment
to Intergraph of a termination fee in the event the
Reorganization Agreement is terminated under certain
circumstances. According to the Reorganization Agreement, so
long as neither Intergraph nor Intergraph Sub is then in material
breach of the Reorganization Agreement and Intergraph and
Intergraph Sub have satisfied the conditions to InterCAP's
obligations to consummate the Merger (to the extent satisfaction
or performance of such conditions is in the exclusive control of
Intergraph), if the Reorganization Agreement is terminated (i) by
InterCAP pursuant to a Superior Offer Termination, (ii) by
Intergraph as a result of the withdrawal or modification by the
InterCAP Board of Directors of its recommendation to the InterCAP
stockholders with respect to the Merger (but only if such
withdrawal arises out of, relates to or follows any inquiry,
contact or proposal to InterCAP from a third party concerning any
Superior Offer or other proposed merger, sale of assets, sale of
additional securities or similar transaction), or (iii) by either
party if any Superior Offer is approved by the requisite vote of
the holders of InterCAP Stock within 180 days of such termination
if such Superior Offer or the reasonable possibility of such
Superior Offer was known to InterCAP or its directors at the time
the Reorganization Agreement was terminated, then, in any such
case, InterCAP shall pay to Intergraph, at Intergraph's election,
the amount hereafter specified (the "Termination Fee"). If
applicable, the Termination Fee will be equal to the greatest of
(i) the Designated Expenses plus an amount equal to the fully
allocated, reasonable documented cost of time (consisting of
salary and benefits) actually expended by Intergraph officers and
employees in investigating, negotiating, and taking steps
necessary to consummate, the transactions contemplated by the
Reorganization Agreement (but in no event to exceed $300,000 in
the aggregate), (ii) $200,000 in cash, or (iii) 10% of the excess
over $7,500,000 of the total consideration (whether in the form
of cash, securities or other property, or an assumption of
options or warrants) to be paid to InterCAP or its security
holders in connection with the Superior Offer. The
Reorganization Agreement requires that the applicable Termination
Fee be paid to Intergraph within ten days of termination unless
the amount specified in clause (iii) is selected by Intergraph,
in which case such amount shall be payable upon consummation of
the transactions contemplated by the Superior Offer.
THE BOARD OF DIRECTORS OF INTERCAP UNANIMOUSLY RECOMMENDS A VOTE
FOR ADOPTION AND APPROVAL OF THE REORGANIZATION AGREEMENT AND THE
MERGER.
PROPOSAL TO AMEND INTERCAP'S CERTIFICATE OF INCORPORATION
General
The Board of Directors of InterCAP has adopted resolutions
recommending, and at the Meeting InterCAP stockholders will be
asked to consider and act upon, a proposed amendment to Article
Fourth, Section I A, paragraph 4(a) of InterCAP's Certificate
that would extend the date from October 1, 1994 to January 15,
1995, after which the liquidation preference of the InterCAP
Series A Preferred Stock would be increased from $1.475 per share
to $1.475 per share plus one-half of all accrued but unpaid
dividends (which accrued at $1.475 annually) thereon. The form
of the Charter Amendment is attached as Appendix B hereto.
Background
Under the terms of the InterCAP Certificate, the original
liquidation preference of the InterCAP Series A Preferred Stock
was fixed at $1.475 per share, plus an amount equal to all
accrued but unpaid dividends (at a rate of 10% per year) thereon
from the original issue date (in 1988 or 1989) to the effective
date of the liquidation. In addition, the InterCAP Certificate
provides that a consolidation or merger of InterCAP or a sale of
all or substantially all the assets of InterCAP is to be regarded
as a liquidation of InterCAP. Moreover, in the case of a
consolidation, merger or asset sale, each holder of InterCAP
Series A Preferred Stock is provided the option to elect to
receive in the transaction either the liquidation preference for
the InterCAP Series A Preferred Stock or to have the conversion
privileges of the InterCAP Series A Preferred Stock be
appropriately adjusted such that after the transaction, the
InterCAP Series A Preferred Stock would be convertible into the
number of shares of stock or other securities or property of
InterCAP or the successor corporation to which a holder of that
number of shares of InterCAP Common Stock issuable upon
conversion of the InterCAP Series A Preferred Stock would have
been entitled in the transaction.
As discussed under "The Merger and Related Transactions--
Background of the Merger," the Board of Directors of InterCAP
began actively considering a strategic transaction involving
InterCAP, including the possible sale of InterCAP, in 1993.
Management believed that if InterCAP were then sold or
participated in a strategic combination with one or more other
companies, all or substantially all the proceeds would be
distributed to the holders of InterCAP Preferred Stock in respect
of their liquidation preferences and, absent adjustment to such
liquidation preferences, the amount of proceeds available for
distribution to holders of InterCAP Common Stock, including
employees who held options to acquire shares of InterCAP Common
Stock, would be nominal at best. In recognition of the
importance of incentivizing InterCAP's employees to continue to
build its business and to identify, negotiate and consummate a
strategic transaction, in May 1993, the Board of Directors of
InterCAP proposed, and thereafter InterCAP's stockholders
(including all holders of InterCAP Series A Preferred Stock)
approved, an amendment to InterCAP's Certificate that reduced the
liquidation preference of the InterCAP Series A Preferred Stock
from $1.475 per share plus all accrued but unpaid dividends
thereon to $1.475 per share plus (if the effective date of the
liquidation was after October 1, 1994) an amount equal to one-
half of all accrued but unpaid dividends thereon. The primary
purpose of this amendment was to provide incentive to InterCAP's
management to consummate a strategic transaction or sale of
InterCAP by October 1, 1994.
When active discussions between InterCAP and Intergraph
commenced in August 1994, it became apparent that it would be
difficult to consummate a merger transaction by October 1, 1994.
Accordingly, InterCAP management personnel asked the holders of
InterCAP Series A Preferred Stock if they would be willing to
postpone the increase in the Series A Liquidation Preference to a
date after October 1, 1994 provided that InterCAP could execute a
definitive agreement with Intergraph by no later than September
30, 1994. Such holders agreed on the condition that the Merger
be consummated no later than January 15, 1995.
Pursuant to the Preferred Stock Agreement, the holders of
InterCAP Preferred Stock who are parties thereto have agreed to
vote all shares of InterCAP Stock they own in favor of the
Charter Amendment.
Effect of the Charter Amendment
If the Charter Amendment is approved and adopted, the effect
will be to fix the liquidation preference of the InterCAP Series
A Preferred Stock at $1.475 per share through January 15, 1995.
Accordingly, if the Merger is approved and consummated prior to
that date, the holders of InterCAP Series A Preferred Stock will
receive shares of Intergraph Common Stock with a value of $1.475
for each share of InterCAP Series A Preferred Stock they own.
From a financial viewpoint, the Charter Amendment benefits the
holders of InterCAP Series B Preferred Stock, InterCAP Series C
Preferred Stock and InterCAP Common Stock by increasing the
amount of the Intergraph Common Stock they will receive in the
Merger by approximately 8%, or $.07 per InterCAP share.
STOCKHOLDER APPROVAL OF REORGANIZATION AGREEMENT,
THE MERGER AND THE CHARTER AMENDMENT
Stockholder Vote
The Reorganization Agreement and the transactions
contemplated thereby must be approved by the stockholders of
InterCAP. The Charter Amendment must also be approved by the
stockholders of InterCAP prior to the consummation of the Merger.
See "Proposal to Amend InterCAP's Certificate of Incorporation."
Accordingly, both the Charter Amendment and the Reorganization
Agreement must be accepted and approved by the stockholders of
InterCAP.
Stockholder Meeting
A special meeting of the InterCAP stockholders will be held
on December ___, 1994 at 10:00 a.m. at InterCAP's offices at 116
Defense Highway, Suite 400, Annapolis, Maryland 21401, for
purposes of (i) consideration of the approval and adoption of the
Charter Amendment; and (ii) consideration of the approval of the
Reorganization Agreement (the "Meeting").
Record Date and Shares Entitled to Vote
The Board of Directors of InterCAP has fixed the close of
business on _________ ___, 1994 as the Record Date for the
determination of stockholders entitled to notice of and to vote
at the Meeting. Accordingly, only InterCAP stockholders as of
the close of business on the Record Date will be entitled to vote
at the Meeting. On the Record Date, there were the following
number of shares of capital stock of InterCAP outstanding and entitled
to vote: (i) 2,911,478 shares of InterCAP Common Stock and (ii)
3,597,155 shares of InterCAP Preferred Stock, of which (A)
927,326 shares are designated InterCAP Series A Preferred Stock;
(B) 1,716,387 shares are designated as InterCAP Series B
Preferred Stock; and (C) 953,442 shares are designated as
InterCAP Series C Preferred Stock. Each share of InterCAP Common
Stock and InterCAP Preferred Stock is entitled to one vote per
share, except that the InterCAP Series A Preferred Stock is
entitled to 1.3329 votes per InterCAP Series A Preferred share.
Proxies; Quorum
Shares of InterCAP Common Stock and InterCAP Preferred Stock
represented at the Meeting by properly executed proxies will,
unless such proxies previously have been revoked, be voted in
accordance with the instructions indicated in such proxies. If
no instructions are so indicated, such shares will be voted by
InterCAP in favor of the adoption and approval of the Charter
Amendment and adoption and approval of the Reorganization
Agreement and the transactions contemplated thereby. See "Proxy
Solicitation."
The presence either in person or by properly executed proxy
of the holders of a majority of the outstanding shares of each
class of InterCAP Stock entitled to vote on the Charter Amendment
and the Reorganization Agreement is necessary to constitute a
quorum at the Meeting.
Vote Required for Charter Amendment
Under the InterCAP Certificate and the Delaware Act,
approval and adoption of the Charter Amendment requires the
affirmative vote of the holders of (i) a majority of the
outstanding shares of InterCAP Common Stock and InterCAP
Preferred Stock, voting as a single class; (ii) a majority of the
outstanding shares of InterCAP Series A Preferred Stock, voting
separately; (iii) a majority of the outstanding shares of
InterCAP Series A Preferred Stock and InterCAP Series B Preferred
Stock; voting as a single class; and (iv) a majority of the
outstanding InterCAP Series C Preferred Stock, voting separately.
The failure of a holder of record of InterCAP Stock to vote in
person or by proxy at the Meeting will have the same effect as a
vote against the Charter Amendment. Substantially all the
holders of the InterCAP Preferred Stock have agreed to vote all
of their InterCAP Stock in favor of the Charter Amendment, and
such holders have sufficient voting power to satisfy each of
clauses (i)-(iv) above. At the close of business on the Record
Date, such persons held approximately 14.03% of the outstanding
InterCAP Common Stock, 100% of the outstanding InterCAP Series A
Preferred Stock, approximately 98.85% of the outstanding InterCAP
Series B Preferred Stock, 100% of the outstanding InterCAP Series
C Preferred Stock, and approximately 63.00% of the combined
voting power of the InterCAP Common Stock and InterCAP Preferred
Stock, taken together. Accordingly, the Charter Amendment will
be approved and adopted by InterCAP's stockholders at the
Meeting, even if no other stockholders of InterCAP vote in favor
of the Charter Amendment.
Vote Required for Reorganization Agreement and Merger
Under the InterCAP Certificate and the Delaware Act,
approval and adoption of the Reorganization Agreement and Merger
requires the affirmative vote of (i) at least 66.67% of the
outstanding shares of InterCAP Common Stock and the InterCAP
Preferred Stock, voting as a single class, and (ii) a majority of
the outstanding shares of InterCAP Series A Preferred Stock and
InterCAP Series B Preferred Stock, voting as a single class. The
failure of a holder of record of InterCAP Stock to vote in person
or by Proxy at the Meeting will have the same effect as a vote against
the Reorganization Agreement. The directors of InterCAP have indicated
that they presently intend to vote all shares of InterCAP Stock over
which they have voting power in favor of the Merger. Accordingly,
if the directors vote in accordance with this indication, the Merger
will be approved by the stockholders, even if no other stockholder
of InterCAP votes in favor of the Merger.
Beneficial Security Ownership of Certain Persons
The directors and executive officers of InterCAP
beneficially owned, or exercised voting control over, as of
September 30, 1994, 1,145,070 shares (representing 39.33% of the
total outstanding shares) of InterCAP Common Stock, 927,326
shares (representing 100.00% of the total outstanding shares) of
InterCAP Series A Preferred Stock, which in turn represents
1,236,033 votes, 1,696,657 shares (representing 98.85% of the
total outstanding shares) of InterCAP Series B Preferred Stock,
and 953,442 shares (representing 100.00% of the total outstanding
shares) of InterCAP Series C Preferred Stock. Insofar as the
holders of InterCAP Common Stock and InterCAP Preferred Stock are
required to vote as a single class, such directors and executive
officers beneficially own or control 73.80% of the combined
classes; insofar as the holders of InterCAP Series A Preferred
Stock and InterCAP Series B Preferred Stock are required to vote
as a single class, such directors and executive officers
beneficially own or control 99.33% of the combined classes. See
"Security Ownership of Certain Beneficial Owners and Management
of InterCAP."
Dissenters' Rights
Holders of InterCAP Stock have the right to demand appraisal
of, and obtain payment for, the "fair value" of their shares by
following the procedures prescribed in Section 262 of the
Delaware Act, a copy of which is attached hereto as Appendix C.
A holder of shares of InterCAP Stock who or which wishes to
exercise his or its appraisal rights must not vote in favor of
the approval and adoption of the Reorganization Agreement and the
Merger. Failure to take any of the steps required under Section
262 on a timely basis may result in the loss of appraisal rights.
See "The Merger And Related Transactions--Dissenters' Rights" in
this Prospectus/ Proxy Statement.
INFORMATION ABOUT INTERGRAPH
Certain documents filed and relating to Intergraph,
including Intergraph's Annual Report on Form 10-K for the fiscal
year ended December 31, 1993, Intergraph's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1994, Intergraph's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1994, Intergraph's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1994, the description of Intergraph's Common
Stock contained in Intergraph's Form 8-A Registration Statement
filed on May 1, 1981, as amended by the Form 8 filed by
Intergraph on July 23, 1986, and Intergraph's definitive Proxy
Statement for the Annual Meeting held May 12, 1994 are
incorporated herein by reference. See "Available Information"
and "Incorporation of Certain Documents by Reference."
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF INTERCAP
The following discussion should be read in conjunction with
the InterCAP consolidated financial statements and notes thereto
appearing elsewhere in this Prospectus/Proxy Statement.
Overview
InterCAP designs and produces complex computer software
systems that assist in creating, editing, converting and
presenting technical illustrations used by large manufacturing
firms. InterCAP's revenues are derived through the initial
license of its products and from annual license renewals and
related customer support services.
Results of Operations - Years Ended June 30, 1992, 1993 and 1994
Summary
Net income for the year ended June 30, 1994 was $781,000
compared to a net loss of $515,000 during the year ended June 30,
1993. The year ended June 30, 1994 increase in net income was
due to a 19% increase in revenues coupled with a 16% decrease in
operating expenses.
The net loss for the year ended June 30, 1993 was $515,000
compared to net income of $207,000 during the year ended June 30,
1992. The net loss incurred during the year ended June 30, 1993
was due to an 18% decline in revenues.
Net income was $207,000 during the year ended June 30, 1992,
down 81.4% from the same period the preceding year. The relative
decrease was predominantly due to extraordinary nonoperating
gains recognized in fiscal 1991.
During the years ended June 30, 1994 and 1992, net operating
loss carryforwards were utilized to reduce income taxes otherwise
payable. The benefit of this reduction is shown as an
extraordinary item in the accompanying consolidated statements of
operations for the year ended June 30, 1992. InterCAP had net
operating loss carryforwards for income tax purposes of
approximately $ 1,478,000, $2,500,000, and $2,300,000 at June 30,
1994, June 30, 1993, and June 30, 1992, respectively, expiring in
years 2002 through 2006.
Revenues
InterCAP sells (licenses) its products directly through its
own sales force located in the U.S. and Germany, and through
original equipment manufacturers and distributors. Customer
support revenues, which include recurring annual license renewals
and other related services, are conducted through the company's
U.S. and Swiss operations. Revenues are classified as U.S.
Direct, Foreign Direct, Original Equipment Manufacturers and
Distributors, U.S. Customer Support and Foreign Customer Support.
Consolidated sales revenues increased by $711,000, or 19%,
to $4,490,000 for the year ended June 30, 1994, as compared to
the year ended June 30, 1993. The year ended June 30, 1994
increase is primarily attributable to increases in U.S. direct
sales, which increased 78%, or $846,000, to $1,931,000. InterCAP
believes fiscal 1995 U.S. sales will be comparable to 1994
results.
The increase in fiscal 1994 U.S. Direct Sales was partially
offset by a 35%, or $78,000, decrease in Foreign Direct Sales
from InterCAP's German operations, which are conducted through a
wholly owned subsidiary of InterCAP. InterCAP attributes the
decline to general conditions in the sluggish German economy.
InterCAP does not expect German revenues to improve significantly
until the German economy improves.
Original Equipment Manufacturer and Distributor sales
decreased 25%, or $182,000 for the year ended June 30, 1994 to
$549,000. InterCAP terminated its relationship with its largest
European distributor and replaced it with two new distributors
located in Europe. Reductions in sales were due to weakness in
the overall European economy, and from disruption due to new
distributors coming on board mid-year and year-end. InterCAP
anticipates modest growth in distributor sales in fiscal 1995 as
the new distributors become more productive.
U.S. Customer Support revenues increased 8%, or $65,000, to
$869,000 for the year ended June 30, 1994, due to growth in the
installed base.
Foreign Customer Support revenues from InterCAP's wholly
owned Swiss subsidiary, which services customers located in
England, Germany, Switzerland, France and Italy, increased 6%, or
$53,000, to $937,000 for the year ended June 30, 1994, due to
growth in the installed base. InterCAP expects customer support
revenues to increase modestly in fiscal 1995.
For the year ended June 30, 1993, total consolidated sales
revenues declined 18%, or $818,000, to $3,779,000, as compared to
$4,597,000 for the year ended June 30, 1992. Decreases were
experienced in every revenue classification and geographic
location except for Foreign Customer Support, which enjoyed an
increase of 51%, or $299,000, to $884,000 for the year ended June
30, 1993. U.S. Direct Sales, Foreign Direct Sales, Distributor
sales and U.S. Customer Support were down 13%, 61%, 16%, and 13%,
respectively, from the comparable prior year period. The
downturns in both U.S. and European economies were the primary
cause for the decline as major corporations halted or delayed
capital expenditures and focused on downsizing.
The Foreign Customer Support revenue increase during the
year ended June 30, 1993 was due to growth in the number of
customers purchasing annual license renewals.
Consolidated sales revenues increased by $144,000, or 3.2%
during the year ended June 30, 1992 to $4,597,000, as compared to
$4,452,000 during the year ended June 30, 1991. U.S. Direct
Sales, Original Equipment Manufacturers and Distributors and
Foreign Customer Support were up 24%, 43% and 42%, respectively,
from the comparable prior year period. These increases were
offset by decreases in Foreign Direct Sales and U.S. Customer
Support revenues of 44% and 26%, respectively.
Selling, General and Administrative Expenses
For the year ended June 30, 1994, selling, general and
administrative expenses decreased by 16%, or $504,000, from
fiscal 1993 due to a 12% reduction in headcount. All reductions
were in the sales area and resulted from a decision to focus
sales efforts on a fewer number of larger opportunities. This
reduction resulted in decreased direct labor expenses of 16%, or
$337,000, and led to related reductions in overhead expenses.
InterCAP plans to continue to monitor closely all expenses and
does not anticipate a significant increase in expenses for fiscal
year 1995.
For the year ended June 30, 1993, selling, general and
administrative expenses decreased 5%, or $152,000 from the year
ended June 30, 1992. Increases in advertising expense,
professional fees and direct labor expenses of $49,000, $51,000
and $50,000, respectively, were offset against reductions in
equipment rental expenses and bad debt expenses of $80,000 and
$44,000, respectively.
Selling, general and administrative expenses increased 5%,
or $154,000 during the year ended June 30, 1992 due to increases
of $314,000 in direct labor expenses, $49,000 in taxes and
licenses and $44,000 in bad debt expenses, offset by reductions
of $152,000 in professional fees.
Gross Margin
Gross margin for the year ended June 30, 1994, was 78.2%
versus 69.8% and 73.1% for the years ended June 30, 1993, and
June 30, 1992, respectively. The 8.4 point increase in gross
margin from the year ended June 30, 1993 to the year ended June
30, 1994 was the result of a shift downwards in the ratio of
sales through distributors to total company sales, because sales
through distributors earn a lower margin than direct sales to end
users.
Gross margins at the year ended June 30, 1993, declined 3.3
points from the year ended June 30, 1992, due to a decline in
sales volume.
Gross margins for the year ended June 30, 1992, decreased
9.0 points from the same period of the preceding year, primarily
due to distributor commissions included in cost of products sold
during the year ended June 30, 1992. During the year ended June
30, 1991, Distributor Commissions were offset against Original
Equipment Manufacturer and Distributor revenues resulting in a
higher reported margin.
Taxes
Taxes have historically not been a significant item in
InterCAP reporting due to the utilization of net operating loss
carryforwards accumulated prior to 1991. At June 30, 1994,
InterCAP's net operating loss carryforward balance was
$1,478,000, versus $2,500,000 at June 30, 1993 and $2,300,000 at
June 30, 1992.
Liquidity and Capital Resources
At June 30, 1994, InterCAP had approximately $132,000 in
cash and cash equivalents, as compared to $260,000 at June 30,
1993. InterCAP's net working capital was $527,000 at June 30,
1994, as compared to a $39,000 working capital deficit at June
30, 1993. The increase was primarily attributable to increased
cash flow from increased sales activity and profitable
operations. Under the terms of the InterCAP Preferred Stock,
beginning in January 1995, InterCAP may be required to redeem in
three annual payments the outstanding InterCAP Preferred Stock at
its original issue price, plus dividends accrued at a 10% annual
rate from the original date of purchase (the "Redemption
Amounts"). Because maximum redemption payments are limited to
InterCAP's preceding 12 months net income, the precise Redemption
Amounts, if any, are currently unknown.
Results of Operations - Three Months Ended September 30, 1993 and 1994
Summary
InterCAP's net income for the quarter ended September 30,
1994, was $194,000, compared to a loss of $224,000 during the
quarter ended September 30, 1993. InterCAP's increase in net
income for the quarter ended September 30, 1994 was due to a 107%
increase in revenues, while operating expenses increased 14%.
Revenues
InterCAP sells (licenses) its products directly through its
own sales force located in the U.S. and Germany, and through
Original Equipment Manufacturers and Distributors. Customer
support revenues which include recurring annual license renewals
and other related services are conducted through the company's
U.S. and Swiss operations. Revenues are classified as U.S.
Direct, Foreign Direct, Original Equipment Manufacturers and
Distributors, U.S. Customer Support and Foreign Customer Support.
During the quarter ended September 30, 1994, U.S. Direct
Sales, Foreign Direct Sales and Foreign Customer Support were up
584% or $492,000, 304% or $35,000, and 74% or $103,000,
respectively, from the comparably weak prior year period.
Revenues for the quarter ended September 30, 1994 were $1,110,007
compared with $536,145 for the comparable quarter of the prior
year. Original Equipment Manufacturer and Distributor Sales and
U.S. Customer Support Revenue declined 13% or $24,000 and 14% or
$14,000, respectively, during the quarter ended September 30,
1994 versus the quarter ended September 30, 1993.
Gross Margin
Gross margin for the quarter ended September 30, 1994 was
77.7% versus 63.0% for the quarter ended September 30, 1993 due
to strong revenue growth on modest expense increases.
Selling, General and Administrative Expenses
During the quarter ending September 30, 1994, selling,
general and administrative expenses increased 14%, or $75,000,
from the quarter ended September 30, 1993. The increase is
partially due to increases in professional fees, which were up
775% or $30,000, due to recognition of audit and tax preparation
fees in the first quarter of fiscal year 1995 versus recognition
of similar charges in the second and third quarter of fiscal year
1994.
Taxes and licenses were up $25,000 or 102% during the
quarter ending September 30, 1994 as compared to the quarter
ended September 30, 1993, due to a favorable 1993 adjustment of
$25,000 to reduce an overaccrual of value added tax incurred by
InterCAP's German subsidiary. Direct labor costs were up 4% or
$19,000 during the quarter ended September 30, 1994, as compared
to the quarter ended September 30, 1993.
Taxes
During the quarter, InterCAP utilized net operating loss
carryforwards to reduce its accrued tax expense to approximately
7% of net income, or $14,000.
Liquidity and Capital Resources
At September 30, 1994, InterCAP had approximately $14,000 in
cash and cash equivalents as compared to $132,000 at June 30,
1994. InterCAP's net working capital was $717,000 at September
30, 1994, as compared to a $527,000 working capital at June 30,
1994. The increase was primarily attributable to increased cash
flow from sales activity and profitable operations.
InterCAP has a $400,000 revolving credit agreement.
Availability is restricted by the receivable balances.
InterCAP believes that existing cash balances together with
cash from operations and cash available from its revolving line
of credit agreement will be adequate to meet operating cash
requirements during the upcoming fiscal year (exclusive of any
Redemption Amounts required in connection with the InterCAP
Preferred Stock).
BUSINESS OF INTERCAP
Introduction
InterCAP was incorporated in Delaware in 1987. The
principal offices of InterCAP are located at 116 Defense Highway,
Suite 400, Annapolis, Maryland 21401, telephone (410) 224-2926.
InterCAP has two wholly owned foreign sales and customer support
subsidiaries, InterCAP Graphics Systems, Gmbh, Paul-Ehrlich-
Strasse 1, 69181 Leimen, Germany, and InterCAP Graphics Systems,
AG, Dorfzentrum, 8917 Oberlunkhofen, Switzerland.
InterCAP designs and produces complex computer software
systems that assist in creating, editing, converting and
presenting technical illustrations used extensively by large
manufacturing firms in documentation, maintenance, manufacturing
and assembly, and training. InterCAP's products allow
illustrators to include many different types of graphic source
materials in their electronic artwork and provide the capability
to incorporate and blend existing CAD graphics with scanned
images derived from existing paper, film, electronic and live
video artwork to produce high-quality finished artwork on a wide
variety of text composition systems, laser printers,
phototypesetters and plotters.
InterCAP markets its software products directly and through
independent distributors, primarily to large multinational
corporations. InterCAP has a diversified domestic and
international customer base. InterCAP's clients include market
leaders in aerospace, automotive, defense, farm and construction
equipment manufacturers, medical products, recreation, industrial
equipment, electronic systems, computer systems and consumer
products. Domestic business includes government programs with
the Department of Defense "Commerce at Light Speed" ("CALS")
initiative. InterCAP sells its products through a direct sales
force of three sales persons (two domestic and one
international), and seven value-added resellers ("VARs"), which
include international distributors and original equipment
manufacturers ("OEMs"). Pre-sales support is a joint effort of
InterCAP's salesmen and technical support engineers along with
VARs, distributors and OEMs in international installations.
Customer support is generally handled directly by InterCAP.
InterCAP is now focusing on assisting clients in two
strategic areas: (1) cost reduction in the creation and
management of quality illustrations and technical drawings, and
(2) efficiency improvement in the overall technical document
publishing and distribution process. While InterCAP is already
a leading source of software for professional technical
illustrators, InterCAP is also pioneering the evolution of
critical industry standards in the CGM and CALS arenas.
Principal Products and Services
InterCAP presently offers seven major software products,
described below, each of which currently run, on UNIX-based
workstations. The software is supplied in a bundle with a
complete "suite" of input and output device drivers and file
format conversion programs. InterCAP is presently developing
versions of its existing products to run on personal computers
("PCs") utilizing 32-bit Microsoft TM operating systems and is
planning additional products to expand its 32-bit PC offerings,
while maintaining its position in the UNIX market.
Illustrator 2 automates the graphics authoring and
creation segment of the computer-aided publishing process. It
allows professional technical illustrators in the aerospace,
defense, electronics, heavy equipment and other manufacturing
industries to manipulate graphic data by combining mixed media,
such as raster data (scanned images), video, and two dimensional
and three dimensional vector data (geometric entities).
Illustrator 2 features an intuitive user interface, data
integration and manipulation capabilities, data storage and
retrieval abilities, and time-saving data creation and editing
features.
Mechanical Drafting Plus was developed specifically for
creating, editing and maintaining high quality legacy mechanical
engineering drawings. Mechanical Drafting Plus features hybrid
raster/vector databases, dimensioning and tolerancing capability.
Quick Edit, first made available in 1992, is a graphics
editor that permits technical authors and other casual users of
industrial graphics quickly and easily to "finish-up" or modify
illustrations. With over 200 drawing and editing commands at
their disposal, technical writers, engineers, and illustrators
can use Quick Edit for raster, vector and photo editing, all
under a single user interface. Quick Edit is conveniently
distributed across any local area networks to enhance
productivity while facilitating the sharing of professional
expertise.
Red-Liner is an easy-to-use software package for
electronically viewing, marking up, and commenting on technical
illustrations and engineering drawings. It can be used on a stand
alone basis or integrated with Illustrator 2. Released in 1993,
Red-Liner can create industry-standard CGM vector graphics markup
files, protect the original art from changes during markup, and
guide revisions of the finalized graphics.
X-Change is a graphical data conversion tool that
provides direct translation between a variety of industry-
standard file formats. It is designed to streamline the flow of
graphic data between engineering, manufacturing and publishing
functions. In addition to InterCAP's proprietary formats, this
package can convert from a large variety of dissimilar software
products and peripheral devices, including all major U.S.
government, international and industrial standards. X-Change was
first released in 1993.
MetaLink Author, InterCAP's newest product, is targeted
to illustrators and "document engineers" responsible for
assembling intelligent graphics for use within intelligent
electronic information presentation systems known as IETMs.
MetaLink is the first native implementation of the new CGM
standard that supports animation, integrated revision control,
hotspots, and graphical linking.
MetaLink Runtime is the companion product to InterCAP's
MetaLink Author. MetaLink Runtime allows organizations to
present CGM encoded electronic technical illustrations in
advanced IETM's and intelligent graphics applications. The
architecture is expected to be the base of all future InterCAP
graphics products.
InterCAP also provides a variety of services ancillary to
the design and marketing of its products, including system
installations, training and support. These services are
essential to maintaining an important part of InterCAP's business
renewal customers.
Competition
At the "high end" of the illustration market, InterCAP
competes with Auto-trol Technology Corporation. In this segment,
InterCAP competes on the quality of its software products and
technical support, and on its tight adherence to industry
standards, rather than on price. InterCAP's products also
sometimes compete with less sophisticated illustrator products,
such as those offered by Corel and Autodesk, Inc., when price is
more heavily weighted than performance.
In the graphics data conversion tool arena, InterCAP
competes against low price, often PC-based, software tools.
InterCAP competes in this segment through the high quality of its
adherence to the CGM standard.
The MetaLink family of products currently has no direct
competition. By virtue of InterCAP's leading role in developing
the new international standards on which these products are
based, InterCAP was the first, and is still the only, company to
market this new technology.
Backlog
InterCap's annual license renewals from its installed base
total approximately $2,000,000. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations of
InterCAP." Customer renewal rates have historically averaged
around 95% annually. InterCAP has a $5,800,000 "Indefinite
Delivery Indefinite Quantity" contract to supply software to the
Department of Defense over an eight-year period, although there
can be no assurance that any amounts will be received under this
contract in future years.
Strategic Partnerships
InterCAP has a number of strategic partnerships in place
that extend and enhance the sales, marketing, support and
technical resources of the company. The partnership members
include ArborText, Computer Science Corporation, DEC, Fujitsu,
Hewlett-Packard, IBM, InContext, InterLeaf, Rank Xerox, Sun and
Xerox. Several of these companies are also customers.
Employees
As of September 30, 1994, InterCAP employed 36 persons on a
full time basis, including three in its office in Germany and
four in its office in Switzerland. InterCAP also employs several
part-time employees. InterCAP believes its employee relations
are good.
Properties
InterCAP's headquarters are located in an office building in
Annapolis, Maryland, where InterCAP leases approximately 8,000
square feet of office space. This lease expires in September of
1995. InterCAP also leases approximately 1,200 square feet of
office space in each of its offices in Germany and Switzerland.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT OF INTERCAP
The following table sets forth certain information with
respect to beneficial ownership of InterCAP Stock as of September
30, 1994, by (i) each person who is known by InterCAP to own
beneficially more than five percent of the outstanding shares of
InterCAP Common Stock or any series of InterCAP Preferred Stock,
(ii) by each of InterCAP's current directors, (iii) by each of
InterCAP's current executive officers, (iv) by all of InterCAP's
current directors and executive officers as a group. Except as
indicated in the footnotes to the table, the persons named in the
table have sole voting power and investment power with respect to
all shares of InterCAP Stock shown beneficially owned by them,
subject to community property laws where applicable.
<TABLE>
<CAPTION>
Name and Address Amount and Nature of Class or Series
of Beneficial Owner Beneficial Ownership of Securities Percent of Class(1)
- ------------------------------------ ---------------------- ------------------ ---------------------
<S> <C> <C> <C>
Venture First II L.P. 36,260(5) Common *
c/o Venture First Associates II L.P. 915,340 Series A Preferred 98.7%
201 Allen Road, Suite 410 1,677,630 Series B Preferred 97.7%
Atlanta, Georgia 30328
GeoCapital II L.P. 953,442 Series C Preferred 100.0%
555 Twin Dolphin Drive, Suite 570
Redwood City, CA 94065-2102
A.G.W. Biddle, III, 508,586(2) Common 13.6%
Director, President and 11,986 Series A Preferred 1.3%
Chief Executive Officer 19,027 Series B Preferred 1.1%
116 Defense Highway, Suite 400
Annapolis, Maryland 21401
Michael E. Faherty, Director 140,677(3) Common 3.8%
John C. Gebhardt, Director, 484,205(4) Common 12.9%
Secretary, Executive Vice-
President and Chief Technical Officer
116 Defense Highway, Suite 400
Annapolis, Maryland 22401
W. Andrew Grubbs, Director 36,260(5) Common *
500 Old Greensboro Road 915,340 Series A Preferred 98.7%
Chapel Hill, NC 27516 1,677,630 Series B Preferred 97.7%
James Harrison, Director 953,442(6) Series C Preferred 100.0%
555 Twin Dolphin Drive, Suite 570
Redwood City, CA 94065-2102
John N. Maguire, 90,677 Common 2.4%
Chairman of the Board
Thomas O. Mills, Director, 198,340(7) Common 5.3%
Vice President
116 Defense Highway, Suite 400
Annapolis, Maryland 21401
All directors and Executive 1,458,708 Common 39.1%
Officers as a group 927,326 Series A Preferred 100.0%
1,696,657 Series B Preferred 98.8%
953,442 Series C Preferred 100.0%
</TABLE>
- ------------------------
* Less than 1%
(1) The percentages are calculated on the basis of the amount of
outstanding securities plus those which the beneficial owner
has the right to acquire within 60 days following September
30, 1994. The amounts shown include 36,260 shares of Common
Stock subject to issuance upon exercise of Warrants in
accordance with the Preferred Stock Agreement and exclude
the NQSO's. See "The Merger and Related Transactions--
Options Outstanding Prior to the Merger."
(2) Includes 100,000 shares of InterCAP Common Stock issuable
upon the exercise of ISO's that are exercisable within 60
days of September 30, 1994. Excludes 80,724 shares of
InterCAP Common Stock issuable upon the exercise of NQSO's
granted under the InterCAP Option Program.
(3) Includes 25,000 shares of InterCAP Common Stock held by a
trust for the benefit of Kathleen Ann Faherty, Mr. Faherty's
daughter, 25,000 shares of InterCAP Common Stock held by a
trust for the benefit of Maureen Ellen Faherty, Mr.
Faherty's daughter, and 25,000 shares of InterCAP Common
Stock held by a trust for the benefit of Patrick W. Faherty,
Mr. Faherty's son. Although Mr. Faherty is the trustee of
each trust, he disclaims beneficial ownership of all the
shares held by these trusts.
(4) Includes 118,800 shares of InterCAP Common Stock issuable
upon the exercise of ISO's that are exercisable within 60
days of September 30, 1994. Excludes 95,900 shares of
InterCAP Common Stock issuable upon the exercise of NQSO's
granted under the InterCAP Option Program.
(5) Includes 36,260 shares of InterCAP Common Stock subject to
issuance upon exercise of Warrants in accordance with the
Preferred Stock Agreement and 915,340 shares of InterCAP
Series A Preferred Stock and 1,677,630 shares of InterCAP
Series B Preferred Stock owned by Venture First II L.P.
Venture First Associates II L.P. is the sole general partner
of Venture First II L.P., and Mr. Grubbs is a general
partner of Venture First Associates II L.P.
(6) Includes 953,442 shares of InterCAP Series C Preferred Stock
owned by GeoCapital II L.P., of which Mr. Harrison is a
general partner.
(7) Includes 49,575 shares of InterCAP Common Stock issuable
upon the exercise of ISO's that are exercisable within 60
days of September 30, 1994. Excludes 43,450 shares of
InterCAP Common Stock issuable upon the exercise of NQSO's
granted under the InterCAP Option Program and 17,000 shares
of InterCAP Common Stock issuable upon the exercise of
ISO's granted under the InterCAP Option Plan which will
become fully vested upon consummation of the Merger.
DESCRIPTION OF INTERGRAPH CAPITAL STOCK
The authorized capital stock of Intergraph consists of
100,000,000 shares of Intergraph Common Stock, $.10 par value.
As of September 30, 1994, there were 44,644,003 shares of
Intergraph Common Stock outstanding.
Intergraph Common Stock
Holders of Intergraph Common Stock are entitled to one vote
for each share held on all matters submitted to a vote of
stockholders and do not have cumulative voting rights. If a
quorum is present, the affirmative vote of a majority of the
shares represented constitutes an act of the stockholders,
including the election of directors. Holders of Intergraph
Common Stock are entitled to receive ratably such dividends, if
any, as may be declared by the Board of Directors out of funds
legally available therefor. Intergraph has never, however, paid
dividends on the Intergraph Common Stock and does not expect to
pay dividends in the foreseeable future. See "Risk Factors."
Upon the liquidation, dissolution or winding up of Intergraph,
the holders of Intergraph Common Stock are entitled to receive
ratably the net assets of Intergraph available after the payment
of all debts and other liabilities. The outstanding shares of
Intergraph Common Stock are, and the shares of Intergraph Common
Stock issued in the Merger will be, duly authorized, fully paid
and nonassessable.
Stockholder Rights Plan
On August 25, 1993, the Board of Directors of Intergraph
declared a dividend distribution of one right (a "Right") for
each outstanding share of Intergraph Common Stock (the "Common
Shares") of Intergraph. The distribution was payable on
September 7, 1993 (the "Rights Record Date") to the stockholders
of record as of the close of business on the Rights Record Date.
Each Right entitles the registered holder to purchase from
Intergraph one Common Share at a price of $50.00 (the "Purchase
Price"), subject to adjustment. The description and terms of the
Rights are set forth in a Rights Agreement, dated August 25, 1993
(the "Rights Agreement"), between Intergraph and Harris Trust and
Savings Bank, as Rights Agent (the "Rights Agent").
The following is a general description only and is subject
to the detailed terms and conditions of the Rights Agreement.
Rights Evidenced by Intergraph Common Stock
Until the earlier to occur of (i) the close of business on
the tenth calendar day following a public announcement that a
person or group of affiliated or associated persons has acquired,
or obtained the right to acquire, beneficial ownership of 15% or
more of the outstanding Common Shares (an "Acquiring Person"),
and (ii) the close of business on the tenth business day (or such
later date as may be specified by the Board of Directors)
following the commencement of a tender offer or exchange offer by
a person or group of affiliated or associated persons, the
consummation of which would result in beneficial ownership by
such person or group of 15% or more of the outstanding Common
Shares (the earlier of such dates being hereinafter called the
"Distribution Date"), the Rights will be evidenced, with respect
to any of the Common Share certificates outstanding as of the Rights
Record Date, by such Common Share certificates.
The Rights Agreement provides that, until the Distribution
Date, the Rights will be transferred with and only with the
Common Shares. Until the Distribution Date (or earlier
redemption or expiration of the Rights), new Common Share
certificates issued after the Rights Record Date upon transfer or
new issuance of Common Shares will contain a notation
incorporating the Rights Agreement by reference. Until the
Distribution Date (or earlier redemption or expiration of the
Rights), the surrender for transfer of any certificates for
Common Shares in respect of which Rights have been issued will
also constitute the transfer of the Rights associated with the
Common Shares represented by such certificates. As soon as
practicable following the Distribution Date, separate
certificates evidencing the Rights (the "Right Certificates")
will be mailed to holders of record of the Common Shares as of
the close of business on the Distribution Date and such separate
Right Certificates alone will evidence the Rights.
Exercise of Rights Certificates; Expiration of Rights
No Right is exercisable at any time prior to the
Distribution Date. The Rights will expire on September 7, 2003
(the "Final Expiration Date") unless earlier redeemed or
exchanged by Intergraph as described below. Until a Right is
exercised, the holder thereof, as such, will have no rights as a
stockholder of Intergraph, including without limitation the right
to vote or to receive dividends.
Adjustment to Prevent Dilution
The Purchase Price payable, and the number of Common Shares
or other securities issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i)
in the event of a stock dividend on, or a subdivision,
combination or reclassification of, the Common Shares, (ii) upon
the grant to holders of the Common Shares of certain rights or
warrants to subscribe for or purchase Common Shares at a price,
or securities convertible into Common Shares with a conversion
price, less than the then current market price of the Common
Shares or (iii) upon the distribution to holders of the Common
Shares of evidences of indebtedness or cash (excluding regular
periodic cash dividends), assets, stock (excluding dividends
payable in Common Shares) or of subscription rights or warrants
(other than those referred to above).
Protection Against Certain Unfair Two-Step or Coercive
Transactions; Right to Buy Intergraph Common Stock at Half
Price
In the event (a "Flip-in Event") that (i) any person or
group of affiliated or associated persons becomes the beneficial
owner of 15% or more of the outstanding Common Shares, or (ii)
any Acquiring Person merges into or combines with Intergraph and
Intergraph is the surviving corporation, proper provision shall
be made so that each holder of a Right, other than Rights that
are or were owned beneficially by the Acquiring Person (which,
from and after the later of the Distribution Date and the date of
the earlier of either of such events, will be void), will
thereafter have the right to receive, upon exercise thereof at
the then current exercise price of the Right, that number of
Common Shares (or, under certain circumstances, an economically
equivalent security or securities or assets of Intergraph) having
a market value of two times the exercise price of the Right.
To illustrate the operation of such an adjustment, at a
Purchase Price of $16.00, assuming the current market price (as
determined pursuant to the provisions of the Rights Agreement)
per Common Share was $8.00, each Right not owned beneficially by
an Acquiring Person at or after the time of such an occurrence
would entitle its holder to purchase (after the Distribution
Date) from Intergraph four Common Shares (having a market value
of $32.00) for $16.00.
In the event (a "Flip-over Event") that, following the first
date of public announcement that a person has become an Acquiring
Person, (i) Intergraph merges with or into any person and
Intergraph is not the surviving corporation, (ii) any person
merges with or into Intergraph and Intergraph is the surviving
corporation, but its Common Shares are changed or exchanged, or
(iii) 50% or more of Intergraph's assets or earning power,
including without limitation securities creating obligations of
Intergraph, are sold, proper provision shall be made so that each
holder of a Right will thereafter have the right to receive, upon
the exercise thereof at the then current exercise price of the
Right, that number of shares of common stock (or, under certain
circumstances, an economically equivalent security or securities)
of such other person which at the time of such transaction would
have a market value of two times the exercise price of the Right.
At any time after the later of the Distribution Date and the
first occurrence of a Flip-in Event or Flip-over Event and prior
to the acquisition by any person or group of affiliated or
associated persons of 50% or more of the outstanding Common
Shares, the Board of Directors of Intergraph may exchange the
Rights (other than any Rights which have become void), in whole
or in part, at an exchange ratio of one Common Share per Right
(subject to adjustment).
With certain exceptions, no adjustment in the Purchase Price
will be required until cumulative adjustments require an
adjustment in the Purchase Price of at least 1%. Intergraph is
not required to issue fractional Common Shares or other
securities issuable upon the exercise of Rights. In lieu of
issuing such securities, Intergraph may make a cash payment, as
provided in the Rights Agreement.
Redemption
Intergraph may redeem the Rights in whole, but not in part,
at a price of $0.01 per Right (the "Redemption Price"), at any
time prior to the close of business on the earlier of (i) the
Distribution Date and (ii) the Final Expiration Date.
Immediately upon any redemption of the Rights, the right to
exercise the Rights will terminate and the only right of the
holders of Rights will be to receive the Redemption Price.
Amendment of Intergraph Rights Plan
The Rights Agreement may be amended by the Board of
Directors in any manner prior to the Distribution Date without
the approval of any holders of certificates representing Common
Shares. After the Distribution Date, the Rights Agreement may be
amended by the Board of Directors without the approval of any
holders of Right Certificates, including amendments which add
other events requiring adjustment to the Purchase Price payable
and the number of Common Shares or other securities issuable or
property purchasable upon the exercise of the Rights or which
modify procedures relating to the redemption of the Rights,
provided that no amendment may be made which decreases the stated
Redemption Price or the period of time remaining until the Final
Expiration Date or which modifies a time period relating to when
the Rights may be redeemed at such time as the Rights are not
then redeemable. Under certain circumstances set forth in
the Rights Agreement, the Rights Agreement may only be amended by
action of the Independent Directors (defined as any director who
is not an officer or employee of Intergraph and (i) who was a
director prior to August 25, 1993, and is not an Acquiring
Person, an affiliate or associate thereof or a representative of
any Acquiring Person, affiliate or associate, or (ii) who becomes
a director after August 25, 1993 and is not an Acquiring Person,
an affiliate or associate thereof or a representative of any
Acquiring Person, affiliate or associate and who is recommended
or nominated for election to the Board of Directors by a majority
of the Independent Directors).
Certain Change in Control Effects
The Rights have certain anti-takeover effects. The Rights
will cause substantial dilution to a person or group that
attempts to acquire Intergraph on terms not approved by the Board
of Directors, except pursuant to an offer conditioned on a
substantial number of Rights being acquired. However, the Rights
should not interfere with any merger or other business
combination approved by the Board of Directors since (subject to
the limitations described above) the Rights may be redeemed by
Intergraph at the Redemption Price prior to the Distribution
Date, subject to extension by a majority of the Independent
Directors. Thus, the rights are intended to encourage persons
who may seek to acquire control of Intergraph to initiate such an
acquisition through negotiations with the Board of Directors.
However, the effect of the Rights may be to discourage a third
party from making a partial tender offer or otherwise attempting
to obtain a substantial equity position in the Common Shares of,
or seeking to obtain control of, Intergraph. To the extent any
potential acquirors are deterred by the Rights, the Rights may
have the effect of preserving incumbent management in office.
As of September 30, 1994, there were 44,644,003 Common
Shares issued and outstanding and 4,222,368 Common Shares
reserved for issuance pursuant to employee benefit plans. As
long as the Rights are attached to the Common Shares, Intergraph
will issue one Right with each new Common Share so that all such
Common Shares will have Rights attached.
The Rights Agreement, which includes the form of Right
Certificate as an exhibit thereto, and the form of press release
announcing the declaration of the dividend distribution of the
Rights are filed as exhibits to the Registration Statement of
which this Prospectus/Proxy Statement is a part and are
incorporated herein by this reference. The foregoing description
of the Rights does not purport to be complete and is qualified in
its entirety by reference to such exhibits.
Delaware Law and Certain Charter and By-law Provisions
Indemnification
Intergraph's Certificate of Incorporation includes
provisions eliminating the personal liability of Intergraph's
directors for monetary damages resulting from breaches of their
fiduciary duties to the extent permitted by Delaware law.
Intergraph's Certificate of Incorporation and Restated By-laws
include provisions indemnifying Intergraph's directors and
officers to the fullest extent permitted by Delaware law,
including under circumstances in which indemnification is
otherwise discretionary, and permitting the Board of Directors to
grant indemnification to employees and agents to the fullest
extent permitted by Delaware law.
Nominations of Directors and Stockholder Proposals
Intergraph's Restated By-laws require that nominations for
the Board of Directors made by a stockholder and proposals by
stockholders seeking to have any business conducted at a
stockholders' meeting comply with particular notice procedures.
A notice by a stockholder of a planned nomination or of proposed
business must generally be given not later than 60 days nor
earlier than 90 days prior to the date of the meeting. A
stockholder's notice of nomination must include particular
information about the stockholder, the nominee and any beneficial
owner on whose behalf the nomination is made and a notice from a
stockholder proposing business to be brought before the meeting
must describe such business and include information about the
stockholder making the proposal, any beneficial owner on whose
behalf the proposal is made, and any other stockholder known to
be supporting the proposal.
Delaware's Anti-Takeover Law
Intergraph is subject to the provisions of Section 203 of
the Delaware Act. In general Section 203 prohibits certain
publicly held Delaware corporations from engaging in a "business
combination" with an "interested stockholder" for a period of
three years after the date of the transaction in which the person
or entity became an interested stockholder, unless, among other
exceptions, (i) the business combination is approved by the Board
of Directors prior to the date the interested stockholder
attained such status, or by the holders of two-thirds of the
outstanding voting stock not owned by the interested stockholder
or (ii) the interested stockholder acquired 85% or more of the
outstanding voting stock of Intergraph in the transaction. For
purposes of Section 203, a "business combination" is defined
broadly to include mergers, asset sales and other transactions
resulting in a financial benefit to the interested stockholder.
Subject to certain exceptions, an "interested stockholder" is a
person or entity who, together with affiliates and associates,
owns, or within the three immediately preceding years of a
business combination did own, 15% of the corporation's
outstanding voting stock.
Actions by Stockholders
Intergraph's Restated By-laws provide that any action
required or permitted to be taken by the stockholders of
Intergraph shall be taken only at a duly called annual or special
meeting of the stockholders, or by the written consent of all
stockholders entitled to vote. Special meetings may be called
only by the Board of Directors or the Chief Executive Officer of
Intergraph. In addition, Intergraph's Restated Bylaws provides
that the Board of Directors may, from time to time, fix the
number of directors constituting the Board of Directors, and only
the directors are permitted to fill vacancies on the Board of
Directors.
Amendment of Certificate of Incorporation and Restated By-laws
The Delaware Act provides generally that the affirmative
vote of a majority of the shares entitled to vote on any matter
is required to amend a corporation's certificate of incorporation
or by-laws, unless a corporation's certificate of incorporation
or by-laws, as the case may be, requires a greater percentage.
Neither the Certificate of Incorporation nor the Restated By-laws
of Intergraph require a higher percentage.
Effect on Change in Control
The provisions of the Certificate of Incorporation and
Restated By-laws discussed above and under "Management of
Intergraph" in Intergraph's definitive Proxy Statement for the
Annual Meeting of Stockholders held May 12, 1994 could make more
difficult or discourage a proxy contest or the acquisition of
control by a holder of a substantial block of Intergraph Common
Stock or the removal of any incumbent member of the Board of
Directors. Such provisions could also have the effect of
discouraging a third party from making a tender offer or
otherwise attempting to obtain control of Intergraph, even though
such an attempt might be beneficial to Intergraph and its
stockholders.
Transfer Agent and Registrar
The transfer agent for Intergraph Common Stock is Harris
Trust and Savings Bank, Shareholder Services Division, P.O. Box
755, Chicago, Illinois 60690-0755.
Listing
Intergraph Common Stock is traded in the NASDAQ system under
the symbol "INGR."
DESCRIPTION OF INTERCAP CAPITAL STOCK
The authorized capital stock of InterCAP consists of
20,000,000 shares of InterCAP Common Stock and 10,000,000 shares
of InterCAP Preferred Stock, of which 1,872,938 shares have been
designated InterCAP Series A Preferred Stock, 2,000,000 shares
have been designated InterCAP Series B Preferred Stock and
953,442 shares have been designated InterCAP Series C Preferred
Stock.
InterCAP Common Stock
Holders of InterCAP Common Stock are entitled to one vote
for each share held of record on all matters submitted to a vote
of the stockholders. Holders of InterCAP Common Stock are
entitled to such dividends as may be declared by the Board of
Directors out of funds legally available therefor, subject to
prior dividend rights of the outstanding InterCAP Preferred
Stock. Shares of InterCAP Common Stock have no conversion,
preemptive or other rights to subscribe for additional shares and
are not subject to redemption, except that shares of InterCAP
Common Stock issued upon conversion of the InterCAP Preferred
Stock have the same preemptive rights as shares of InterCAP
Preferred Stock. All of the outstanding shares of InterCAP
Common Stock are fully paid and nonassessable.
As of September 30, 1994, 2,911,478 shares of InterCAP
Common Stock were issued and outstanding and held of record by 79
stockholders.
InterCAP Preferred Stock
InterCAP is currently authorized to issue 1,872,938 shares
of InterCAP Series A Preferred Stock, 2,000,000 shares of
InterCAP Series B Preferred Stock and 953,442 shares of InterCAP
Series C Preferred Stock. As of September 30, 1994, 927,326
shares of the InterCAP Series A Preferred Stock, 1,716,387 shares
of InterCAP Series B Preferred Stock and all the shares of the
InterCAP Series C Preferred Stock were issued and outstanding and
were held of record by four stockholders.
Conversion
Holders of InterCAP Preferred Stock are entitled to convert
each share of InterCAP Preferred Stock at any time into fully
paid and nonassessable shares of InterCAP Common Stock without
payment of additional consideration. The InterCAP Preferred
Stock is convertible into the number of shares of InterCAP Common
Stock which results from dividing the applicable "Conversion
Price" per share in effect at the time of conversion into $1.475
for each share of InterCAP Series A Preferred Stock being
converted, into $.50 for each share of InterCAP Series B
Preferred Stock being converted and into $.65552 for each share
of InterCAP Series C Preferred Stock being converted. The
initial Conversion Prices per share of the InterCAP Series A
Preferred Stock, InterCAP Series B Preferred Stock and InterCAP
Series C Preferred Stock were $1.475, $.50 and $.65552,
respectively.
The initial Conversion Price per share for each series of
InterCAP Preferred Stock is subject to adjustment in the event of
any stock split, stock dividend, reclassification, merger, sale
of assets, sale of shares of InterCAP Common Stock (or InterCAP
Common Stock equivalents) below the Conversion Price (other than
under InterCAP's stock option plans or other stock purchase
arrangements approved by InterCAP's Board of Directors,
conversion of the InterCAP Preferred Stock or exercise of the
InterCAP Warrants) or other similar event affecting the InterCAP
Common Stock. As of September 30, 1994, the Conversion Price per
share of InterCAP Series A Preferred Stock had been adjusted to
approximately $1.11 per share, making each share of the InterCAP
Series A Preferred Stock convertible into 1.3329 shares of
InterCAP Common Stock.
Each share of InterCAP Preferred Stock will automatically be
converted into shares of InterCAP Common Stock upon the closing
of an underwritten public offering of InterCAP Common Stock
pursuant to an effective registration statement filed under the
Securities Act in which the public offering price per share, when
multiplied by the number of shares of InterCAP Common Stock
outstanding immediately after such public offering on a fully
diluted basis, equals or exceeds $15,000,000.
Voting Rights
In general, holders of InterCAP Preferred Stock vote
together with holders of InterCAP Common Stock on all matters
submitted to a vote of stockholders. Each holder of InterCAP
Preferred Stock is entitled to the number of votes on stockholder
matters equal to the number of shares of InterCAP Common Stock
into which such holder's shares of InterCAP Preferred Stock can
be converted on the record date for the matter to be voted upon.
In addition, the consent of the holders of at least a majority of
the InterCAP Series A Preferred Stock (voting separately), at
least a majority of the InterCAP Series A Preferred Stock and
InterCAP Series B Preferred Stock (voting as a single class), at
least a majority (and in certain cases at least 66.67%) of the
InterCAP Preferred Stock (voting as a single class) and at least
of a majority of the InterCAP Series C Preferred Stock (voting
separately) is required as specified in the InterCAP Certificate
for any redemption of the InterCAP Preferred Stock other than on
the terms set forth in the InterCAP Certificate, any redemption
of InterCAP Common Stock (subject to certain exceptions), any
issuance by InterCAP of any equity security senior to or on a
parity with the InterCAP Preferred Stock as to dividend,
redemption and liquidation rights, any sale of all or
substantially all the assets of InterCAP, any merger or
consolidation of InterCAP, any reclassification or
recapitalization of InterCAP, any sale of stock by an InterCAP
subsidiary, any increase or decrease in the total number of
authorized shares of InterCAP Preferred Stock, any issuance of
securities by InterCAP for property other than cash or any
amendment to the InterCAP Certificate or its By-Laws.
Dividends
Holders of InterCAP Preferred Stock are entitled to receive
when, as and if declared by the Board of Directors of InterCAP
out of funds of InterCAP legally available for the payment of
dividends, cumulative dividends at the annual rate of $.1475 per
share of InterCAP Series A Preferred Stock, $.05 per share of
InterCAP Series B Preferred Stock and $.065552 per share of
InterCAP Series C Preferred Stock. As of June 30, 1994, the
accrued but unpaid dividends on the InterCAP Series A Preferred
Stock totaled approximately $.82 per share in the case of 339,068
shares and approximately $.79 per share in the case of the
remaining 576,272 shares of InterCAP Series A Preferred Stock.
As of June 30, 1994, the accrued but unpaid dividends on the
InterCAP Series B Preferred Stock and the InterCAP Series C
Preferred Stock totalled approximately $.17 per share and
approximately $.17 per share, respectively. After payment in
full of all cumulative dividends on the InterCAP Preferred Stock,
each holder of InterCAP Preferred Stock is entitled to
participate in any dividends declared and paid on the InterCAP
Common Stock on the basis of the number of shares of InterCAP
Common Stock into which the InterCAP Preferred Stock is
convertible on the record date for such dividend. To date, no
dividends have been declared or paid on any capital stock of
InterCAP.
Liquidation
Holders of InterCAP Series C Preferred Stock have a
liquidation preference senior to the holders of InterCAP Series A
Preferred Stock, InterCAP Series B Preferred Stock and InterCAP
Common Stock equal to $.65552 per share, plus all accrued and
unpaid dividends thereon. Holders of InterCAP Series B Preferred
Stock have a liquidation preference senior to the holders of
InterCAP Series A Preferred Stock and InterCAP Common Stock equal
to $.5978 per share, plus an amount equal to one-half of all
accrued and unpaid dividends thereon from January 1, 1993 to the
effective date of the liquidation. Holders of InterCAP Series A
Preferred Stock have a liquidation preference senior to the
holders of InterCAP Common Stock equal to $1.475 per share, plus
an amount equal to one-half of all accrued but unpaid dividends
thereon if the effective date of the liquidation is after October
1, 1994. Pursuant to the Charter Amendment, the liquidation
preference of the InterCAP Series A Preferred Stock would be
amended to provide that the liquidation preference will be $1.475
per share unless the effective date of the liquidation is after
January 15, 1995, in which case the liquidation preference for
the InterCAP Series A Preferred Stock would be $1.475 per share,
plus an amount equal to all accrued and unpaid dividends thereon.
See "Proposal to Amend InterCAP's Certificate of Incorporation."
After the payment in full of all such liquidation preferences, if
the net assets of InterCAP available for distribution to its
stockholders are $5,000,000 or less, the holders of InterCAP
Preferred Stock and InterCAP Common Stock share ratably per share
in any remaining proceeds.
Redemption
The InterCAP Certificate provides that InterCAP must redeem
the InterCAP Preferred Stock in three equal annual installments
commencing January 2, 1994, at a redemption price of $1.475 per
share of InterCAP Series A Preferred Stock, $.50 per share of
InterCAP Series B Preferred Stock and $.65552 per share of
InterCAP Series C Preferred Stock, plus in all cases all accrued
but unpaid dividends thereon. Holders of InterCAP Series C
Preferred Stock have a redemption preference senior to the
holders of InterCAP Series A Preferred Stock and InterCAP Series
B Preferred Stock. Holders of InterCAP Series B Preferred Stock
have a redemption preference senior to InterCAP Series A Preferred
Stock. Any redemption of InterCAP Preferred Stock is to be funded
by use of a sinking fund. Pursuant to InterCAP's Certificate, the
holders of the InterCAP Preferred Stock waived their right to have
the InterCAP Preferred Stock redeemed through January 1, 1995 and
agreed that InterCAP could limit its redemption obligations in each
year to the amount of its net income in the 12-month period preceding
each redemption date.
Preemptive Rights
Holders of InterCAP Preferred Stock and any InterCAP Common
Stock issued upon the conversion of InterCAP Preferred Stock have
the preemptive right to purchase a pro rata portion of all
issuances by InterCAP of equity securities or warrants, rights or
other options to purchase InterCAP equity securities other than
securities issued in connection with stock splits and dividends,
the InterCAP Preferred Stock or InterCAP Common Stock issued upon
conversion thereof, securities issued pursuant to any stock
option plan, stock purchase plan or similar arrangement or
securities issued after a merger or public offering by InterCAP.
The holders of a majority of the InterCAP Preferred Stock may
waive the preemptive rights with respect to any proposed issuance
by InterCAP of its securities.
Options
For a description of the outstanding options under
InterCAP's 1989 Stock Option Plan and 1994 Non-Qualified Stock
Option Program, see "The Merger and Related Transactions--Options
Outstanding Prior to the Merger."
Warrants
At September 30, 1994, there were warrants outstanding
entitling the holder thereof to purchase up to 50,000 shares of
InterCAP Common Stock at an exercise price of $.25 per share (the
"Warrants"). Pursuant to the Preferred Stock Agreement, InterCAP
and the holder of the Warrants have agreed that the Warrants will
be exercised immediately prior to the Effective Date on a
cashless basis by the holder relinquishing the right to purchase
13,740 shares of InterCAP Common Stock under the Warrants in
exchange for the issuance by InterCAP to the holder of 36,260
shares of InterCAP Common Stock.
PRINCIPAL DIFFERENCES BETWEEN INTERGRAPH AND INTERCAP
CAPITAL STOCK
Both Intergraph and InterCAP are Delaware corporations.
Consequently, except for differences arising out of their
respective certificates of incorporation and by-laws and the
Intergraph Rights Agreement, the rights of holders of Intergraph
Common Stock and InterCAP Common Stock are identical; however, as
outlined below, there are significant differences between the
rights, preferences and privileges of the holders of InterCAP
Preferred Stock and the holders of Intergraph Common Stock. The
comparison set forth below is not meant to be a complete
statement of the comparative rights of holders of Intergraph
Common Stock and the holders of InterCAP Common Stock and
InterCAP Preferred Stock, and the identification of specific
differences between the rights of such holders is not meant to
indicate that other equally or more significant differences do
not exist. Such differences can be determined in full by reference
to the respective corporate documents of Intergraph and InterCAP.
Power to Call Special Stockholders' Meetings
The Restated By-laws of Intergraph provide that only the
Board of Directors or the Chairman of the Board of Directors, in
either case pursuant to a resolution adopted by a majority of the
entire Board of Directors, may call a special meeting of
stockholders. InterCAP's By-laws permit the Board of Directors,
the Chairman of the Board or the President to call a special
meeting of stockholders.
Stockholder Rights Plan
In August of 1993, the Board of Directors of Intergraph
adopted a Stockholder Rights Plan which is described in more
detail under "Description of Intergraph Capital Stock--
Stockholder Rights Plan." InterCAP does not have a stockholder
rights plan.
Vacancies on the Board of Directors
Intergraph's Restated By-laws provide that only the
directors remaining in office may fill vacancies in the Board of
Directors resulting from death, resignation, retirement,
disqualification or other cause. InterCAP's By-laws permit the
remaining directors or the stockholders to fill any vacancies in
the Board of Directors.
Stockholder Approval of Certain Business Combinations
InterCAP does not have a class of voting stock that is
listed on a national securities exchange and is therefore not
subject to Section 203 of the Delaware Act. Intergraph Common
Stock is traded on NASDAQ and, therefore, Intergraph is subject
to Section 203 of the Delaware Act. In certain circumstances,
Section 203 makes it more difficult for an acquiror to effect a
business combination with a corporation subject to its
provisions. See "Description of Intergraph Capital Stock--
Delaware Law and Certain Charter and By-law Provisions--
Delaware's Anti-Takeover Law."
Action by Consent of Stockholders
Holders of InterCAP Stock are entitled to take action,
without a meeting, without prior notice and without a vote, if a
consent in writing is signed by a majority of the stockholders of
InterCAP Stock entitled to vote on the matter being considered.
The By-laws of Intergraph also permit action by non-unanimous
written consent in lieu of a stockholders' meeting, but impose
various requirements on the duration and effectiveness of such
written consents, permit the Board of Directors to fix a record
date with respect to such consents, establish procedures for the
appointment of inspectors of elections to review such consents
(and any revocations thereof), and prescribe procedures for
challenges to the decision of the inspectors of elections.
Stockholder Voting
All holders of Intergraph Common Stock vote equally on all
matters to be voted on by Intergraph's stockholders, except as
otherwise required by law. Holders of InterCAP Preferred Stock
will no longer have one or more separate class votes with respect
to approval of certain matters, including any merger,
consolidation, reclassification, recapitalization or sale of
substantially all of the assets, redemption or repurchase of
shares of capital stock, issuance of senior equity securities, or
any amendment or modification of the certificate of incorporation
or by-laws. Upon consummation of the Merger, holders of InterCAP
Preferred Stock will receive Intergraph Common Stock and will
vote equally with all other holders of Intergraph Common Stock.
Liquidation, Conversion, Redemption
Upon liquidation, dissolution or winding up of InterCAP, the
holders of InterCAP Preferred Stock have certain rights to
receive distribution of net assets of InterCAP prior and in
preference to any holders of InterCAP Common Stock. All
stockholders of Intergraph would share ratably in the net assets
of Intergraph upon the occurrence of any such event. In
addition, holders of InterCAP Preferred Stock will lose all
conversion and redemption rights provided in the InterCAP
Certificate.
EXPERTS
The consolidated financial statements of Intergraph
Corporation incorporated by reference in Intergraph's Annual
Report (Form 10-K) for the year ended December 31, 1993, have
been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon included therein and incorporated
herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting
and auditing.
The consolidated financial statements of InterCAP at June
30, 1994 and 1993, and for each of the three years in the period
ended June 30, 1994, included in this Prospectus/Proxy Statement
of InterCAP, which is referred to and made a part of this
Prospectus/Proxy Statement, have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein, and are included in reliance upon
such report given upon the authority of such firm as experts in
accounting and auditing.
LEGAL MATTERS
The validity of Intergraph Common Stock issuable pursuant to
the Merger and certain other legal matters relating to the Merger
and the transactions contemplated thereby will be passed upon for
Intergraph by Balch & Bingham, Birmingham, Alabama. In addition,
certain legal matters relating to the Merger and the transactions
contemplated thereby will be passed upon for InterCAP by Womble
Carlyle Sandridge & Rice, P.L.L.C., Winston-Salem, North
Carolina.
PROXY SOLICITATION
Proxies are being solicited by and on behalf of the Board of
Directors of InterCAP. All expenses of this solicitation,
including the cost of preparing and mailing this Prospectus/Proxy
Statement, will be borne by the Surviving Corporation.
In addition to solicitation by use of the mails, proxies may
be solicited by directors, officers and employees of InterCAP in
person or by telephone, telegram or other means of
communications. Such directors, officers and employees will not
be additionally compensated, but may be reimbursed for out-of-
pocket expenses in connection with such solicitation.
Index to InterCAP Consolidated Financial Statements
Three years in the period ended June 30, 1994
Report of Ernst & Young Independent Auditors F-2
Consolidated Balance Sheets at June 30, 1994 and 1993 F-3
Consolidated Statements of Operations for the years ended
June 30, 1994, 1993 and 1992 F-5
Consolidated Statements of Shareholders' Equity for the
years ended June 30, 1994, 1993 and 1992 F-6
Consolidated Statements of Cash Flows for the years ended
June 30, 1994, 1993 and 1992 F-7
Notes to Consolidated Financial Statements F-8
Three months ended September 30, 1994 and 1993
Consolidated Condensed Balance Sheet (Unaudited)
at September 30, 1994 F-18
Consolidated Condensed Statements of Operations (Unaudited)
for the three months ended September 30, 1994 and 1993 F-19
Consolidated Statements of Shareholders' Equity (Unaudited)
for the three months ended September 30, 1994 F-20
Consolidated Condensed Statements of Cash Flows (Unaudited)
for the three months ended September 30, 1994 and 1993 F-21
Notes to Consolidated Condensed Financial Statements (Unaudited) F-22
Report of Independent Auditors
Board of Directors
InterCAP Graphics Systems, Inc.
We have audited the accompanying consolidated balance sheets
of InterCAP Graphics Systems, Inc. as of June 30, 1994 and
1993, and the related consolidated statements of operations,
shareholders' equity, and cash flows for each of the three
years in the period ended June 30, 1994. These financial
statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects,
the consolidated financial position of InterCAP Graphics
Systems, Inc. at June 30, 1994 and 1993, and the
consolidated results of its operations and its cash flows
for each of the three years in the period ended June 30,
1994, in conformity with generally accepted accounting
principles.
As discussed in Note 2 to the financial statements, in 1994
the Company changed its method of accounting for income
taxes.
Vienna, Virginia \s\Ernst & Young LLP
August 16, 1994
Except for Note 11 as to which
the date is October 18, 1994
InterCAP Graphics Systems, Inc.
Consolidated Balance Sheets
June 30
1994 1993
Assets
Current assets:
Cash and cash equivalents (Note 2) $132,353 $ 260,084
Accounts receivable, less allowance
of $5,000 in 1994 and 1993 849,896 852,845
Prepaid expenses 23,400 30,045
---------------------
Total current assets 1,005,649 1,142,974
Furniture and equipment (Note 2):
Furniture, fixtures and equipment 93,130 89,203
Computer equipment 670,535 575,260
---------------------
763,665 664,463
Accumulated depreciation (643,600) (495,687)
---------------------
120,065 168,776
Capitalized computer software
development costs and other assets,
less accumulated amortization of
approximately $2,402,000 and
$1,830,000, respectively (Note 2) 1,840,196 1,834,586
----------------------
Total assets $2,965,910 $3,146,336
======================
June 30
1994 1993
Liabilities and shareholders'equity
Current liabilities:
Revolving line of credit (Note 3) $ - $ 400,000
Accounts payable 118,731 276,541
Payroll and related accruals 279,385 127,250
Other accrued expenses 41,186 90,467
Unearned income 33,866 -
Distributor commissions payable - 57,363
Current portion of long-term debt
and capital lease obligation (Note 4) 5,548 230,089
---------------------
Total current liabilities 478,716 1,181,710
Long-term debt, less current
portion (Note 4) 150,000 -
Due to related parties (Note 5) - 425,000
Capital lease obligation, less
current portion - 5,548
---------------------
628,716 1,612,258
Commitments and contingencies (Note 9) - -
Series A, convertible redeemable
preferred shares, $.01 par value;
1,876,480 designated, 927,326
shares issued and outstanding in
1994 and 1993 (Note 6) 1,304,274 1,304,274
Series B convertible preferred
shares, $.01 par value; 2,000,000
designated, 1,716,387 shares issued
and outstanding in 1994 and 1993
(Note 6) 848,870 848,870
Series C convertible preferred
shares; $.01 par value, 953,442
designated, 953,442 shares issued
and outstanding in 1994 and 1993
(Note 6) 625,000 625,000
Shareholders' equity (Note 7):
Common shares, $.01 par value,
20,000,000 shares authorized,
2,780,123 and 1,437,154 shares
issued and outstanding in 1994 and
1993, respectively 27,801 14,371
Additional paid-in capital 928,898 808,029
Accumulated deficit (1,195,764) (1,976,467)
Due from shareholders for purchase of
incentive stock options (100,519) -
Currency translation adjustment (101,366) (89,999)
----------------------
Total shareholders' equity (deficit) (440,950) (1,244,066)
----------------------
Total liabilities and shareholders' equity $2,965,910 $3,146,336
======================
See accompanying notes.
InterCAP Graphics Systems, Inc.
Consolidated Statements of Operations
Year ended June 30
1994 1993 1992
Revenues $4,490,442 $3,779,479 $4,596,974
Costs and expenses:
Cost of products sold 980,440 1,142,673 1,238,560
Selling, general and administrative 2,556,386 3,060,049 3,211,581
-----------------------------------
3,536,826 4,202,722 4,450,141
-----------------------------------
Operating income (loss) 953,616 (423,243) 146,833
Other (income) expense:
Profit sharing 134,713 - -
Interest expense 66,725 82,411 38,353
Other (income) expense (47,525) 9,265 (98,746)
-----------------------------------
153,913 91,676 (60,393)
-----------------------------------
Income (loss) before income taxes
and extraordinary item 799,703 (514,919) 207,226
Charge in lieu of income taxes (Note 8) - - 157,000
Provision for income taxes 19,000 - -
-----------------------------------
Income (loss) before
extraordinary item 780,703 (514,919) 50,226
Extraordinary item:
Reduction of income taxes arising
from carryforward of prior year's
operating losses - - 157,000
-----------------------------------
Net income (loss) $780,703 $(514,919) $207,226
===================================
Earnings per share (Note 2):
Primary earnings (loss) per share $0.27 $(0.37) $0.08
====================================
Fully diluted earnings (loss) per
share $0.12 $(0.37) $0.03
====================================
See accompanying notes.
<TABLE>
InterCAP Graphics Systems, Inc.
Consolidated Statements of Shareholders' Equity (Deficit)
<CAPTION>
Additional Currency
Common Stock Paid-in Accumulated Due From Translation
Shares Amount Capital Deficit Shareholders Adjustments Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1991 2,141,620 $21,416 $846,081 $(1,668,774) $ - $(83,223) $(884,500)
Purchase and retirement
of stock (801,951) (8,020) (40,383) - - - (48,403)
Proceeds from issuance of
stock to related party 3,000 30 720 - - - 750
Net income - - - 207,226 - - 207,226
Currency translation
adjustments - - - - - 12,830 12,830
---------------------------------------------------------------------------------
Balance at June 30, 1992 1,342,669 13,426 806,418 (1,461,548) - (70,393) (712,097)
Proceeds from exercise
of stock options 71,261 713 1,611 - - - 2,324
Exercise of warrants 23,224 232 - - - - 232
Net loss - - - (514,919) - - (514,919)
Currency translation
adjustments - - - - - (19,606) (19,606)
-----------------------------------------------------------------------------------
Balance at June 30, 1993 1,437,154 14,371 808,029 (1,976,467) - (89,999) (1,244,066)
Proceeds from exercise
of stock options 1,079,251 10,793 97,133 - - - 107,926
Exercise of warrants 263,718 2,637 23,736 - - - 26,373
Advances to shareholders
for purchase of
stock options - - - - (100,519) - (100,519)
Net income - - - 780,703 - - 780,703
Currency translation
adjustments - - - - - (11,367) (11,367)
---------------------------------------------------------------------------------
Balance at June 30, 1994 2,780,123 $27,801 $928,898 $(1,195,764) $(100,519) $(101,366) $(440,950)
=================================================================================
</TABLE>
InterCAP Graphics Systems, Inc.
Consolidated Statements of Cash Flows
Year ended June 30
1994 1993 1992
Operating Activities
Net income (loss) $ 780,703 $(514,919) $ 207,226
Adjustments to reconcile net income
(loss) to net cash provided by operating
activities:
Loss on disposal of fixed assets 3,708 - -
Exchange gain (1,609) - -
Depreciation and amortization 673,569 635,186 561,239
Changes in operating assets and
liabilities:
Accounts receivable 4,619 501,228 (490,569)
Prepaid expenses 6,645 18,950 (8,506)
Other assets 14,904 - -
Accounts payable (157,582) 110,272 (29,942)
Payroll and other accrued expenses 79,357 (235,482) 132,626
---------------------------------
Net cash provided by operating
activities 1,404,314 515,235 372,074
Investing Activities
Purchases of furniture and
equipment (57,471) (45,793) (127,679)
Expenditures on computer software
development (590,000) (628,988) (543,631)
----------------------------------
Net cash used in investing activities (647,471) (674,781) (671,310)
Financing Activities
Net (decrease) increase in short-
term borrowings (400,000) 101,448 4,629
Proceeds from issuance of debt 150,000 - 379,893
Payments of long-term debt (194,388) (70,902) (508,701)
Proceeds from issuance of stock 11,577 2,866 625,750
Payments for repurchase of stock - - (532,132)
(Payments) proceeds from related
parties (Note 5) (402,797) 200,000 225,000
Payments of capital lease obligations (35,701) (18,138) -
---------------------------------
Net cash (used in) provided by
financing activities (871,309) 215,274 194,439
Effect of exchange rate changes on cash (13,265) 2,664 (15,469)
---------------------------------
Net (decrease) increase in cash and
cash equivalents (127,731) 58,392 (120,266)
Cash and cash equivalents at
beginning of year 260,084 201,692 321,958
---------------------------------
Cash and cash equivalents at end of year $132,353 $260,084 $201,692
=================================
See accompanying notes.
InterCAP Graphic Systems, Inc.
Notes to Consolidated Financial Statements
June 30, 1994
1. Description of Business
InterCAP Graphics Systems, Inc. (InterCAP) develops,
licenses and supports proprietary computer software and
interfaces designed to be used on workstation computers for
the illustration of technical documents produced by computer-
aided publishing software systems. Revenues are derived from
sales in the United States and Europe.
2. Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts
of InterCAP and its subsidiaries, all of which are wholly-
owned. All intercompany balances and transactions have been
eliminated in consolidation.
Furniture and Equipment
Furniture and equipment are stated at cost and depreciated
using the straight-line method over estimated useful lives
ranging from three to five years. Depreciation expense was
approximately $104,000, $122,000 and $119,000 during the
years ended June 30, 1994, 1993 and 1992, respectively.
Computer Software and Other Assets
Software development costs are capitalized upon the
establishment of technological feasibility. Amortization of
such costs (approximately $562,000, $494,000 and $403,000
during 1994, 1993 and 1992, respectively) is provided on a
product-by-product basis at the greater of (a) the ratio of
current gross revenue from the product to the sum of current
and anticipated gross revenues or (b) the straight-line
method over the remaining estimated economic life of the
product. Generally an estimated economic life of five years
is assigned to capitalized software development costs.
Amortization of other assets is provided on a straight-line
basis over the estimated useful lives ranging from five to
ten years.
Revenue Recognition
Revenues from the sale of proprietary software systems
licenses are generally recognized upon shipment of the
system. License renewal fees are recognized as income on the
annual renewal date of the license. Service fees are
recognized upon delivery of the services.
InterCAP Graphics Systems, Inc.
Notes to Consolidated Financial Statements (continued)
2. Accounting Policies (continued)
Revenue Recognition (continued)
Licenses are sold, generally on credit, to independent users
in the United States and Europe. InterCAP performs ongoing
credit evaluations of its customers and generally does not
require collateral.
Cash and Cash Equivalents
Liquid money market instruments with maturities of three
months or less are considered cash equivalents.
Income Taxes
Effective July 1, 1993, the Company adopted Statement of
Financial Accounting Standards (FAS) 109, "Accounting for
Income Taxes." FAS 109 requires a change from the deferred
to the liability method of accounting for deferred income
taxes. As permitted by the Statement, prior year financial
statements have not been restated. There was no cumulative
effect as a result of adopting FAS 109.
Foreign Currency Translation
The financial statements of foreign subsidiaries have been
translated in U.S. dollars in accordance with FAS 52,
"Foreign Currency Translation." Assets and liabilities of
foreign operations are translated into U.S. dollars at the
rates of exchange at the balance sheet dates and the effects
of translation adjustments are deferred and included as a
component of shareholders' equity. Revenues and expenses
are translated into U.S. dollars using weighted average
exchange rates. The effects on the statements of operations
of transaction gains are approximately $34,000, $7,000 and
$59,000 for the years ended June 30, 1994, 1993 and 1992,
respectively, and are included in other income on the
financial statements.
Net Earnings (Loss) Per Share
Primary earnings per common share is computed using the
weighted average number of common shares outstanding plus
the shares that would be outstanding assuming the exercise
of dilutive stock options and warrants, all of which are
considered to be common stock equivalents. The weighted
average number of common shares outstanding for each year
was 2,860,351, 1,389,912 and 2,570,781 in 1994, 1993 and
1992, respectively.
InterCAP Graphics Systems, Inc.
Notes to Consolidated Financial Statements (continued)
2. Accounting Policies (continued)
Net Earnings (Loss) Per Share (continued)
Fully diluted earnings per common share is computed by using
the weighted average number of common shares outstanding,
common stock equivalents related to dilutive stock options,
and common shares issuable upon conversion of convertible
preferred shares. The weighted average number of common
shares outstanding for purposes of the fully diluted
calculation was 6,766,213, 1,389,912 and 6,238,835 in 1994,
1993 And 1992, respectively. Shares issuable upon the
exercise of stock options and warrants or conversion of
preferred stock have been excluded from both the
computations in 1993 because the effect of their inclusion
would be antidilutive.
3. Revolving Line of Credit
The Company has a $400,000 revolving line of credit
available at June 30, 1994. The facility bears interest at
the bank's prime rate plus 1% and is subject to renewal on
October 31, 1994. The note has been secured by the
Company's accounts, contracts rights and general
intangibles.
4. Long-Term Debt
Long-term debt consisted of the following at June 30:
1994 1993
Note payable to bank, bearing interest
at the bank's prime rate plus 1% per
annum and payable in three quarterly
installments beginning July 1995. The
note is secured by the Company's
accounts, contract rights and general
intangibles. $150,000 $ -
Note payable to bank, bearing interest
at the bank's prime rate plus 2% and
payable in three installments beginning
July 1993. The note was secured by the
Company's accounts, contract rights and
general intangibles and was personally
guaranteed by related parties. - 175,000
Subordinated note payable to outside
party bore interest at 12% per annum;
payable January 1994. - 16,667
Other - 2,721
----------------------
150,000 194,388
Less current portion - 194,388
----------------------
$150,000 $ -
======================
InterCAP Graphics Systems, Inc.
Notes to Consolidated Financial Statements (continued)
4. Long-Term Debt (continued)
The Company paid interest of approximately $72,000, $80,000
and $36,000 during 1994, 1993 and 1992, respectively.
5. Related Party Transactions
In conjunction with a repurchase of 801,951 shares of common
stock and 100,000 shares of Series B preferred stock, the
Company borrowed $225,000 from two related parties in April,
1992. These related parties guaranteed the bank loan
outstanding at June 30, 1993 in return for a fee equal to
the difference between 12% and the loan's interest rate,
prime rate plus 2%, multiplied by the outstanding principal.
In addition, the related parties were given warrants to
purchase 162,709 shares of common stock at $0.10 per share.
These warrants expire April, 1997 (Note 7).
During April 1993, two other related parties loaned the
Company $200,000 for operating purposes. These related
parties were given warrants to purchase 81,354 shares of
common stock at $0.10 per share expiring April 1998 (Note
7). The total balance due to related parties plus interest
at 12% was repaid during 1994, $402,797 in cash and $22,203
through the exercise of warrants to purchase 222,031 shares
of common stock.
Interest expense incurred during 1994, 1993 and 1992 related
to the above transactions was $36,000, $38,500 and $6,200,
respectively.
6. Redeemable Preferred Shares
The Company has authorized 10,000,000 preferred shares of
which 1,876,480 were designated Series A Convertible
Preferred. Series A shares are convertible into common
shares at a 1.3329 to 1 ratio, subject to adjustment for any
sales of common equivalents at less than $.50 per share.
Series A shares also carry specific liquidation rights which
waive dividends until October 1, 1994 from which point the
forfeited dividends shall be restated retroactively to the
time of purchase (December 1988) at an annual rate of
$.07375 per share. At June 30, 1994, undeclared, cumulative
dividends of approximately $735,000 were unpaid. InterCAP
may be required to redeem (at $1.475 per share plus accrued
dividends) the Series A shares, in three equal annual
installments beginning January 1995, unless the holders
elect to convert such shares to common. Maximum mandatory
redemption amounts are limited to the Company's earnings
during the preceding 12 months. Any such redemption is
subject to the redemption rights of the Series B
shareholders and Series C shareholders.
InterCAP Graphics Systems, Inc.
Notes to Consolidated Financial Statements (continued)
6. Redeemable Preferred Shares (continued)
The Company designated 2,000,000 of the authorized preferred
shares as Series B Convertible Preferred. The Series B
shares are convertible into common shares at a 1 to 1 ratio,
subject to anti-dilution adjustments. The Series B shares
carry liquidation preferences of $.50 per share and rank
similar to the Series A shares as to dividends. Increases
in liquidation preferences were waived from January 1, 1993
through October 1, 1994. Dividends accrue at an annual rate
of $.05 per share until October 1, 1994. On October 1, 1994
and thereafter, the liquidation preference will be $.5978
per share plus one half accrued and unpaid dividends and
dividends will be restated at an annual rate of $.025 per
share, rather than $.05 per share. At June 30, 1994,
cumulative dividends of approximately $151,000 ($0.08 per
share) were unpaid. InterCAP may be required to redeem the
Series B shares in three equal annual installments beginning
January 1995 at $.50 per share plus any accrued dividends,
unless the holders elect to convert such shares to common.
Maximum mandatory redemption amounts are limited to the
Company's earnings during the preceding 12 months, and are
junior to the rights of the Series C preferred shares.
The Company designated 953,442 shares as Series C
Convertible Preferred. The Series C shares are convertible
into common shares at a 1 to 1 ratio, subject to anti-
dilution adjustments. Upon liquidation, the Series C
preferred shareholders receive $0.65552 per share plus
declared and unpaid dividends before Series A, Series B, and
common stock shareholders are entitled to receive money for
their shares. Series C shareholders rank similar to Series A
and Series B shareholders, with respect to dividends (which
accrue at the annual rate of $0.065552 per share). At June
30, 1994, cumulative dividends of approximately $160,000
($0.17 per share) were unpaid. InterCAP may be required to
redeem the Series C shares in three equal annual
installments beginning January 1995 at $0.65552 per share
plus any accrued dividends, unless the shareholders elect to
convert such shares to common. Maximum mandatory redemption
amounts are limited to the Company's earnings during the
preceding 12 months.
The preferred shareholders are entitled to the number of
votes equal to the largest number of full common shares into
which such shares of preferred stock could be converted. In
connection with the sale of the Series A, B, and C shares,
InterCAP agreed to certain covenants including restrictions
on loans to and investments in others, mergers and
acquisitions, creation of indebtedness, capital
expenditures, redemption of capital stock, and cash or
property dividends on common shares.
InterCAP Graphics Systems, Inc.
Notes to Consolidated Financial Statements (continued)
7. Shareholders' Equity
The Company has a Stock Option Plan which provides for
2,500,000 shares of common stock to be granted under the
Plan. The purpose of the Plan is to compensate various key
executives and key employees for services rendered to or on
behalf of the Company. Under the plan, options generally
vest at the rate of 25% each year beginning one year from
the date of grant. There are 431,255 such options vested
and outstanding at June 30, 1994 exercisable at prices
ranging from $0.10 to $0.42.
The following table summarizes the option activity for the
years ended June 30:
1994 1993 1992
Outstanding at beginning of year 2,209,050 2,417,499 2,274,187
Granted 110,000 147,500 180,000
Canceled 304,737 261,824 36,688
Exercised 1,079,251 94,125 -
-------------------------------
Outstanding at end of year 935,062 2,209,050 2,417,499
===============================
At June 30, 1994 various warrants were outstanding as
follows:
Security Warrant Price Shares Expiration Date
Common .10 81,355 April 1997
Common .25 50,000 January 1997
Common .25 50,000 December 1996
An aggregate of 6,587,217 common shares are reserved because
of various conversion rights related to preferred stock,
options and warrants described above.
In September 1993, six employees exercised 1,005,188 options
in return for long term notes totaling $100,519.
In April 1993, an officer exercised warrants to purchase
11,986 shares of Series A preferred stock, 19,027 shares of
Series B preferred stock and 23,224 shares of common stock
for a nominal price.
InterCAP Graphics Systems, Inc.
Notes to Consolidated Financial Statements (continued)
8. Income Taxes
At June 30, 1994 InterCAP has net operating loss
carryforwards (NOL) of approximately $1,478,000 and a
general business credit carryforward of $278,000 expiring on
varying dates through 2008. In addition, the Company has an
alternative minimum tax carryforward of approximately
$31,000 with no expiration date.
Deferred income taxes reflect the net tax effects of net
operating loss and alternative minimum tax carryforwards,
research credits and temporary differences between the
carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax
purposes. Significant components of the Company's deferred
tax assets and liability at June 30, 1994 are as follows:
1994
Deferred tax assets:
Net operating loss $591,000
Research and development 278,000
Alternative minimum tax credit
carryforward 31,000
Accrued expenses 14,000
Depreciation 10,000
---------
Total deferred tax assets 924,000
Deferred tax liability:
Amortization of capitalized
software costs (723,000)
---------
201,000
Valuation allowance (201,000)
---------
Net deferred tax asset $ -
=========
The Company did not record deferred taxes for similar timing
differences as described above for the years ended June 30,
1993 and 1992 under the deferral method.
Income (loss) before income taxes for the years ended June
30 was attributable to the following jurisdictions:
1994 1993 1992
Domestic $962,000 $ (92,000) $132,000
Foreign (162,000) (423,000) 75,000
-------------------------------
$800,000 $(515,000) $207,000
===============================
InterCAP Graphics Systems, Inc.
Notes to Consolidated Financial Statements (continued)
8. Income Taxes (continued)
Significant components of the provision for income taxes
attributable to continuing operations are as follows:
1994 1993 1992
Current:
Federal $17,000 $ - $140,000
State 2,000 - 17,000
-------------------------------
19,000 - 157,000
Benefit of NOL - - (157,000)
-------------------------------
Net tax provision $19,000 $ - $ -
===============================
The reconciliation of income tax computed at the U.S.
Federal Statutory rate to income tax expense is:
Liability Deferred Method
Method
1994 1993 1992
Statutory rate 34% (34)% 34%
State income taxes after
federal benefit 5 (5) 5
Benefit from utilization
of NOL (federal and state) (39) - (39)
Alternative minimum tax 2 - -
Valuation allowance on
net deferred tax
benefits - 39 -
-------------------------------
2% -% -%
===============================
The Company paid $1,000 towards its federal and state tax
liabilities during the year ended June 30, 1994. No
payments were made in 1993 or 1992.
During 1992 NOLs were utilized to reduce income taxes
otherwise payable. The benefit of this reduction is shown
as an extraordinary item in the consolidated statement of
operations.
InterCAP Graphics Systems, Inc.
Notes to Consolidated Financial Statements (continued)
9. Commitments
The Company leases equipment with a net book value at June
30, 1994 of approximately $7,000 ($37,000 at June 30, 1993)
under a capital lease expiring September 1994. InterCAP
leases office space under a non-cancelable operating lease
that expires July 31, 1995. Future minimum lease payments
at June 30, 1994 were as follows:
Operating
Leases
1995 $202,000
1996 17,000
--------
Total minimum lease payments $219,000
========
Rental expense under the operating lease was approximately
$257,000, $260,000 and $254,000, for the years ended June
30, 1994, 1993 and 1992, respectively.
10. 401(k) Plan
Effective August 31, 1987, the Company adopted a defined
contribution and profit-sharing plan. This plan, which
covers substantially all employees, stipulates that
employees may elect an amount between 2% and 15% of their
total compensation to contribute to the plan.
At the end of each plan year, the Company, at its
discretion, may make a profit-sharing contribution to the
plan, which would be allocated to the accounts of all
eligible employees on the basis of their compensation. All
employees who are participants during the plan year and are
employed by the Company on the last day of the plan year
would be eligible to share in the profit-sharing
contribution. No contributions have been made by the Company
to the plan for the three years in the period ended June 30,
1994.
11. Subsequent Event
On September 30, 1994, the Company entered into an agreement
and plan of reorganization with Intergraph Corporation
whereby the Company will become a wholly-owned subsidiary of
Intergraph in a transaction which is expected to be
accounted for as a purchase transaction.
InterCAP Graphics Systems, Inc.
Notes to Consolidated Financial Statements (continued)
11. Subsequent Event (continued)
In conjunction with the Plan of Reorganization with
Intergraph Corporation, the Series A shareholders have
elected to exchange their Series A preferred stock at a
fixed rate of $1.475 per share for total consideration in
the merger of $1,368,000. Also, the Series B and C
preferred shareholders have agreed to convert all preferred
shares to common shares prior to the closing and forego any
accrued dividends.
InterCAP Graphics Systems, Inc.
Consolidated Condensed Balance Sheets (Unaudited)
September 30, 1994
Assets
Current assets:
Cash and cash equivalents $ 14,013
Accounts receivable, less allowance of $5,000 1,330,351
Prepaid expenses 42,010
----------
Total current assets 1,386,374
Furniture and equipment, net 109,600
Capitalized computer software development costs
and other assets, less accumulated amortization
of approximately $2,554,000 1,819,665
----------
Total assets $3,315,639
==========
Liabilities and shareholders' equity
Current liabilities:
Revolving line of credit $166,956
Accounts payable and other accruals 449,499
Current portion of long-term debt and capital
lease obligation 52,624
----------
Total current liabilities 669,079
Long-term debt, less current portion 100,000
Capital lease obligation, less current portion 2,876
----------
771,955
Series A, convertible redeemable preferred shares,
$.01 par value: 1,876,480 designated; 927,326
issued and outstanding 1,304,274
Series B convertible preferred shares, $.01 par
value; 2,000,000 shares designated, 1,716,387
shares issued and outstanding 848,870
Series C convertible preferred shares, $0.01 par
value; 953,442 shares designated, issued and
outstanding 625,000
Shareholders' equity:
Common shares, $.01 par value; 20,000,000 shares
authorized, 2,911,478 shares issued and
outstanding 29,115
Additional paid-in capital 948,219
Accumulated deficit (1,001,616)
Due from shareholders for purchase of incentive
stock options (100,519)
Currency translation adjustment (109,659)
-----------
Total shareholders' equity (deficit) (234,460)
-----------
Total liabilities and shareholders' equity $3,315,639
===========
InterCAP Graphics Systems, Inc.
Consolidated Condensed Statements of Operations (Unaudited)
Three Months Ended
September 30
1994 1993
Revenues $1,110,007 $ 536,145
Costs and expenses:
Cost of products sold 244,240 196,644
Selling, general and administrative 636,986 555,638
-----------------------
881,226 752,282
-----------------------
Operating income (loss) 228,781 (216,137)
Other (income) expense:
Profit sharing 32,837 -
Interest expense 5,978 26,216
Other (18,469) 1,743
-----------------------
20,346 27,959
-----------------------
Income (loss) before income taxes 208,435 (244,096)
Provision for income taxes 14,287 -
-----------------------
Net income (loss) $194,148 $ (244,096)
=======================
Earnings per share:
Primary earnings (loss) per share $.06 $(.16)
=======================
Fully diluted earnings (loss) per share $.03 $(.16)
=======================
<TABLE>
InterCAP Graphics Systems, Inc.
Consolidated Statements of Shareholders' Equity (Deficit)
(Unaudited)
<CAPTION>
Additional Currency
Common Stock Paid-in Accumulated Due From Translation
Shares Amount Capital Deficit Shareholders Adjustments Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1994 2,780,123 $27,801 $928,898 $(1,195,764) $(100,519) $(101,366) $(440,950)
Proceeds from exercise of stock
options and warrants 131,355 1,314 19,321 - - - 20,635
Net income - - - 194,148 - - 194,148
Currency translation
adjustments - - - - - (8,293) (8,293)
----------------------------------------------------------------------------------------
Balance at September 30, 1994 2,911,478 $29,115 $948,219 $(1,001,616) $(100,519) $(109,659) $(234,460)
========================================================================================
</TABLE>
InterCAP Graphics Systems, Inc.
Consolidated Condensed Statements of Cash Flows (Unaudited)
Three Months Ended
September 30
1994 1993
Operating Activities
Net income (loss) $194,148 $(244,096)
Adjustments to reconcile net income
(loss) to net cash (used in) provided by
operating activities:
Exchange gain (8,293) 2,871
Depreciation and amortization 178,633 160,059
Changes in operating assets and liabilities:
Accounts receivable (480,455) 467,033
Prepaid expenses (18,610) 464
Other assets 17,903 (1,069)
Accounts payable and other accruals (23,669) (161,156)
-----------------------
Net cash (used in) provided by
operating activities (140,343) 224,106
Investing Activities
Purchases of furniture and equipment (10,040) (8,102)
Expenditures on computer software
development (150,000) (131,400)
------------------------
Net cash used in investing activities (160,040) (139,502)
Financing Activities
Net increase (decrease) in short-term
borrowings 166,956 (63,827)
Payments of long-term debt - (126,789)
Proceeds from issuance of stock 20,635 18,237
Payments of capital lease obligations (5,548) (10,318)
------------------------
Net cash provided by financing activities 182,043 (182,697)
------------------------
Net (decrease) increase in cash and
cash equivalents (118,340) (98,093)
Cash and cash equivalents at beginning
of period 132,353 260,084
------------------------
Cash and cash equivalents at end of period $14,013 $ 161,991
========================
InterCAP Graphics Systems, Inc.
Consolidated Condensed Financial Statements (Unaudited)
1. Basis of Presentation
These financial statements should be read in conjunction
with the InterCAP Graphics Systems, Inc. (the "Company")
consolidated financial statements for the three years in the
period ended June 30, 1994. The interim financial
information included herein is unaudited. In the opinion of
the Company's management, the unaudited information
presented reflects all adjustments, consisting of normal
recurring accruals, necessary for a fair presentation of the
unaudited information shown.
2. Property and Equipment
At September 30, 1994, property and equipment consists of
the following:
Furniture, fixtures and equipment $ 95,844
Computer equipment 688,615
--------
784,459
Less accumulated depreciation (674,859)
--------
$ 109,600
========
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
APPENDICES
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
(with Exhibits)
==============================================================================
APPENDIX A
----------
AGREEMENT AND PLAN OF REORGANIZATION
among
INTERGRAPH CORPORATION
INTERGRAPH DC CORPORATION - SUBSIDIARY 7
and
INTERCAP GRAPHICS SYSTEMS, INC.
Dated as of September 30, 1994
==============================================================================
TABLE OF CONTENTS
Page
----
ARTICLE I. 1
THE MERGER 1
SECTION 1.1 The Merger 1
SECTION 1.2 Effective Time 1
SECTION 1.3 Certain Effects of the Merger 2
SECTION 1.4 Certificate of Incorporation and By-Laws 2
SECTION 1.5 Directors and Officers 2
SECTION 1.6 Tax-Free Reorganization 2
SECTION 1.7 Stockholders' Communications 2
SECTION 1.8 Preparation of S-4; Other Filings 3
SECTION 1.9 Closing 4
ARTICLE II. 4
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES 4
SECTION 2.1 Total Consideration; Effect on Capital Stock 4
SECTION 2.2 Escrow Deposit; Exchange of Certificates 7
SECTION 2.3 Conversion of InterCAP Options 8
ARTICLE III. 9
REPRESENTATIONS AND WARRANTIES OF INTERCAP 9
SECTION 3.1 Organization and Qualification 9
SECTION 3.2 Subsidiaries and Interests in Other Entities;
Interests of Certain Persons 10
SECTION 3.3 Capitalization 10
SECTION 3.4 Authority 12
SECTION 3.5 No Conflict; Consents; No Defaults 13
SECTION 3.6 Financial Statements and Reports;
Books Records 13
SECTION 3.7 Absence of Changes 14
SECTION 3.8 Absence of Undisclosed Liabilities 15
SECTION 3.9 Taxes; Regulatory Filings 16
SECTION 3.10 Environmental Matters 16
SECTION 3.11 Intellectual Property 17
SECTION 3.12 Employee Benefit Plans 19
SECTION 3.13 Employment Agreements 20
SECTION 3.14 Labor Matters 20
SECTION 3.15 Compliance with Laws 20
SECTION 3.16 Litigation and Customer Relations 20
SECTION 3.17 Assets and Material Contracts; Insurance 21
SECTION 3.18 Bankruptcy 23
SECTION 3.19 Customer Orders; Warranties 23
SECTION 3.20 Broker or Finder 23
SECTION 3.21 Certain Agreements 23
SECTION 3.22 Bank Accounts; Powers of Attorney 24
SECTION 3.23 Minute Books 24
SECTION 3.24 Board Approval 24
SECTION 3.25 Vote Required 24
SECTION 3.26 Information Supplied 24
SECTION 3.27 Business Generally 25
SECTION 3.28 Post-Merger Stockholder Continuity 25
SECTION 3.29 Full Disclosure 25
ARTICLE IV. 25
REPRESENTATIONS AND WARRANTIES OF INTERGRAPH 25
SECTION 4.1 Due Incorporation 26
SECTION 4.2 Due Authorization; Binding Agreement 26
SECTION 4.3 Capital Stock 26
SECTION 4.4 Authority 26
SECTION 4.5 Certain Documents 26
SECTION 4.6 Information Provided 27
ARTICLE V. 27
COVENANTS OF INTERCAP 27
SECTION 5.1 Affirmative Covenants of InterCAP 27
SECTION 5.2 Negative Covenants of InterCAP 29
ARTICLE VI. 31
ADDITIONAL AGREEMENTS 31
SECTION 6.1 Access To, and Information Concerning,
Properties and Records 31
SECTION 6.2 Objections of Stockholders 31
SECTION 6.3 Miscellaneous Agreements and Consents 31
SECTION 6.4 InterCAP Indebtedness 31
SECTION 6.5 No Solicitation 32
SECTION 6.6 Public Announcement; Confidentiality and
Non-Disclosure 32
SECTION 6.7 Employee Matters 32
SECTION 6.8 Expenses 33
SECTION 6.9 Further Assurances 33
ARTICLE VII. 33
CONDITIONS TO CONSUMMATION OF THE MERGER 33
SECTION 7.1 Conditions to Each Party's Obligation to
Effect the Merger 33
SECTION 7.2 Conditions to the Obligations of Intergraph
and Intergraph Subsidiary to Effect the Merger 34
SECTION 7.3 Conditions to the Obligations of InterCAP to
Effect the Merger 36
ARTICLE VIII. 36
TERMINATION; AMENDMENT; WAIVER 36
SECTION 8.1 Termination 36
SECTION 8.2 Effect of Termination 37
SECTION 8.3 Reimbursement of Expenses 37
SECTION 8.4 Termination Fee 37
SECTION 8.5 Amendment 38
SECTION 8.6 Extension; Waiver 38
ARTICLE IX. 38
SURVIVAL; INDEMNIFICATION; REMEDIES 38
SECTION 9.1 Survival of Representations and Warranties 38
SECTION 9.2 Indemnification 39
SECTION 9.3 Remedies 42
ARTICLE X. 42
MISCELLANEOUS 42
SECTION 10.1 Entire Agreement; Assignment 42
SECTION 10.2 Severability 42
SECTION 10.3 Notices 43
SECTION 10.4 Governing Law 43
SECTION 10.5 Descriptive Headings 43
SECTION 10.6 Parties in Interest 43
SECTION 10.7 Counterparts 44
SECTION 10.8 Incorporation by Reference 44
SECTION 10.9 Certain Definitions 44
ATTACHMENTS
EXHIBITS
A. Certificate of Merger
B. Preferred Stock Agreement
C. Escrow Agreement
D. Form of ISO Agreement
E. Form of NQSO Agreement
F-1. Certificate of Individual InterCAP Stockholders
F-2. Certificate of InterCAP Entity Stockholders
SCHEDULES
Schedule 2.3 Assumed Options
Schedule 3.1 Lists of Holders of InterCAP Stock and Options; List
of Directors and Officers
Schedule 3.2 Subsidiaries and Interests in Other Entities;
Interests in Certain Persons
Schedule 3.3 Summary of Capital Structure
Schedule 3.5 Conflicts, Consents and Defaults
Schedule 3.7 Absence of Changes
Schedule 3.9 Taxes; Regulatory Filings
Schedule 3.11 Intellectual Property
Schedule 3.12 Employee Benefit Plans
Schedule 3.13 Employment Agreements
Schedule 3.16 Customer and Distributor Relations
Schedule 3.17 Insurance Policies and Material Contracts
Schedule 3.21 Certain Agreements
Schedule 3.22 Bank Accounts
Schedule 5.1(h) Liabilities and Obligations of InterCAP
Schedule 7.2(o) List of Certain Employees
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") dated as
of September 30 1994, by and among Intergraph Corporation, a
Delaware corporation ("Intergraph"), Intergraph DC Corporation -
Subsidiary 7, a Delaware corporation and a wholly-owned
subsidiary of Intergraph ("Intergraph Subsidiary"), and InterCAP
Graphics Systems, Inc., a Delaware corporation ("InterCAP").
WHEREAS, InterCAP desires to affiliate with Intergraph and
Intergraph Subsidiary, and Intergraph and Intergraph Subsidiary
desire to affiliate with InterCAP in the manner provided in this
Agreement;
WHEREAS, Intergraph and InterCAP believe that the Merger (as
defined in Section 1.1) of Intergraph Subsidiary with and into
InterCAP in the manner provided by, and subject to the terms and
conditions set forth in, this Agreement and all exhibits,
schedules and supplements hereto is desirable and in the best
interests of their respective institutions and stockholders; and
WHEREAS, the respective boards of directors of InterCAP,
Intergraph and Intergraph Subsidiary approved this Agreement and
the transactions contemplated hereby substantially on the terms
and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants hereinafter set forth, and other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties, intending to be legally bound,
hereby agree as follows:
ARTICLE I.
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to
the conditions hereof, and in accordance with the General
Corporation Law of the State of Delaware (the "GCL"), Intergraph
Subsidiary shall be merged with and into InterCAP (the "Merger")
and InterCAP shall become a wholly-owned subsidiary of Intergraph
as soon as practicable following the satisfaction or waiver, if
permissible, of the conditions set forth in Article VII hereof.
Following the Merger, InterCAP shall continue as the surviving
corporation with the name InterCAP Graphics Systems, Inc. (the
"Surviving Corporation") and the separate corporate existence of
Intergraph Subsidiary shall cease. (Intergraph Subsidiary and
InterCAP are sometimes referred to as the "Constituent
Corporations".)
SECTION 1.2 Effective Time. The Merger shall be
consummated by the filing with the Delaware Secretary of State of
a Certificate of Merger in the form attached hereto as Exhibit A
in accordance with the relevant provisions of the GCL and by the
certification by the Secretary of State of Delaware that the
Certificate of Merger has been filed in such office. (The date
and time of such issuance and filing or such other time and date
as may be specified in the Certificate of Merger shall be the
"Effective Time").
SECTION 1.3 Certain Effects of the Merger. The Merger
shall have the effects set forth in Section 259 of the GCL.
SECTION 1.4 Certificate of Incorporation and By-Laws. The
Certificate of Incorporation and the By-Laws of Intergraph
Subsidiary, in each case as in effect at the Effective Time, shall
be the Certificate of Incorporation and By-Laws of the Surviving
Corporation, except that the name of the Surviving Corporation
shall be as specified in Section 1.1.
SECTION 1.5 Directors and Officers. The directors and
officers of Intergraph Subsidiary at the Effective Time shall be
the directors and officers of the Surviving Corporation and shall
hold office from the Effective Time until their respective
successors are duly elected or appointed and qualified in the
manner provided in the Certificate of Incorporation and By-Laws
of the Surviving Corporation, or as otherwise provided by law.
SECTION 1.6 Tax-Free Reorganization. For federal income
tax purposes, the parties intend that the Merger be treated as a
tax-free reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code").
Except for cash paid in lieu of fractional shares, no
consideration that could constitute "other property" within the
meaning of Section 356(b) of the Code is being transferred by
Intergraph for the InterCAP Stock (as defined in Section 2.1) in
the Merger. The parties shall not take a position on any tax
return inconsistent with this Section 1.6.
SECTION 1.7 Stockholders' Communications. InterCAP,
acting through its Board of Directors, shall, in accordance with
applicable law:
(a) duly call, give notice of, convene and hold a
meeting (the "Stockholders' Meeting") of its stockholders as soon
as practicable after the Form S-4 (as defined below) has been
declared effective, for the purpose of approving and adopting
this Agreement and the transactions contemplated thereby;
(b) include in the Proxy Statement (as defined in
paragraph (c) below) the unanimous recommendation of its Board of
Directors that the stockholders of InterCAP vote in favor of the
approval and adoption of this Agreement and the transactions
contemplated hereby;
(c) (i) obtain and furnish the information required to
be included by it in the Proxy Statement and cause the Proxy
Statement to be mailed to its stockholders at the earliest
practicable time following the effectiveness of the Form S-4, and
(ii) use its best efforts to obtain the approval and adoption of
the Merger by all of InterCAP's stockholders. The letter to
stockholders, notice of Stockholder's Meeting, proxy statement
(together with the prospectus portion of the registration
statement on Form S-4 (the "Form S-4") registering the Intergraph
Common Stock to be issued in the Merger under the Securities Act
of 1933, as amended (the "Securities Act")), and form of proxy to
be distributed to stockholders in connection with the Merger
shall be in form and substance reasonably satisfactory to
Intergraph, and are collectively referred to herein as the "Proxy
Statement";
(d) permit the exercise of the Warrants (as defined in
Section 3.3), and the conversion of certain shares of InterCAP
Preferred Stock (as hereafter defined) into InterCAP Common Stock
(as hereafter defined), pursuant to the terms of that certain
Preferred Stock Agreement dated of even date herewith between
InterCAP and the holders of at least 95% of InterCAP Preferred
Stock, a copy of which is attached as Exhibit B to this Agreement
(the "Preferred Stock Agreement"); and
(e) in connection with the Stockholders' Meeting,
unanimously recommend that the stockholders approve an amendment
to InterCAP's certificate of incorporation in the form
contemplated by the Preferred Stock Agreement (the "Charter
Amendment").
SECTION 1.8 Preparation of S-4; Other Filings. As
promptly as practicable after the date of this Agreement,
Intergraph shall prepare and file with the Securities and
Exchange Commission ("SEC") the Form S-4. Each of Intergraph and
InterCAP shall use its best efforts to respond to any comments of
the SEC, to have the Form S-4 declared effective under the
Securities Act as promptly as practicable after such filing, and
to cause the Proxy Statement to be mailed to the holders of
InterCAP Stock (as defined in Section 2.1) at the earliest
practicable time, but in any event within two business days after
the Form S-4 has been declared effective by the SEC. As promptly
as practicable after the date of this Agreement, Intergraph and
InterCAP shall properly prepare and file any other filings
required under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), the Securities Act or any other federal or
state laws, and Intergraph shall properly prepare and file any
filings required under state securities or "blue sky" laws, in
each case relating to the Merger and the transactions
contemplated by this Agreement (collectively, the "Other
Filings"). InterCAP shall promptly furnish Intergraph with all
information concerning InterCAP as may be reasonably required in
connection with any action contemplated by this Section 1.8.
Each party will notify the other party promptly of the receipt of
any comments from the SEC or its staff and of any request by the
SEC or its staff or any other government officials for amendments
or supplements to the Form S-4 or any Other Filing or for
additional information. Each party will supply the other party
with copies of all correspondence between such party or any of
its representatives, on the one hand, and the SEC, or its staff
or any other government officials, on the other hand, with
respect to the Form S-4, the Merger or any Other Filing. Each
party shall promptly provide the other party (or its counsel)
with copies of all filings made by such party with any
governmental authority in connection with this Agreement and the
transactions contemplated hereby and thereby. The Form S-4 and
the Other Filings shall comply in all material respects with all
applicable requirements of law. Whenever any event occurs which
should be set forth in an amendment or supplement to the Form S-4
or any Other Filing, Intergraph or InterCAP, as the case may be,
shall promptly inform the other party of such occurrence and
cooperate in filing with the SEC or its staff or any other
government officials, and/or mailing to stockholders of InterCAP,
such amendment or supplement.
SECTION 1.9 Closing. Upon the terms and subject to the
conditions hereof, as soon as practicable after the vote of the
stockholders of InterCAP in favor of the approval and adoption of
this Agreement has been obtained, and the satisfaction or waiver,
if permissible, of the conditions set forth in Article VII
hereof, InterCAP, Intergraph Subsidiary and Intergraph shall
execute and deliver the Certificate of Merger, as described in
Section 1.2, and the parties hereto shall take all such other and
further actions as may be required by law to make the Merger
effective. Prior to the filing of the Certificate of Merger
pursuant to Section 1.2, a closing (the "Closing") will be held
at such place as the parties may agree for the purpose of
confirming all of the foregoing. The date upon which the Closing
takes place is sometimes referred to hereinafter as the "Closing
Date".
ARTICLE II.
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.1 Total Consideration; Effect on Capital Stock.
In consideration of the Merger, Intergraph will (i) issue to the
holders of the common and preferred shares of InterCAP stock
(collectively, the "InterCAP Stock"), shares of Intergraph common
stock, par value $.10 per share ("Intergraph Common Stock"), (ii)
pay cash in respect of fractional shares pursuant to Section
2.2(c) hereof, and (iii) assume certain outstanding InterCAP
stock options as specified in Section 2.3 (collectively, the
"Merger Consideration"). The aggregate number of shares of
Intergraph Common Stock to be issued to holders of InterCAP Stock
in the Merger, exclusive of shares issuable upon the exercise of
Assumed Options under Section 2.3 (the "Total Intergraph Share
Amount") shall be determined by (i) subtracting the Aggregate
Assumed Option Spread (as defined in Section 2.3(e)) from
$7,500,000 (with the result of such subtraction being referred to
as the "Closing Merger Consideration"), and (ii) dividing the
Closing Merger Consideration by the average closing sale price of
Intergraph Common Stock as reported by the NASDAQ National Market
System for the ten (10) days of trading immediately preceding the
fifth business day prior to the Closing Date (the "Share
Determination Market Price"). The Total Intergraph Share Amount
shall be available for the conversion and exchange of all
outstanding shares of capital stock of InterCAP and for all
options (other than the Assumed Options to be assumed under
Section 2.3), warrants, rights, calls, commitments or agreements
of any character to which InterCAP is a party or by which it is
bound calling for the issuance of shares of capital stock of
InterCAP, or any securities convertible into or exercisable or
exchangeable for, or representing the right to purchase or
otherwise receive, directly or indirectly, any such capital
stock, or other arrangements to acquire, at any time or under any
circumstance, capital stock of InterCAP or any such other
securities (the "Fully Diluted InterCAP Shares"). For purposes
of the calculation of the exchange ratio for Intergraph Common
Stock under Section 2.1(c) hereof, it is assumed that the number
of Fully Diluted InterCAP Shares is as set forth in InterCAP's
representations and warranties in Section 3.3 hereof. At the
Effective Time, subject and pursuant to the terms and conditions
of this Agreement, by virtue of the Merger and without any action
on the part of the Constituent Corporations or the holders of the
capital stock of the Constituent Corporations:
(a) Capital Stock of Intergraph Subsidiary. Each
issued and outstanding share of the common stock, par value $.01
per share, of Intergraph Subsidiary shall be converted into one
share of common stock, par value $.01 per share, of the Surviving
Corporation.
(b) Cancellation of Certain Shares of InterCAP Stock.
Each share of InterCAP Stock that is (i) owned by InterCAP as
treasury stock, (ii) authorized but unissued, or (iii) owned by
any subsidiary of InterCAP, shall be cancelled and no Intergraph
Common Stock or other consideration shall be delivered in
exchange therefor. As used herein, a "subsidiary" of any
corporation means another corporation an amount of whose voting
securities sufficient to elect at least a majority of its Board
of Directors is owned directly or indirectly by such corporation.
(c) Exchange Ratios. Subject to Sections 2.1 and 2.2
of this Agreement, shares of InterCAP Stock shall be exchanged
and converted into shares of Intergraph Common Stock on the
following basis:
(i) each share of InterCAP Series A
Convertible Preferred Stock, $.01 par value per share
("InterCAP Series A Preferred Stock"), issued and
outstanding at the Effective Time (other than shares
cancelled pursuant to Section 2.1(b) and shares held by
Dissenting Stockholders, if any), including all accrued and
unpaid dividends thereon, shall be exchanged and converted
into the right to receive a fraction of a share of
Intergraph Common Stock having a value (determined prior to
the Closing Date using the Share Determination Market Price)
of $1.475000000 (the "Series A Exchange Ratio");
(ii) each share of (a) InterCAP common stock, $.01
par value per share ("InterCAP Common Stock"), (b) InterCAP
Series B Convertible Preferred Stock, $.01 par value per
share ("InterCAP Series B Preferred Stock"), if any, and (c)
InterCAP Series C Convertible Preferred Stock, $.01 par
value per share ("InterCAP Series C Preferred Stock"), if
any, issued and outstanding at the Effective Time (other
than shares cancelled pursuant to Section 2.1(b) and shares
held by Dissenting Stockholders, if any), including all
accrued and unpaid dividends thereon, shall be exchanged and
converted into the right to receive a fraction of a share of
Intergraph Common Stock having a value (determined prior to
the Closing Date using the Share Determination Market Price)
of $.90975693 (the "Non-Series A Exchange Ratio"); and
(iii) For purposes of this Agreement,
(A) the Series A Exchange Ratio and the
Non-Series A Exchange Ratio are
referred to as the "Exchange Ratios";
(B) all calculations under this Section
2.1(c) shall be rounded to the nearest
one hundred millionth (.00000001).
Each share of Intergraph Common Stock to be issued upon
conversion of shares of InterCAP Stock in accordance with this
Section 2.1(c) shall include the corresponding percentage of a
right (the "Intergraph Rights") to purchase "Common Shares"
pursuant to and as defined in the Rights Agreement dated August
25, 1993 by and between Intergraph and Harris Trust and Savings
Bank, an Illinois banking corporation (the "Intergraph Rights
Agreement"). Prior to the Distribution Date (as defined in the
Intergraph Rights Agreement), all references in this Agreement to
the Intergraph Common Stock to be received in the Merger shall be
deemed to include the Intergraph Rights. For convenience of
reference, the shares of Intergraph Common Stock to be issued
upon the exchange and conversion of InterCAP Stock in accordance
with this Section 2.1(c) are sometimes hereinafter collectively
referred to as the "Intergraph Shares".
(d) Shares of Dissenting Stockholders. Each issued
and outstanding share of InterCAP Stock held by any InterCAP
stockholder who has not voted for the Merger and who shall have
delivered a written demand for payment of the fair value of such
InterCAP Stock within the time and in the manner provided in
Section 262 of the GCL ("Dissenting Stockholders"), if any, shall
not be exchanged and converted as described in Section 2.1(c) but
shall become the right to receive such consideration as may be
determined to be due to such Dissenting Stockholder pursuant to
Section 262 of the GCL (the "Delaware Statute"); provided,
however, that each share of InterCAP Stock issued and outstanding
at the Effective Time and held by a Dissenting Stockholder who or
which shall, after the Effective Time, withdraw his or its demand
for appraisal or lose or fail to perfect his or its right of
appraisal as provided in the Delaware Statute shall be deemed, as
of the Effective Time, to be exchanged and converted into
Intergraph Common Stock as provided in Section 2.1(c), without
interest. After the Effective Time, as provided in the Delaware
Statute, no Dissenting Stockholder will be entitled to vote the
shares of InterCAP Stock which are the subject of such Dissenting
Stockholder's demand for appraisal for any purpose or be entitled
to the payment of dividends or other distributions on such
shares.
(e) Adjustments for Capital Changes. If, prior to the
Effective Time, Intergraph recapitalizes through a subdivision of
its outstanding shares into a greater number of shares, or a
combination of its outstanding shares into a lesser number of
shares, or reorganizes, reclassifies or otherwise changes its
outstanding shares into the same or a different number of shares
or other classes, or declares a dividend on its outstanding
shares payable in shares of its capital stock or securities
convertible into shares of its capital stock (a "Stock Adjustment
Event"), then the applicable Exchange Ratio for InterCAP Stock
will be adjusted appropriately so as to maintain the relative
proportionate interests of the holders of shares of InterCAP
Stock and the holders of shares of Intergraph Common Stock.
SECTION 2.2 Escrow Deposit; Exchange of Certificates.
(a) Escrow Deposit. Before the Effective Time of the
Merger, Intergraph and InterCAP shall appoint a mutually
acceptable escrow agent (the "Escrow Agent") to serve as such
under the Escrow Agreement (as defined in Section 2.2(b)). At
the Effective Time, Intergraph shall cause to be deposited with
the Escrow Agent a certificate or certificates on behalf of each
of the stockholders of InterCAP (the "Stockholders"), other than
Dissenting Stockholders, and such Stockholders, by their approval
of the Merger, shall be deemed to have authorized and directed
Intergraph to make such deposit on their behalf, representing
fifteen percent (15%) of the Intergraph Shares to be issued to
each such Stockholder rounded up to the nearest whole share of
Intergraph Common Stock (collectively, the "Escrow Shares").
(b) Procedure for Exchange. Before the Effective Time
of the Merger, Intergraph shall appoint its transfer agent or
such other entity as it may determine to act as exchange agent
(the "Exchange Agent") in the Merger. As soon as practicable
following the Closing, Intergraph shall make available to the
Exchange Agent the Intergraph Shares (exclusive of the Escrow
Shares). As soon as practicable after the Closing, the Exchange
Agent shall mail to each holder of record of a certificate (an
"Old Certificate") representing InterCAP Stock at the Effective
Time, (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Old
Certificates shall pass, only upon delivery of the Old
Certificates to the Exchange Agent and shall be in form
reasonably satisfactory to Intergraph), and (ii) instructions for
use in effecting the surrender of the Old Certificates in
exchange for certificates evidencing the Intergraph Shares. Upon
surrender to the Exchange Agent of an Old Certificate for
cancellation, accompanied by a duly executed letter of
transmittal, the holder of such Old Certificate shall be entitled
to receive in exchange therefor, one or more certificates
representing the number of Intergraph Shares (other than Escrow
Shares) to which such holder is entitled under Section 2.1 (the
"New Certificates"). The Old Certificates so surrendered shall
be forthwith cancelled. In the event any Old Certificates are
alleged to be lost, stolen or destroyed, the record owner of such
Old Certificates shall deliver to the Exchange Agent (i) an
affidavit confirming that such Old Certificates are lost, stolen
or destroyed, (ii) a bond or other indemnity agreement in form
satisfactory to Intergraph sufficient to indemnify Intergraph in
respect of any subsequent claim relating to such lost, stolen or
destroyed certificates, and (iii) a duly executed letter of
transmittal. Upon receipt of the items specified in clauses (i)
- - (iii) above, the Exchange Agent shall issue and deliver New
Certificates in respect thereof as if the lost, stolen or
destroyed Old Certificates had been surrendered in compliance
with this Agreement. In the event of a transfer of ownership of
shares of InterCAP Stock which is not registered on the transfer
records of InterCAP, a New Certificate representing the proper
number of shares of Intergraph Common Stock may be issued to a
transferee if the Old Certificate representing such InterCAP
Stock is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and by
evidence that any applicable stock or other transfer taxes have
been paid. Until surrendered as contemplated by this Section
2.2, each Old Certificate shall be deemed, on and after the
Effective Time, to represent only the right to receive upon such
surrender, New Certificates representing the applicable
Intergraph Shares (other than the Escrow Shares) as contemplated
by Section 2.1(c), in all cases without interest. All Escrow
Shares shall be held by, and distributed in accordance with, the
terms and provisions of an Escrow Agreement among InterCAP,
Intergraph, the Stockholders' Committee (as hereafter defined)
and the Escrow Agent in the form of Exhibit C (the "Escrow
Agreement").
(c) Fractional Shares. No fractional shares of
Intergraph Common Stock will be issued in connection with the
Merger, but in lieu thereof, each holder of InterCAP Stock who
would otherwise be entitled to receive a fraction of a share of
Intergraph Common Stock (after giving effect to the rounding
requirements of the last sentence of Section 2.2(a)) will receive
from Intergraph, at such time as such Stockholder shall receive a
New Certificate representing whole shares of Intergraph Common
Stock as contemplated by Section 2.2(b), an amount of cash equal
to the product of (i) the Share Determination Market Price,
multiplied by (ii) the fraction of a share of Intergraph Common
Stock otherwise issuable to such holder. The fractional
interests of each Stockholder will be aggregated so that no
Stockholder will receive cash in an amount equal or greater than
the value of the Share Determination Market Price of one whole
share of Intergraph Common Stock.
(d) No Further Ownership Rights in InterCAP Stock.
All shares of Intergraph Common Stock issued upon the surrender
for exchange of shares of InterCAP Stock in accordance with the
terms of this Article II shall be deemed to have been issued in
full satisfaction of all rights pertaining to such shares of
InterCAP Stock. If, after the Effective Time, any Old
Certificate is presented to the Surviving Corporation for any
reason, such Old Certificate shall be cancelled and exchanged as
provided in this Article II.
(e) No Liability. Neither Intergraph, Intergraph
Subsidiary nor InterCAP shall be liable to any holder of shares
of InterCAP Stock, or Intergraph Common Stock, as the case may
be, for shares (or dividends or distributions with respect
thereto) of Intergraph Common Stock to be issued in exchange for
InterCAP Stock pursuant to this Section 2.2, if, at the end of
the period from the Closing through the expiration of the time
specified by applicable Escheat Law (as hereafter defined), such
shares are delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law ("Escheat
Law").
SECTION 2.3 Conversion of InterCAP Options. At the
Effective Time, each of InterCAP's then outstanding options (an
"Option") shall be converted and assumed as follows:
(a) Each outstanding incentive stock option under
InterCAP's 1989 Stock Option Plan (the "InterCAP Option Plan")
which is listed on Schedule 3.1 (collectively, the "ISO's"), and
each outstanding nonqualified stock option awarded by InterCAP
under InterCAP's 1994 Non-Qualified Stock Option Program (the
"InterCAP Option Program") which is listed on Schedule 3.1
(collectively, the "NQSO's"), shall, by virtue of the Merger and
without any further action on the part of the holder thereof, be
assumed by Intergraph and automatically converted into an option
to purchase a number of shares of Intergraph Common Stock
determined by multiplying the number of shares of InterCAP Common
Stock covered by the Option immediately prior to the Effective
Time by the Option Conversion Fraction, as defined below and
rounded up to the nearest whole number of shares (the "Adjusted
Intergraph Share Amount"). The exercise price per share of
Intergraph Common Stock shall equal the exercise price in effect
under such Option immediately prior to the Effective Time divided
by the Option Conversion Fraction, and rounded up to the nearest
whole cent (the "Adjusted Intergraph Exercise Price").
(b) The options to purchase Intergraph Common Stock
into which the Options are converted pursuant to Section 2.3(a)
shall contain the same status as "incentive stock options" under
Section 422 of the Code (but only if such Options were
theretofore incentive stock options under Section 422 of the
Code), and, except as disclosed on Schedule 2.3, shall otherwise
be on substantially the same terms and conditions as the Option
being assumed (including without limitation, a requirement that
the vesting of each ISO shall be accelerated by virtue of the
Merger and the vesting of each NQSO shall be as set forth in the
form of Non-Qualified Stock Option Agreement attached as Exhibit
E hereto (the "NQSO Agreement")). Following conversion and
assumption by Intergraph, the Options are referred to herein as
"Assumed Options."
(c) As used herein, the term "Option Conversion
Fraction" means a fraction, the numerator of which is $.90975693
and the denominator of which is the Share Determination Market
Price.
(d) Intergraph shall take all corporate action
necessary to reserve for, or otherwise permit the issuance of, a
sufficient number of shares of Intergraph Common Stock for
delivery upon exercise of the Assumed Options in accordance with
this Section 2.3. Prior to the Effective Time, Intergraph shall
file one or more registration statements on Form S-8 (the "Form S-
8") with respect to the shares of Intergraph Common Stock subject
to such Assumed Options, and shall use its best efforts to
maintain the effectiveness of such registration statement as of
the Effective Time and for so long as such Assumed Options remain
outstanding.
(e) For purposes of this Agreement, the term
"Aggregate Assumed Option Spread" means an amount equal to
$1,021,573.65.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF INTERCAP
InterCAP represents, warrants and covenants to Intergraph
and to Intergraph Subsidiary as follows:
SECTION 3.1 Organization and Qualification. InterCAP is
a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and has all
requisite power and authority to own, lease, and operate its
properties and assets, and to carry on its business as is now
being conducted. InterCAP is duly qualified as a foreign
corporation to do business, and is in good standing, in each of
the states and other jurisdictions where its properties and
assets or the nature or extent of its business require such
qualification and where the failure to be so qualified would have
a Material Adverse Effect (as defined in Section 10.9(a)).
InterCAP has delivered to Intergraph complete and correct copies
of its certificate of incorporation (including all amendments
thereto) and bylaws (including all amendments thereto). Attached
hereto as Schedule 3.1 is an accurate and complete list of the
holders of InterCAP Common Stock, InterCAP Preferred Stock,
Options and Warrants (as defined in Section 3.3(a)), and any
person who possesses any equity interest in, or right to acquire
equity interest in, InterCAP, and such list accurately states the
number of shares of InterCAP Common Stock, Preferred Stock,
Options and Warrants held by each holder thereof immediately
prior to the execution of this Agreement. InterCAP agrees to
provide Intergraph with an amended Schedule 3.1 immediately prior
to Closing which is accurate as of such date. Schedule 3.1 also
contains an accurate and complete list of the directors and
officers of InterCAP.
SECTION 3.2 Subsidiaries and Interests in Other Entities;
Interests of Certain Persons. Except as described in Schedule
3.2, InterCAP does not have any subsidiaries or affiliates, nor
does it own any interest in any general or limited partnerships,
joint ventures, consortia, corporations, trusts, or other
entities. Each of the InterCAP subsidiaries listed on Schedule
3.2 is validly existing under the law of its place of
organization. Except as disclosed in Schedule 3.2, and except
for non-controlling interests in entities whose securities are
publicly held, none of InterCAP's officers, directors, employees,
consultants or stockholders (i) have or to InterCAP's knowledge
claim, any direct or indirect interest in any property, real or
personal, tangible or intangible, including inventions, patents,
trade secrets, know-how, copyrights, trademarks or trade names
used in or pertaining to InterCAP's business, except for the
normal rights of a stockholder, or (ii) to the best knowledge of
InterCAP, have any direct or indirect financial or other interest
in any corporation, partnership, joint venture or other entity
that is a party to any agreement with InterCAP or otherwise does
any business with InterCAP. Schedule 3.2 describes the ownership
structure of each of the subsidiaries listed on such Schedule.
Except as disclosed in Schedule 3.2, InterCAP (x) has not, since
July 1, 1992, transacted any business with, and (y) has no
current or executory commitments or obligations to, or any
ongoing transactions with, any affiliated or related companies,
partnerships, ventures or other entities, and no such entity has
a claim of right or ownership in any of InterCAP's properties or
assets, including, but not limited to, its computer software
programs and other Intellectual Property Rights (as defined in
Section 3.11(a)).
SECTION 3.3 Capitalization.
(a) As of the date of this Agreement, the authorized
capital stock of InterCAP consists of 20,000,000 shares of
InterCAP Common Stock, $.01 par value, and 10,000,000 shares of
InterCAP Preferred Stock, par value $.01 per share ("InterCAP
Preferred Stock"), of which 2,911,478 shares of InterCAP Common
Stock, 927,326 shares of InterCAP Preferred Stock designated as
InterCAP Series A Convertible Preferred Stock, 1,716,387 shares
of InterCAP Preferred Stock designated as InterCAP Series B
Convertible Preferred Stock, and 953,442 shares of InterCAP
Preferred Stock designated as InterCAP Series C Convertible
Preferred Stock are issued and outstanding. InterCAP previously
reserved up to a maximum of 2,500,000 shares of InterCAP Common
Stock for issuance upon the exercise of Options pursuant to the
InterCAP Option Plan, of which (i) 1,173,376 have been exercised
or have terminated or expired unexercised, (ii) 935,062 have been
granted and remain outstanding but unexercised as ISO's at
exercise prices ranging from $.10 to $.42 per share of InterCAP
Common Stock with an aggregate exercise price of $137,331.20, and
(iii) 391,562 have been irrevocably retired from such reservation
and are no longer available for future grants or awards.
InterCAP has reserved up to a maximum of 391,562 shares of
InterCAP Common Stock for issuance upon exercise of Options
pursuant to the InterCAP Option Program, all of which Options
have been or will be granted on terms set forth in the NQSO
Agreement, as disclosed on Schedule 2.3, to such persons, with
respect to such InterCAP Stock, and at such exercise prices as
are listed on Schedule 3.1 (and an aggregate exercise price of
$48,000.53). InterCAP has reserved 50,000 shares of InterCAP
Common Stock for issuance upon the exercise of warrants expiring
in December of 1996 and having an exercise price of $.25 per
share of InterCAP Common Stock (the "Warrants"). Pursuant to the
Preferred Stock Agreement, such Warrants will be exercised prior
to the Effective Time, resulting in the issuance of an additional
36,260 shares of InterCAP Common Stock. Schedule 3.1 sets forth,
with respect to each Option, the number of shares of InterCAP
Common Stock covered by such Option, the exercise price, the term
and the holder of such Option. Except as disclosed on Schedule
2.3, each ISO has been awarded on the terms set forth in the form
of "InterCAP Graphics Systems, Inc. 1989 Employee Stock Option
Agreement" attached hereto as Exhibit D, and each NQSO has been
awarded on the terms set forth in the NQSO Agreement. The ISO's
have been awarded under, and in substantial compliance with the
terms of, the InterCAP Option Plan, and the InterCAP Option Plan
has been validly approved by the requisite vote of the InterCAP
Stockholders. As of the Effective Time, all issued and
outstanding shares of InterCAP Stock reflected on the amended
Schedule 3.1 required to be delivered under Section 3.1 will be
duly and validly issued, fully paid and nonassessable. Schedule
3.3 hereto provides a summary of the capital structure of
InterCAP as of the date of this Agreement, and except for
transactions expressly contemplated by the Preferred Stock
Agreement, such summary will accurately describe the capital
structure of InterCAP at the Effective Time. Except as disclosed
on Schedules 3.1 or 3.3, there are no outstanding subscriptions,
options, rights, warrants, convertible securities, or other
agreements, commitments, or obligations of InterCAP to issue any
shares of its capital stock of any class, except as contemplated
by this Agreement, or to sell, hypothecate, dispose of, or
otherwise transfer shares or any other equity interest in
InterCAP.
(b) The InterCAP Series A Preferred Stock has a
liquidation preference of $1.4750 per share, and is convertible
into InterCAP Common Stock at a ratio of 1.0 to 1.3329, and
neither such liquidation preference nor conversion ratio has been
adjusted or modified since June 30, 1994, except to the extent
the effect of such adjustment or modification will be waived or
postponed upon execution of the Preferred Stock Agreement. As of
June 30, 1994, undeclared, accrued but unpaid dividends on the
InterCAP Series A Preferred Stock totaled $.82 per share in the
case of 339,068 shares and $.79 per share in the case of the
remaining 576,272 shares of InterCAP Series A Preferred Stock
(rounded to the nearest cent). Since June 30, 1994, undeclared,
unpaid dividends on the InterCAP Series A Preferred Stock have
accrued and continue to accrue on a daily basis at an annualized
rate of 10% ($.1475 per share) (collectively, the "Accrued Series
A Dividends"). By virtue of the Preferred Stock Agreement and
the Charter Amendment, the liquidation preference for the
InterCAP Series A Preferred Stock will be fixed at $1.4750 per
share during the period specified in the Preferred Stock
Agreement and as of the Effective Time, and such liquidation
preference will not have been increased to reflect any portion of
the Accrued Series A Dividends. The InterCAP Series B Preferred
Stock has a liquidation preference of $.5978 per share. After
October 1, 1994, such liquidation preference will be $.5978 plus
one-half of all accrued and unpaid dividends (whether or not
declared) from January 1, 1993 (the "Dividend Adjustment
Amount"), which Dividend Adjustment Amount will be approximately
$.04 per share as of October 1, 1994, and will accrue at a rate
of $.025 per year thereafter. The InterCAP Series B Preferred
Stock is convertible into InterCAP Common Stock at a ratio of 1.0
to 1.0. Neither the liquidation preference of the InterCAP
Series B Preferred Stock nor its conversion ratio has been
adjusted or modified since June 30, 1994, other than increases in
such liquidation preference on a daily basis at an annualized
rate of 5% ($.025 per share) in respect to additional undeclared,
accrued but unpaid dividends. The InterCAP Series C Preferred
Stock has a liquidation preference of $.65552 per share plus
accrued and unpaid dividends, whether or not declared (which, as
of June 30, 1994, were $.17 per share, rounded to the nearest
cent), and is convertible into InterCAP Common Stock at a ratio
of 1.0 to 1.0, and neither such liquidation preference nor such
conversion ratio has been adjusted or modified since June 30,
1994, other than increases in such liquidation preference on a
daily basis at an annualized rate of 10% ($.065552 per share) in
respect of additional undeclared, accrued but unpaid dividends.
(c) All options to acquire any equity interest in
InterCAP, other than the ISO's and NQSO's, and all warrants to
purchase InterCAP Common Stock or InterCAP Preferred Stock,
including all Warrants, have been exercised or have expired, or
will be exercised or will expire prior to Closing.
(d) Except as described on Schedule 3.3, InterCAP is
not obligated (either by virtue of its certificate of
incorporation or otherwise) under or with respect to any put,
call, redemption right, repurchase obligation, right of first
refusal, buy-sell arrangement or other contractual commitment of
InterCAP to repurchase or redeem any InterCAP Stock (collectively
a "Repurchase Obligation"). As of the date of this Agreement, no
Repurchase Obligation is currently in effect that requires
InterCAP to redeem or repurchase any InterCAP Stock, and as of
the Effective Time, no Repurchase Obligation will obligate
InterCAP to redeem or repurchase any InterCAP Stock.
SECTION 3.4 Authority. This Agreement has been duly
authorized by the Board of Directors of InterCAP, and has been
duly executed and delivered by and on behalf of InterCAP, and
constitutes a legal, valid and binding obligation of InterCAP,
enforceable against InterCAP in accordance with its terms,
subject to laws of general application relating to bankruptcy,
insolvency, and the relief of debtors and the rules governing
specific performance, injunctive relief, and other equitable
remedies.
Section 3.5 No Conflict; Consents; No Defaults.
(a) Neither the execution and delivery of this
Agreement or any other agreements referred to herein, nor
consummation of the transactions contemplated hereby (i) will,
except to the extent validly and effectively waived or modified
pursuant to the Preferred Stock Agreement and the Charter
Amendment, conflict with or violate the certificate of
incorporation (including any certificate of designations and
preferences relating to any series of InterCAP Preferred Stock)
or the bylaws of InterCAP or will violate any agreement,
arrangement or understanding between or among any stockholders of
InterCAP; (ii) will, except as set forth on Schedule 3.5, with or
without the giving of notice or the lapse of time, or both,
conflict with or result in a breach of any terms or provisions
of, or constitute a default or give rise to a right of
acceleration under, or result in the creation or imposition of
any lien, charge, or encumbrance upon any property or assets of
InterCAP under any indenture, mortgage, agreement, contract or
other instrument to which InterCAP is a party or by which any of
its property is bound, in each case, where such conflict, breach,
default, right of acceleration or imposition would have a
Material Adverse Effect; or (iii) will violate any existing
applicable law, rule, regulation, judgment, or order or decree of
any governmental instrumentality or court having jurisdiction
over InterCAP or its subsidiaries or any of their respective
properties, where such violation would have a Material Adverse
Effect.
(b) All consents or approvals of any third parties or
federal, state or local regulatory or governmental agencies
necessary for InterCAP to enter into this Agreement and the
agreements referred to herein and to perform each and every one
of its obligations hereunder have been obtained or will be
obtained prior to Closing.
(c) InterCAP is not in default of any debt agreement
or debt instrument to which InterCAP is a party.
SECTION 3.6 Financial Statements and Reports; Books and
Records. InterCAP has furnished (or, in the case of monthly
interim statements, will furnish within twenty days of the end of
the preceding month) to Intergraph the following annual and
interim monthly financial statements described in paragraphs (a)
through (d) below (collectively, the "Financial Statements"):
(a) InterCAP's statement of Projected Profits and
Losses and statement of Projected Cash Flow for the fiscal year
ending June 30, 1995;
(b) InterCAP's unaudited balance sheet and income
statement as of August 31, 1994;
(c) InterCAP's audited financial statements as of the
year ended June 30, 1994 (the "June 30 Audit"), as well as
InterCAP's audited financial statements for the years ended June
30, 1988, 1989, 1990, 1991, 1992, and 1993; and
(d) InterCAP's monthly interim financial statements
and revised statements of projected profits, losses and cash flow
covering periods beginning September 1, 1994.
The Financial Statements (i) which disclose the projected
financial condition and results of operations of InterCAP, were
or will be based on reasonable assumptions when issued; and (ii)
which disclose the past financial condition and results of
operations of InterCAP, are true, complete and correct in all
material respects, fairly present the financial condition and
results of operations of InterCAP as of the periods indicated,
and were prepared in accordance with generally accepted
accounting principles ("GAAP") and on a basis consistent with
prior periods, except for the absence of footnotes in monthly
interim financial statements.
SECTION 3.7 Absence of Changes. Since June 30, 1994,
InterCAP has not
(a) experienced a Material Adverse Effect;
(b) except as contemplated by the Preferred Stock
Agreement, amended its Certificate of Incorporation or its By-
Laws, or changed the character of its business in any material
manner;
(c) incurred, assumed or become subject to, whether
directly or by way of any guarantee or otherwise, any obligations
or liabilities (absolute, accrued, contingent or otherwise)
except in the ordinary course of business, in a prudent manner
and consistent with past practices (which obligations and
liabilities have been disclosed in writing to Intergraph);
(d) permitted or allowed any of its property or assets
to be subject to any mortgage, pledge, lien, security interest,
encumbrance, restriction or charge of any kind (other than
statutory liens not yet delinquent or liens described on Schedule
3.7);
(e) except as disclosed on Schedule 3.7, cancelled any
debts, waived any claims or rights of material value, or sold,
transferred, or otherwise disposed of any of its properties or
assets otherwise than in the ordinary course of its business
consistent with past practices;
(f) disposed of or permitted to lapse any rights to
the use of any trademark, service mark, trade name or copyright,
or Intellectual Property Rights (as defined in Section 3.11(a)),
or disposed of or disclosed to any person other than its
employees or agents, any trade secret or Intellectual Property
Rights not theretofore a matter of public knowledge, other than
any disclosure made to customers or actual or potential joint
venturers that have executed reasonable non-disclosure agreements
in favor of InterCAP;
(g) except as set forth on Schedule 3.7, granted any
increase in compensation or paid or agreed to pay or accrue any
bonus, percentage compensation, service award, severance payment
or like benefit to or for the credit of any director, officer,
employee or agent, or entered into any employment or consulting
contract or other agreement for personal services with any
director, officer or employee, or adopted, amended or terminated
any pension, employee welfare, retirement, stock purchase, stock
option, stock appreciation rights, termination, severance,
protection, golden parachute, savings or profit-sharing plan
(including trust agreements and insurance contracts embodying
such plans), or any deferred compensation or collective
bargaining agreement, any group insurance contract or any other
incentive, welfare or employee benefit plan or agreement
maintained by InterCAP or the directors, employees or former
employees of InterCAP;
(h) directly or indirectly declared or paid any
dividend or made any distribution in respect of its capital stock
or redeemed, purchased or otherwise acquired, or arranged for the
redemption, purchase or acquisition of, any shares of its capital
stock or other of its securities;
(i) acquired any capital stock or other equity
securities or acquired any equity or ownership interest in any
person;
(j) except as disclosed on Schedule 3.7, issued,
reserved for issuance, granted, sold or authorized the issuance
of any shares of its capital stock or subscriptions, options,
warrants, calls rights or commitments of any kind relating to the
issuance or sale of or conversion into shares of its capital
stock;
(k) made any, or acquiesced with, any change in any
method of accounting or accounting practice;
(l) except for the transactions contemplated by this
Agreement or as otherwise permitted hereunder, entered into any
transaction, or entered into, modified or amended any contract or
commitment, other than in the ordinary course of business, in a
prudent manner and consistent with past practices; and
(m) except for the transactions contemplated by this
Agreement or as otherwise permitted hereunder, agreed, whether in
writing or otherwise, to take any action the performance of which
would change the representations contained in this Section 3.7 in
the future so that any such representation reasonably could be
expected to be untrue as of the Closing.
SECTION 3.8 Absence of Undisclosed Liabilities. Except
for (i) expenses in connection with the transactions contemplated
by this Agreement; (ii) payments required to be made by InterCAP
in connection with the Merger under the Employment Agreement
dated September 10, 1990 between InterCAP and A.G.W. Biddle, III,
as amended through and including the amendment thereto dated as
of September 26, 1994 (the "Biddle Agreement"), and (iii) as
reflected in InterCAP's June 30 Audit or expressly permitted by
Article V hereof, neither InterCAP nor any of its subsidiaries
have any unrecorded debt, liability, or obligation of any nature,
whether accrued, fixed, contingent, for indemnification or
otherwise, and whether due or to become due, which, either
individually or in the aggregate, exceeds $25,000.
SECTION 3.9 Taxes; Regulatory Filings. Except as
disclosed on Schedule 3.9, InterCAP and its subsidiaries have
timely and, in all material respects, accurately filed all
required federal, state, county, local, and foreign tax returns
and reports. The provisions for taxes reflected in the Financial
Statements are adequate for any and all federal, state, county,
local, and foreign taxes accruable through the periods ending on
the date of such Financial Statements and for all prior periods,
whether or not disputed. There are no present disputes as to
taxes of any nature due and payable by InterCAP, or which a
governmental body or agency asserts are due and payable by
InterCAP. There are no audits, collection proceedings, or
investigations, pending or, to the knowledge of InterCAP,
threatened by any governmental body with respect to taxes owed or
alleged to be owed by InterCAP. InterCAP has timely filed and
obtained all permits, licenses or regulatory filings required or
used in the conduct of InterCAP's business, unless the failure to
obtain or file such permits, licenses or filings would not have a
Material Adverse Effect. There are no deficiencies or active,
pending or, to the knowledge of InterCAP, threatened examinations
in connection with any of the foregoing.
SECTION 3.10 Environmental Matters.
(a) InterCAP has obtained all the necessary permits
under, has complied with and is currently in full compliance
with, all restrictions, limitations, conditions, standards,
prohibitions, and other requirements under, all applicable laws
relating to pollution, waste disposal, or protection of the
environment, including, without limitation, laws relating to
emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals, or industrial, toxic, or
hazardous substances or wastes, into the environment (including,
without limitation, ambient air, surface water, ground water,
land surface, or subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes
or other Environmental Laws (as defined in Section 10.9(b)).
InterCAP has not released or disposed of, or arranged or provided
for disposal of, any Polluting Substances in a manner that
violates or contravenes any applicable Environmental Law.
(b) InterCAP's leasehold interest in its office space
is, to the best of InterCAP's knowledge, free of any and all
Polluting Substances (as defined in Section 10.9(c)) or other
type of contamination that are matters of environmental concern,
and InterCAP owns no interest in real estate other than such
leasehold interest.
(c) There is no civil, criminal, or administrative
action, suit, demand, claim, hearing, notice of violation,
investigation, proceeding, notice or demand letter pending or, to
the knowledge of InterCAP, threatened against InterCAP relating
in any way to the Environmental Laws or any rule, regulation,
ordinance, interpretation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated,
or approved thereunder.
SECTION 3.11 Intellectual Property.
(a) Schedule 3.11 of this Agreement lists (i) by
product or program name, every computer software product and
program which is solely and exclusively owned by InterCAP, and
which is material to the business of InterCAP as presently
constituted, as well as all documentation owned by InterCAP which
is shipped to end users (collectively, "InterCAP Products"); (ii)
by product name or the identity of the sole or joint owner, every
computer software product, program, or other intellectual
property which is separately owned by, or jointly owned with, a
third party (collectively, "ISD's"), and which is material to the
business of InterCAP ("ISD Property"); (iii) each and every
registered and unregistered trademark and trademark application,
trade name, registered patent and patent application, and
copyright registration and copyright registration application,
which is solely or jointly owned or, in the case of applications,
filed by or on behalf of InterCAP (collectively, the
"Intellectual Property Rights").
(i) The InterCAP Products and the ISD
Property (collectively, the "Software Products") constitute all
of the computer software code currently necessary for InterCAP to
conduct the material aspects of its business as presently
constituted (including but not limited to supporting customers,
modifying and enhancing the InterCAP Products, developing
software to meet product commitments to existing customers and
customer prospects, and developing software to meet existing
product development plans) and, to the best of InterCAP's
knowledge and belief, meet InterCAP's current business plans;
provided, however, that to the extent the Software Products may
not be sufficient to meet InterCAP's current business or product
development plans, InterCAP does not have reason to believe that
InterCAP would be incapable of, or prohibited from, independently
creating or obtaining such computer software code as may be
necessary to carry out such plans.
(ii) InterCAP is the sole and exclusive owner of
all right, title, and interest in and to the InterCAP Products,
and owns licenses or other valid rights to use any intellectual
property upon which the InterCAP Products are based or from which
the InterCAP Products are derived, including but not limited to
the right to use, reproduce, modify, and distribute the InterCAP
Products, as well as the right to grant licenses to ISD's and
pursue infringement actions. To the best of InterCAP's knowledge
and belief, InterCAP's exercise and full enjoyment of the rights
and privileges appurtenant to such exclusive ownership will not
infringe upon the intellectual property rights of others, and no
person or other entity has made, or to the best of InterCAP's
knowledge, threatened to make any claim that the exercise and
full enjoyment of such rights will constitute an infringement of
the intellectual property rights of such other person or entity.
(iii) InterCAP has valid and sufficient rights
in the ISD Property to permit InterCAP to conduct its business
and, to the best of InterCAP's knowledge and belief, to meet
InterCAP's current business plans. To the best of InterCAP's
knowledge and belief, none of the ISD's currently intend, or
during the past year have threatened, to terminate or revoke such
rights.
(b) Except as disclosed in Schedule 3.11 to this
Agreement, the InterCAP Products are free and clear of liens,
mortgages, and other encumbrances, and InterCAP has not released,
disclosed, or created or suffered the creation of a contingent or
existing obligation to release, disclose, transfer, deliver, or
license (i) the source codes for any of the InterCAP Products, or
(ii) any trade secrets or other confidential or proprietary
information relating to the InterCAP Products (including, without
limitation, information relating to or describing source code
architecture, subroutine calls, algorithms (if any), or
programmers' notes or similar documentation), unless such
release, disclosure, transfer, delivery, or license was
accompanied by a non-disclosure agreement prohibiting the
recipient from using or disclosing such trade secrets or
information. Neither the execution and delivery of this
Agreement or any other agreement referred to herein, nor the
consummation of the transactions contemplated hereby, will cause
or result in the release or disclosure of any of the foregoing.
(c) Except as disclosed in Schedule 3.11, each and
every current and former employee and consultant of InterCAP
hired or retained by InterCAP since January 1, 1988 who had
access to InterCAP's trade secrets and proprietary and
confidential information has entered into an employment, non-
disclosure, or consulting agreement (collectively, "Protective
Agreements") with InterCAP containing provisions (i) assigning
all of such employee's or consultant's right, title, and
interest, if any, in and to the InterCAP Products to InterCAP, or
designating the product of any programming services performed for
InterCAP to be Works-Made-For-Hire, as that term is defined in
Section 101 of the Copyright Act of 1976, and (ii) prohibiting
the disclosure of InterCAP's trade secrets and proprietary and
confidential information by such employee or consultant. To the
best of InterCAP's knowledge and belief, there have been no
breaches of any of the Protective Agreements, or any other
unauthorized release, disclosure, use, or appropriation of any
InterCAP trade secrets or other confidential or proprietary
information of InterCAP.
(d) InterCAP has no copyright registrations, trademark
registrations, or patents.
(e) Except as disclosed in Schedule 3.11 to this
Agreement, InterCAP is under no existing or contingent obligation
to compensate any other person or entity in connection with the
use, reproduction, modification, or distribution of any of the
Software Products.
(f) To the best of InterCAP's knowledge and belief, no
person or other entity is infringing upon any of InterCAP's
intellectual property.
SECTION 3.12 Employee Benefit Plans.
(a) Plans and Related Documents. InterCAP does not
have or purport to have, and does not contribute to, any pension,
profit-sharing, option, severance compensation or incentive plan
or arrangement, or any other type of Employee Benefit Plan (as
defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974 ("ERISA")) ("Employee Plan"), or have any
obligation to, or customary arrangement with, employees for
bonuses, incentive compensation, vacations, severance pay,
insurance or other benefits, except as set forth in Schedule 3.12
of this Agreement (other than statutory protections afforded to
employees under non-U.S. law). A complete and accurate summary
of each Employee Plan and a complete and accurate copy of each
document prepared in connection with such Employee Plan has been
furnished to Intergraph.
(b) Absence of Certain Types of Plans. None of the
Employee Plans is a multiemployer plan (within the meaning of
Section 3(37) or 4001(a)(3) of ERISA) or a single employer
pension plan (within the meaning of Section 4001(a)(15) of ERISA)
for which InterCAP could incur liability under Section 4063 or
4064 of ERISA. Except as set forth in Schedule 3.12, none of the
Employee Plans is a severance plan within the meaning of the
provisions of ERISA applicable to severance plans. Except as set
forth in Schedule 3.12, none of the Employee Plans obligate
InterCAP to pay separation, severance, termination, or similar-
type benefits solely as a result of any transaction contemplated
by this Agreement or as a result of a "change in control" with
respect to InterCAP, within the meaning of such terms under
Section 280G of the Code. None of the Employee Plans provides for
or promises retiree medical or life insurance benefits to any
current or former employee, officer, or director of InterCAP.
(c) Compliance with Applicable Law. Each Employee
Plan has been operated in all material respects in accordance
with the requirements of all applicable laws, including, without
limitation, ERISA and the Code. InterCAP has timely filed all
reports or other materials required to be filed under ERISA in
connection with the Employee Plans. InterCAP has performed all
obligations required to be performed by it or under, is not in
any respect in default under or in violation of, and has no
knowledge of any default or violation by any party to, any
Employee Plan. No legal action, suit, or claim is pending or
threatened with respect to any Employee Plan (other than claims
for benefits in the ordinary course) and, to InterCAP's
knowledge, no fact or event exists that could give rise to any
such action, suit, or claim. The Internal Revenue Service has
issued a favorable determination letter with respect to the
qualification of each Employee Plan which is intended to be
qualified and with respect to each trust established in
connection with any Employee Plan which is intended to be exempt
from federal income taxation under Section 501(a) of the Code,
except in the case of the InterCAP Graphics Systems, Inc. 401(k)
Profit Sharing Plan and Trust (the "401(k) Plan"), which has been
operated since inception pursuant to standardized prototype plan
forms which have received favorable determination letters from
the Internal Revenue Service.
(d) Plan Contributions and Funding. All
contributions, premiums, or payments required to be made with
respect to any Employee Plan have been made on or before their
due dates. All such contributions have been fully deducted for
income tax purposes, no such deduction has been challenged or
disallowed by any governmental entity, and no fact or event
exists which could give rise to any such challenge or
disallowance. As of the Closing, no Employee Plan which is
subject to Title IV of ERISA will have an "unfunded benefit
liability" (within the meaning of Section 4001(a)(18) of ERISA).
No funded plan, arrangement, or policy covering employees,
officers, or directors of InterCAP or its subsidiaries employed
outside of the United States has any unfunded liabilities that,
as of the balance sheets provided pursuant to Section 3.6 of this
Agreement, were not fully reflected in such balance sheets.
SECTION 3.13 Employment Agreements. Except as disclosed
on Schedule 3.13 hereto, there is no employment, consulting,
severance or indemnification agreement to which InterCAP or any
of its subsidiaries is a party or by which either of them is
bound.
SECTION 3.14 Labor Matters.
(a) There are no labor or employment controversies
pending or, to the knowledge of InterCAP, threatened between
InterCAP or its subsidiaries and any of their employees;
(b) InterCAP is not now, and has never been, a party
to any collective bargaining agreement or other labor union
contract applicable to persons employed by InterCAP or its
subsidiaries, nor are there any activities or proceedings of any
labor union to organize any such employees; and
(c) There are no unfair labor practice complaints
pending against InterCAP before the National Labor Relations
Board or any current union representation questions involving
employees of InterCAP or its subsidiaries.
SECTION 3.15 Compliance with Laws. InterCAP and its
subsidiaries have been and continue to be in compliance with all,
and are not in violation of any, applicable laws, regulations, or
administrative orders of any county, state, municipality, or of
any subdivision thereof to which their business, properties, or
any part thereof is subject, the violation of which, or the non-
compliance with which, would have a Material Adverse Effect.
SECTION 3.16 Litigation and Customer Relations. No suit,
action, arbitration, administrative proceeding, or governmental
investigation is pending or, to InterCAP's knowledge, threatened
by, against or affecting InterCAP or its business, properties,
rights, assets, or financial condition. InterCAP is not in
violation of any order, writ, injunction, or decree to which it
is subject of any federal, state, local, or foreign court,
department, agency, or instrumentality. InterCAP has furnished
Intergraph with copies of all written customer complaints made
against InterCAP in connection with the performance or lack
thereof of its software since July 1, 1992, and none of
InterCAP's software has been rejected or returned as a result of
unacceptable performance or functionality. To the best of
InterCAP's knowledge, no material portion of InterCAP's renewal
customer base has materially reduced or terminated, or, to the
knowledge of InterCAP intends to materially reduce or terminate,
the amount of its renewal business with InterCAP. InterCAP has
furnished to Intergraph true and correct copies of InterCAP's
standard form of end-user license agreement, distributor
agreement and renewal agreement (collectively, the "Specified
Product Agreements"), and except as disclosed on Schedule 3.17,
all of InterCAP's relationships with end-users or distributors
conform to the material terms of the Specified Product Agreements
and contain no material terms in addition to those contained in
the Specified Product Agreements. Schedule 3.17 lists all
distributors or others having currently effective rights to sell,
license, market or distribute any of the InterCAP Products.
Except as disclosed on Schedule 3.16, to the best of InterCAP's
knowledge, none of its end-user licensees or renewal licensees
has expressed to InterCAP an intention to reduce their license
commitments with InterCAP.
SECTION 3.17 Assets and Material Contracts; Insurance.
InterCAP has good and marketable title to all of its assets,
properties and rights, including the Intellectual Property
Rights, free and clear of any and all liens, claims, and
encumbrances, except as described on the Financial Statements or
in any of the Schedules to this Agreement. InterCAP has
sufficient rights to use the assets and properties currently
employed in the conduct of its business. InterCAP maintains
adequate insurance coverage on its assets and properties in
accordance with customary industry practice. Schedule 3.17 lists
and briefly describes all policies of title, asset, fire, hazard,
casualty, liability, life, workers' compensation and other forms
of insurance held by InterCAP. Except as described on Schedule
3.17, InterCAP has no material contracts to which it is a party
or by which it is bound. All contracts to which InterCAP is a
party (including, without limitation, any debt instrument or
agreement) are valid and legally binding and are in full force
and effect. To InterCAP's knowledge, there are no defaults
thereunder by any party thereto, and there are no conditions
which, with notice, the lapse of time, or both, would constitute
a default by any party thereunder. To the best of InterCAP's
knowledge, Schedule 3.17 also lists all written or oral
contracts, agreements and other instruments not made in the
ordinary course of business to which InterCAP is a party, or made
in the ordinary course of business and referred to in clauses (i)
through (xiv) of this Section 3.17. Except as disclosed on
Schedule 3.17 or other Schedules to this Agreement, InterCAP is
not a party to any agreement, arrangement or understanding,
whether written or oral, formal or informal, relating to:
(i) any distributorship, dealer, sales, advertising,
agency, manufacturer's representative, franchise or similar
contract or relationship or any other contract relating to
the payment of a commission or other fee calculated as or by
reference to a percentage of the profits or revenues of
InterCAP or of any business segment of InterCAP;
(ii) any joint venture, partnership or other agreement
or arrangement for the sharing of profits;
(iii) the future purchase, sale or license of
products, material, supplies, equipment or services
requiring payments by InterCAP in an amount in excess of
$25,000 per annum, which agreement, arrangement or
understanding is not terminable on 30 days' notice without
cost or other liability at or at any time after the
Effective Time, or in which InterCAP has granted or received
manufacturing rights, most favored nations pricing
provisions or exclusive marketing or other rights relating
to any product, group of products, services, technology,
assets or territory;
(iv) any material license (whether as licensor or
licensee), royalty, permit, software development or
franchise agreement, including, without limitation, any
agreement pursuant to which InterCAP licenses any InterCAP
rights to any third party (other than ordinary course
licenses to end-users);
(v) the employment of any officer, employee,
consultant or agent or any other type of contract,
commitment or understanding with any officer, employee,
consultant or agent which (except as otherwise generally
provided by applicable law) is material and is not
immediately terminable without cost or other liability at or
at any time after the Effective Time;
(vi) indenture, mortgage, promissory note, loan
agreement, guarantee or other agreement or commitment for
the borrowing of money, for a line of credit or for a
leasing transaction of a type required to be capitalized in
accordance with Statement of Financial Accounting Standards
No. 13 of the Financial Accounting Standards Board;
(vii) any material agreement, instrument or other
arrangement granting or permitting any encumbrance on any of
the properties, assets or rights of InterCAP;
(viii) any material lease for real property (whether as
lessor or lessee) or any other lease or agreement under
which InterCAP is lessee of or holds or operates any items
of tangible personal property owned by any third party;
(ix) contract or commitment for charitable contributions;
(x) contract or commitment for capital expenditures
individually in excess of $10,000;
(xi) any agreement or contract with a "disqualified
individual" (as defined in Section 280G(c) of the Code),
which could result in a disallowance of the deduction for
any "excess parachute payment" (as defined in Section
280G(b)(i) of the Code) under Section 280G of the Code;
(xii) agreement or arrangement outside the ordinary
course of InterCAP's business for the sale of any assets,
properties or rights having a value in excess of $10,000;
(xiii) agreement which restricts InterCAP from engaging
in any aspect of its business or competing in any line of
business in any geographic area; or
(xiv) any other agreement, contract or commitment
which is material to InterCAP.
For purposes of this Section 3.17, the term "material," shall
mean and refer to those agreements, contracts, instruments or
arrangements (as applicable) that involve payments by or to
InterCAP, or otherwise have a value, of at least $25,000.
InterCAP has furnished to Intergraph true and complete copies of
all such agreements listed in Schedule 3.17.
SECTION 3.18 Bankruptcy. InterCAP has not applied for or
consented to the appointment of any trustee or receiver for any
of its property or assets, made a general assignment for the
benefit of its creditors, admitted in writing its inability to
pay its debts as they become due, or commenced any case or
proceeding under any chapter of the Federal Bankruptcy Code or
any other federal or state law relating to bankruptcy, insolvency
or liquidation, except that InterCAP's former French subsidiary
was dissolved in accordance with French law following adequate
provision for, or payment of, all liabilities and obligations of
such subsidiary.
SECTION 3.19 Customer Orders; Warranties. All customer
orders in backlog on the books and records of InterCAP are bona
fide orders deliverable in the normal course of InterCAP's
operations, and in any event within six months of the Closing.
Existing purchase orders are in the normal course for quantities
and at prices that will not result in a loss to InterCAP or its
subsidiaries and there are no undisclosed purchase commitments,
which individually or in the aggregate are material. InterCAP
and its subsidiaries have not made any commitments to customers
for sales already made or for orders in backlog, other than
customary warranty and maintenance commitments based upon past
practices. InterCAP has made no warranty commitments to United
States customers in excess of one hundred twenty (120) days, or
to European customers in excess of one hundred eighty (180) days,
from the date any such warranty commences.
SECTION 3.20 Broker or Finder. InterCAP has not agreed to
pay any brokerage, finder's, or other fee or commission in
connection with the transactions contemplated by this Agreement.
SECTION 3.21 Certain Agreements. Except as set forth on
Schedule 3.21, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated
hereby will (i) result in any payment (including, without
limitation, severance, unemployment compensation, golden
parachute, bonus or otherwise) becoming due to any director or
employee of InterCAP from InterCAP under any Employee Plan or
otherwise, (ii) materially increase any benefits otherwise
payable under any Employee Plan, or (iii) result in the
acceleration of the time of payment or vesting of any such
benefits.
SECTION 3.22 Bank Accounts; Powers of Attorney. Schedule
3.22 sets forth a true and complete list of (i) all bank accounts
and safe deposit boxes of InterCAP and all persons who are
signatories thereunder or who have access thereto and (ii) the
names of all persons, firms, associations, corporations or
business organizations holding general or special powers of
attorney from InterCAP and a summary of the terms thereof.
SECTION 3.23 Minute Books. The minute books of InterCAP
provided to Intergraph for review contain a materially complete
and accurate summary of all meetings of and actions by the board
of directors and stockholders of InterCAP from the time of its
incorporation to the date of such review and reflect all actions
referred to in such minutes accurately in all material respects.
SECTION 3.24 Board Approval. The Board of Directors of
InterCAP has unanimously (i) approved this Agreement and each of
the related agreements to which InterCAP is a party and the
transactions contemplated hereby and thereby, (ii) determined
that the Merger is in the best interests of the stockholders of
InterCAP and is on terms that are fair to such stockholders and
(iii) recommended that the stockholders of InterCAP approve the
Merger in accordance with this Agreement and the GCL.
SECTION 3.25 Vote Required. The only votes of the holders
of any class or series of InterCAP Stock necessary to approve the
Charter Amendment, the Merger, this Agreement, and each of the
related agreements to which InterCAP is a party and the
transactions contemplated hereby and thereby are: (i) in the case
of the Charter Amendment, the affirmative vote of (a) a majority
of the outstanding shares of InterCAP Common Stock and InterCAP
Preferred Stock, voting as a single class; (b) a majority of the
outstanding shares of InterCAP Series A Preferred Stock, voting
separately; (c) a majority of the outstanding shares of InterCAP
Series A Preferred Stock and InterCAP Series B Preferred Stock,
voting as a single class; and (d) a majority of the outstanding
InterCAP Series C Preferred Stock, voting separately; and (ii) in
the case of the Merger, this Agreement and each of the related
agreements to with InterCAP is a party and the transactions
contemplated hereby and thereby, the affirmative vote of (a) at
least 66.67% of the outstanding shares of InterCAP Common Stock
and the InterCAP Preferred Stock, voting as a single class, and
(b) a majority of the outstanding shares of InterCAP Series A
Preferred Stock and InterCAP Series B Preferred Stock, voting as
a single class.
SECTION 3.26 Information Supplied. None of the
information supplied or to be supplied by InterCAP or any
Stockholder for inclusion or incorporation by reference in (i)
the Form S-4 will, at the time the Form S-4 is filed with the SEC
and at the time the Form S-4 becomes effective under the
Securities Act, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not
misleading, and (ii) the Proxy Statement will, at the dates
mailed to the Stockholders and at the effective date of the
Stockholder Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of
the circumstances under which they are made, not misleading. The
Proxy Statement will comply as to form in all material respects
with the provisions of all applicable laws, rules and regulations
of all governmental authorities.
SECTION 3.27 Business Generally. There have been no
events or transactions, or information which has come to the
attention of InterCAP or any officer or director thereof which
could reasonably be expected to have a Material Adverse Effect on
InterCAP, and InterCAP is not obligated under any contract or
agreement or subject to any corporate restriction which
reasonably could be expected to have a Material Adverse Effect on
InterCAP.
SECTION 3.28 Post-Merger Stockholder Continuity. To the
best knowledge of InterCAP, there is no plan or intention on the
part of the Stockholders (a "Plan") to sell, exchange, transfer,
distribute, pledge or otherwise dispose of (a "Sale") (a) shares
of Intergraph Common Stock to be issued to the Stockholders in
the Merger, which shares would have an aggregate fair market
value, as of the Effective Time of the Merger, in excess of fifty
percent (50%) of the aggregate fair market value, immediately
prior to the Merger, of all outstanding shares of InterCAP Stock,
or (b) more than fifty percent (50%) of the shares of Intergraph
Common Stock to be received in exchange for InterCAP Stock in the
Merger. For purposes of this representation, shares of InterCAP
Stock (or the portion thereof) (i) with respect to which a
Stockholder receives cash in lieu of fractional shares of
Intergraph Common Stock or pursuant to the exercise of
dissenters' rights and/or (ii) with respect to which a Sale
occurs during the period beginning with the commencement of
negotiations (whether formal or informal) between InterCAP and
Intergraph regarding the Merger and ending on the Effective Time
of the Merger, shall be considered shares of outstanding InterCAP
Stock exchanged for Intergraph Common Stock in the Merger and
then disposed of pursuant to a Plan.
SECTION 3.29 Full Disclosure. The (i) representations and
warranties made by InterCAP contained herein, and (ii)
statements contained in any exhibit, schedule, certificate,
memorandum, report, instrument or other information (either
verbal or written), furnished or to be furnished by InterCAP, or
on its behalf, in connection with this Agreement, as of the date
given, furnished or made, taken as a whole, do not contain and
will not contain any untrue statement of material fact, and do
not omit and will not omit to state any material fact necessary
in order to make the statements herein or therein, in light of
the circumstances under which they were made, not misleading.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF INTERGRAPH
Intergraph represents, warrants, and covenants to InterCAP
as follows:
SECTION 4.1 Due Incorporation. Intergraph and Intergraph
Subsidiary are corporations duly organized, validly existing, and
in good standing under the laws of the State of Delaware, and
have the requisite corporate power and authority to enter into
and perform this Agreement.
SECTION 4.2 Due Authorization; Binding Agreement. This
Agreement has been duly authorized and approved by all necessary
corporate action on the part of Intergraph and Intergraph
Subsidiary, has been duly executed and delivered by each of them,
and constitutes a valid and legally binding obligation of each of
them, enforceable against each of Intergraph and Intergraph
Subsidiary in accordance with its terms.
SECTION 4.3 Capital Stock. Intergraph's Form 10-Q filed
with the SEC with respect to the fiscal quarter ended June 30,
1994 (the "Form 10-Q"), sets forth a true and complete
description of the authorized and outstanding shares of capital
stock of Intergraph as of such date. All outstanding shares of
Intergraph Common Stock are validly issued, fully paid and non-
assessable and not subject to preemptive rights. Intergraph has
duly authorized and will make available for issuance the
Intergraph Common Stock to be issued as Merger Consideration,
and, when issued in accordance with the terms of Article II, the
shares of Intergraph Common Stock issued as the Merger
Consideration will be validly issued, fully paid and
nonassessable and free of preemptive rights. Intergraph owns all
the outstanding shares of capital stock of Intergraph Subsidiary,
and all of such shares are validly issued, fully paid and
nonassessable and not subject to preemptive rights.
SECTION 4.4 Authority. The execution, delivery and
performance by Intergraph of this Agreement and each of the
additional agreements contemplated hereby, and the execution,
delivery and performance of this Agreement by Intergraph
Subsidiary and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all necessary
corporate action on the part of Intergraph and Intergraph
Subsidiary. This Agreement and each of the additional agreements
contemplated hereby are valid and binding obligations of
Intergraph, enforceable against Intergraph in accordance with
their respective terms; and this Agreement when executed and
delivered by Intergraph Subsidiary, as contemplated hereby, will
be a valid and binding obligation of Intergraph Subsidiary,
enforceable against Intergraph Subsidiary in accordance with its
respective terms.
SECTION 4.5 Certain Documents. As of their respective
dates, the Intergraph Form 10-K filed with the SEC for the year
ended December 31, 1993 (the "Intergraph 10-K") and Intergraph's
Quarterly Reports on Form 10-Q, current reports on Form 8-K (if
any), and definitive 1994 proxy statement filed with the SEC,
when taken as a whole, do not contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading.
SECTION 4.6 Information Provided. The information
provided and to be provided by Intergraph for use in the Form S-4
and Forms S-8 to be used in connection with the Merger will not,
at the time filed with the SEC and as of the respective dates the
Form S-4 and Forms S-8 become effective, when taken as a whole,
contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
ARTICLE V.
COVENANTS OF INTERCAP
SECTION 5.1 Affirmative Covenants of InterCAP. From and
after the date hereof until the Effective Time or the earlier
termination of this Agreement pursuant to Article VIII (the
"Executory Period"), InterCAP shall carry on its business in the
usual, regular and ordinary course in substantially the same
manner as heretofore conducted and use all reasonable efforts
consistent with past practice and policies to preserve intact its
present business organizations, keep available the services of
its present officers and key employees, and preserve its
relationships with customers, suppliers, dealers, distributors
and others having business dealings with InterCap. InterCAP
shall promptly notify Intergraph of any event or occurrence or
emergency not in the ordinary course of business of InterCAP
which has, or reasonably could be expected to have, a Material
Adverse Effect. Except as expressly contemplated by this
Agreement, InterCAP shall, unless it obtains the prior written
consent of Intergraph, from the date of this Agreement to the
Closing:
(a) operate and conduct the businesses of InterCAP in
the ordinary course of business;
(b) preserve intact InterCAP's corporate existence,
business organization, assets, licenses, permits, authorizations,
and business opportunities;
(c) comply with all contractual obligations applicable
to InterCAP's operations;
(d) maintain all InterCAP's properties in good repair,
order and condition, reasonable wear and tear excepted, and
maintain the insurance coverages described in Schedule 3.17 or
obtain comparable insurance coverages from reputable insurers
which, in respect to amounts, types and risks insured, are
adequate for the business conducted by InterCAP and consistent
with the existing insurance coverages;
(e) comply in all material respects with all
applicable laws and regulations, domestic and foreign;
(f) promptly notify Intergraph upon obtaining
knowledge of any additional default, event of default or
condition with which the passage of time or giving of notice
would constitute an additional default or event of default under
any loan documents and promptly notify and provide copies to
Intergraph of any material written communications concerning such
loan documents;
(g) between the date of this Agreement and Closing,
promptly give written notice to Intergraph upon obtaining
knowledge of any event or fact that would cause any of the
representations or warranties of InterCAP contained in or
referred to in this Agreement to be untrue or misleading in any
material respect;
(h) deliver to Intergraph a list (Schedule 5.1(h)),
dated as of the Effective Time, showing all liabilities and
obligations of InterCAP, except those arising in the ordinary
course of business, incurred since June 30, 1994, certified by an
officer of InterCAP;
(i) promptly notify Intergraph of any material change
or inaccuracies in any data previously given or made available to
Intergraph pursuant to this Agreement;
(j) provide access at Intergraph's expense, to the
extent that InterCAP has the right to provide access, to any or
all property, real or personal, which InterCAP currently or has
in the past leased, operated, owned or managed in any manner so
as to enable Intergraph to physically inspect any structure or
components of any structure on such property, including without
limitation surface and subsurface testing and analyses;
(k) use its best efforts to collect all amounts due to
InterCAP as a result of the exercise of any outstanding stock
options or warrants other than the Management Loans (as defined
on Schedule 3.7);
(l) comply with all material aspects of ERISA which
are applicable to InterCAP;
(m) use its best efforts, subject to the terms and
conditions of this Agreement, to retain all of its existing
employees;
(n) promptly notify Intergraph upon receipt of any
document identifying InterCAP as a party to any litigation or
adversarial proceeding; and
(o) prior to the Effective Time, InterCAP shall cause
that certain Promissory Note, dated September 13, 1993 and made
by A.G.W. Biddle III in the principal amount of $30,000 (the
"Biddle Note") to be replaced by a new note in equal principal
amount and otherwise on substantially similar terms to the Biddle
Note, except that the entire unpaid principal balance of such
replacement note shall be due 30 months after the Effective Time.
SECTION 5.2 Negative Covenants of InterCAP. Except with
the prior written consent of Intergraph or as otherwise
specifically permitted or contemplated by this Agreement,
InterCAP shall not from the date of this Agreement to the
Closing:
(a) make any amendment to its Certificate of
Incorporation or Bylaws other than adoption of the Charter
Amendment;
(b) make any change in the methods used in allocating
and charging costs or recognizing revenues, except as may be
required by applicable law, regulation or GAAP and after notice
to Intergraph;
(c) make or permit any change in the number of shares
of its capital stock issued and outstanding, or issue, reserve
for issuance, grant, sell or authorize the issuance of any shares
of its capital stock or subscriptions, options, warrants, calls,
rights or commitments of any kind relating to the issuance or
sale of or conversion into shares of its capital stock, except
for (i) the conversion of shares of Series B Preferred Stock and
Series C Preferred Stock to InterCAP Common Stock as contemplated
by the Preferred Stock Agreement (ii) the exercise of the
Warrants in accordance with the Preferred Stock Agreement, and
(iii) the exercise of ISO's in accordance with their terms, but
only if (a) InterCAP shall have made full and accurate disclosure
of all facts material to the optionholder's decision to exercise
such ISO; (b) InterCAP shall have received an opinion of its
counsel to the effect that the issuance of InterCAP Common Stock
upon exercise of such ISO is exempt from the registration
requirements of all applicable federal and state securities laws;
and (c) Intergraph shall have determined, to its reasonable
satisfaction and with the advice of counsel, that such exercise
does not violate any federal and state securities laws applicable
to Intergraph in connection with its Form S-4 filing;
(d) contract to create, amend or renew any debt
arrangement or other obligation or liability (absolute, accrued,
contingent or otherwise), or modify, waive or extend any loan
documents or any rights thereunder, except for refinancing
(without increase in principal amount) of any such arrangement or
obligation on terms (including pricing and collateral) no less
favorable to InterCAP than were in effect prior to such
refinancing;
(e) mortgage, pledge, hypothecate or otherwise
encumber, any material asset or permit or incur any lien,
security interest or encumbrances, restrictions, or charge of any
kind (other than statutory liens for which the obligations
secured thereby shall not become delinquent) to be filed against
any assets or properties of InterCAP, except in connection with
refinancings of indebtedness permitted under Section 5.2 (d) and
equipment leases permitted under Section 5.2(k);
(f) cancel any material debts, waive any material
claims or rights of value or sell, contract to sell, transfer, or
otherwise dispose of any of its properties or assets which are
material to the transactions contemplated by this Agreement or
which, in the aggregate, constitute a material portion of
InterCAP's assets or property;
(g) dispose of or permit to lapse any rights to the
use of any material trademark, service mark, trade name or
copyright, or dispose of or disclose, or create any firm or
contingent obligation to dispose or disclose to any person other
than its employees, any material trade secret (including but not
limited to source codes for InterCAP Products) not theretofore a
matter of public knowledge, except that InterCAP may make such
disclosures (other than disclosures of source code) pursuant to
customary non-disclosure agreements in the ordinary course of its
business;
(h) except as expressly contemplated by or disclosed
pursuant to this Agreement, grant any increase in compensation or
pay or agree to pay or accrue any bonus, incentive or like
benefit to or for the credit of any director, officer, employee
or other person, hire any employees, or enter into, terminate or
modify any employment, consulting or severance agreement or other
agreement with any director, officer or employee, or adopt, amend
or terminate any Employee Plan or change or modify the period of
vesting or retirement age for any participant of such a plan, or
make any InterCAP contribution to any 401(k), profit sharing, or
similar plan for the benefit of employees;
(i) declare, pay or set aside for payment any dividend
or other distribution or payment in respect of shares of its
capital stock, including without limitation any accrued but
unpaid dividends on InterCAP Preferred Stock;
(j) acquire the capital stock or other equity
securities or interest of any other entity;
(k) make any capital expenditure or a series of
expenditures of a similar nature in excess of $100,000 in the
aggregate during the Executory Period;
(l) make any tax election or settle or compromise any
federal, state, local or foreign tax liability;
(m) except as contemplated by this Agreement or
expressly permitted by Section 6.5 hereof, adopt a plan of
complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization, or other
reorganization or business combination of InterCAP;
(n) enter into, renew or amend any real property or
equipment leases, except equipment leases permitted under Section
5.2(k);
(o) initiate or settle any legal or other adversarial
proceedings;
(p) except as expressly permitted by Section 6.5
hereof, enter into any agreement, understanding or commitment,
written or oral, with any other person which is in any manner
inconsistent with the obligations of InterCAP and its directors
under this Agreement or any related written agreement.
ARTICLE VI.
ADDITIONAL AGREEMENTS
SECTION 6.1 Access To, and Information Concerning,
Properties and Records. During the Executory Period, InterCAP
shall, to the extent permitted by law, give Intergraph and its
legal counsel, accountants and other representatives (at
Intergraph's expense) full access, during normal business hours,
throughout the period prior to the Closing, to all of InterCAP's
properties, books, contracts, commitments and records, permit
Intergraph to make such inspections as they may require, and
furnish to Intergraph during such period all such information
concerning InterCAP and its affairs as Intergraph may reasonably
request. All information disclosed by InterCAP to Intergraph
which is confidential and is so identified to Intergraph as
confidential shall be held confidential by Intergraph and its
representatives, except to the extent counsel to Intergraph has
advised them such information is required to or should be
disclosed in the Forms S-8, Form S-4, Proxy Statement or
otherwise as required by applicable law. In the event this
Agreement is terminated pursuant to the provisions of Article
VIII, upon the written request of InterCAP, Intergraph agrees to
use reasonable efforts to return to InterCAP or destroy all
copies of any non-public information furnished to Intergraph by
InterCAP (whether or not such information was designated as
confidential by InterCAP), except that Intergraph may retain
copies of such material to the extent necessary to defend (and
solely for the purpose of defending) its interests in any then
pending or threatened dispute between Intergraph and InterCAP
concerning or relating to this Agreement.
SECTION 6.2 Objections of Stockholders. InterCAP will
promptly advise Intergraph in writing of any written objection to
the Merger received by InterCAP from any stockholder of InterCAP
and furnish Intergraph with such information as Intergraph may
reasonably request with respect thereto.
SECTION 6.3 Miscellaneous Agreements and Consents.
Subject to the terms and conditions of this Agreement, Intergraph
and InterCAP agree to use all reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done,
all things necessary, proper, or advisable under applicable laws
and regulations to consummate and make effective, as soon as
practicable after the date hereof, the transactions contemplated
by this Agreement. Intergraph and InterCAP shall use their
respective best good faith efforts to obtain or cause to be
obtained consents of all third parties and governmental and
regulatory authorities necessary or desirable for the
consummation of the transactions contemplated herein, to obtain
the requisite approval of the Stockholders with respect to the
Merger and the Charter Amendment, and to satisfy the other
conditions to Closing contained herein.
SECTION 6.4 InterCAP Indebtedness. Prior to the
Effective Time, InterCAP shall pay all regularly scheduled
payments on all InterCAP indebtedness (other than dividends
accruing on the InterCAP Preferred Stock).
SECTION 6.5 No Solicitation. Neither InterCAP nor any
subsidiary, nor any of their respective officers, directors,
employees, representatives, agents or affiliates (including, but
not limited to, any investment banker, attorney or accountant
retained by InterCAP or any subsidiary), shall, directly or
indirectly, solicit, initiate or participate in any way in
discussions or negotiations with, or knowingly provide any
information to, any corporation, partnership, person, entity or
group (other than Intergraph or its affiliates) (a "Third Party")
concerning any merger, sale of any significant portion of the
assets, sale of shares of capital stock or similar transactions
involving InterCAP or any subsidiary. InterCAP shall promptly
notify Intergraph in writing of any such inquiry, contact or
proposal (including, without limitation, successive inquiries,
contacts or proposals) and shall, in such notice indicate the
identity of the person or the material terms and conditions of
any inquiry, contact or proposal, including, without limitation,
price. Notwithstanding anything to the contrary set forth
herein, the Board of Directors of InterCAP may respond to any
unsolicited proposal or inquiry with respect to any of the
foregoing, and may provide information to, and negotiate with,
any person, group or entity in connection therewith if the Board
of Directors first certifies in writing to Intergraph that the
Board of Directors has determined, with the written advice of
counsel, that it must do so in the exercise of its fiduciary
duties.
SECTION 6.6 Public Announcement; Confidentiality and Non-
Disclosure. Intergraph and InterCAP acknowledge and agree that,
without the written consent of the other party and except as
otherwise required or permitted herein, neither Intergraph nor
InterCAP will disclose to any other person or entity, other than
its respective legal and financial advisors, either (i) the fact
that discussions or negotiations are taking place between the
parties, or (ii) the existence, execution or content of this
Agreement or the transactions contemplated hereby, or (iii) any
terms, conditions, or other facts discussed or proposed by the
parties hereto with respect to this Agreement or any of the
prospective transactions contemplated by said documents;
provided, however, that either party may make such disclosures
(i) to the extent required by law, or (ii) to the extent
information becomes public other than through a breach of this
Agreement. Subject to extension by written amendment in
accordance with Section 8.5 of this Agreement, the non-disclosure
proscriptions imposed on Intergraph and InterCAP by this Section
6.6 shall survive for one (1) year from the date this Agreement
terminates. Subject to written advice of counsel with respect to
legal requirements relating to public disclosure of matters
related to the subject matter of this Agreement, the timing and
content of any announcements, press releases or other public
statements concerning the proposal contained herein will occur
upon, and be determined by, the mutual consent of Intergraph and
InterCAP. Intergraph shall request confidential treatment of the
schedules to this Agreement in connection with the filing of the
Form S-4 and, if applicable, the Forms S-8.
SECTION 6.7 Employee Matters. Intergraph presently
intends that, after the Merger, neither Intergraph nor the
Surviving Corporation will make additional contributions to the
Employee Plans. Intergraph agrees, however, that the employees
of the Surviving Corporation will be entitled to participate as
employees in the employee welfare and pension benefit plans
maintained for employees of Intergraph, its affiliates, or both
in accordance with their respective terms, and for purposes of
vesting, eligibility, benefit accrual and all other purposes
under such employee plans, employees of the Surviving Corporation
shall be credited for their years of service at InterCAP.
Intergraph further agrees that for so long as InterCAP remains
profitable (but in no event for a period of more than one (1)
year following the Effective Time), (i) the salaries of the
employees of InterCAP immediately prior to the Effective Time
shall not be generally reduced as part of any Intergraph-wide
reduction of employee compensation, and (ii) the employees of
InterCAP immediately prior to the Effective Time shall not be
subject to any Intergraph-wide layoffs or reductions in force;
provided, however, that notwithstanding the foregoing, (i)
unless otherwise agreed in writing by Intergraph and any
particular employee, all employees of InterCAP shall continue to
be employees at will following the Merger and (ii) Intergraph may
generally reduce the work force of InterCAP or its subsidiaries
(otherwise than as part of an Intergraph-wide layoff or reduction
in force) if it determines in its sole discretion to do so based
on the business conditions, cost structure, and results of
operations of InterCAP.
SECTION 6.8 Expenses. Except as set forth in Section
8.3, the parties hereto will pay their own expenses incurred in
preparing for, entering into and carrying out this Agreement and
the transactions contemplated herein.
SECTION 6.9 Further Assurances. In case at any time
after the Effective Time any further action is reasonably
necessary or desirable to carry out the purposes of this
Agreement or to vest the Surviving Corporation with full title to
all properties, assets, rights, approvals, immunities and
franchises of InterCAP, the proper officers and directors of each
party to this Agreement shall take all such necessary action.
ARTICLE VII.
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.1 Conditions to Each Party's Obligation to
Effect the Merger. The respective obligations of each party to
effect the Merger are subject to the satisfaction or waiver of
the following conditions prior to the Effective Time:
(a) the Closing will not violate any injunction, order
or decree of any court or governmental body having competent
jurisdiction;
(b) to the extent required by applicable law or the
Certificate of Incorporation of InterCAP, the approval of the
Merger by each class of Stockholders required to approve such
matters in accordance with Section 3.25; and
(c) the registration statement on Form S-4 with
respect to the Intergraph Common Stock constituting the Merger
Consideration shall have become effective under the Securities
Act and shall not be the subject of any stop order or proceeding
seeking a stop order.
(d) some or all of the recipients of the Intergraph
Common Stock to be issued in the Merger shall have executed and
delivered certificates to Intergraph and InterCAP in the form of
Exhibit F-1 or Exhibit F-2 (as appropriate) hereto certifying as
to the matters set forth therein with respect to at least fifty
percent (50%) of the Intergraph Common Stock to be issued in the
Merger;
(e) InterCAP and Intergraph shall each have received
an opinion of counsel, in form and substance satisfactory to the
opinion recipient, substantially to the effect that, as of the
Effective Time on the basis of facts, representations and
assumptions set forth in such opinion which are consistent with
the state of facts existing at the Effective Time, the Merger
will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code;
(f) the Certificate of Incorporation of InterCAP shall
have been duly amended in the manner contemplated by the
Preferred Stock Agreement following approval of such amendment by
all requisite action of the board of directors and stockholders
of InterCAP; and
(g) the closing sale price of Intergraph Common Stock
as reported by the NASDAQ National Market System on the business
day immediately prior to the Closing Date shall be not less than
$6.00 per share nor more than $14.00 per share (in each case, as
adjusted to reflect any Stock Adjustment Event).
SECTION 7.2 Conditions to the Obligations of Intergraph
and Intergraph Subsidiary to Effect the Merger. The obligations
of Intergraph and Intergraph Subsidiary to effect the Merger are
subject to the satisfaction (by InterCAP) or waiver (by
Intergraph) of the following conditions:
(a) all representations and warranties of InterCAP
shall be true and correct in all material respects as of the date
hereof and at and as of the Closing, with the same force and
effect as though made on and as of the Closing;
(b) InterCAP shall have performed in all material
respects all obligations and agreements and in all material
respects complied with all covenants and conditions, contained in
this Agreement to be performed or complied with by it prior to
the Effective Time;
(c) there shall not have occurred a Material Adverse
Effect (other than any Material Adverse Effect arising solely
from matters disclosed to Intergraph in the Schedules hereto)
since June 30, 1994;
(d) the directors of InterCAP, in their capacities as
such, shall have delivered to Intergraph an instrument dated the
Effective Time releasing InterCAP from any and all claims of such
directors (except as to rights of indemnification pursuant to the
bylaws of InterCAP or otherwise) and shall have delivered to
Intergraph their resignations as directors of InterCAP;
(e) the officers of InterCAP, in their capacities as
such, shall have delivered to Intergraph an instrument dated the
Effective Time releasing InterCAP from any and all claims of such
officers (except as to accrued compensation and benefits and
rights of indemnification pursuant to the bylaws of InterCAP or
otherwise);
(f) Intergraph shall have received an opinion of
counsel to InterCAP in form and substance reasonably satisfactory
to Intergraph;
(g) all corporate and other proceedings in connection
with the transactions contemplated by this Agreement and all
documents and instruments incident to such transactions shall be
reasonably satisfactory in all respects to Intergraph and its
counsel;
(h) the Board of Directors and stockholders of
InterCAP shall have approved the Merger and the holders of no
more than five percent (5%) of the issued and outstanding shares
of InterCAP Stock immediately prior to the Effective Time shall
have preserved their right to exercise dissenter's rights under
the Delaware Statute;
(i) all necessary regulatory approvals shall have been
received;
(j) Intergraph shall have received certificates dated
as of the date of the Closing executed by an appropriate officer
of InterCAP, certifying in such reasonable detail as Intergraph
may reasonably request, to the effect described in Sections
7.2(a), (b), (c) and (h);
(k) InterCAP shall have working capital immediately
prior to the Closing Date (but exclusive of transaction expenses
relating to the Merger and payments under the Biddle Agreement
which are required by virtue of the Merger) of at least $450,000,
and InterCAP's aggregate indebtedness for borrowed money shall
not exceed $210,000.
(l) all of the Warrants shall have been exercised, and
the Series B Preferred Stock and Series C Preferred Stock shall
have been converted to InterCAP Common Stock, in accordance with
the Preferred Stock Agreement;
(m) the Preferred Stock Agreement shall have been
executed, delivered and performed by the parties thereto;
(n) Intergraph, InterCAP, Intergraph Subsidiary and
the members of the Stockholders' Committee shall have executed
and delivered the Escrow Agreement, securing the indemnification
obligations of the Stockholders pursuant to Article IX hereof;
and
(o) Intergraph Subsidiary shall have entered into
employment agreements with all current InterCAP employees
identified on Schedule 7.2(o), and such agreements shall remain
in full force and effect as of the Effective Time.
SECTION 7.3 Conditions to the Obligations of InterCAP to
Effect the Merger. The obligations of InterCAP to effect the
Merger are subject to the satisfaction (by Intergraph) or waiver
(by InterCAP) of the following conditions prior to the Effective
Time:
(a) all representations and warranties of Intergraph
contained herein shall be true and correct in all material
respects as of the date hereof and at and as of the Closing, with
the same force and effect as though made on and as of the
Closing;
(b) Intergraph shall have performed in all material
respects all obligations and agreements and in all material
respects complied with all covenants and conditions contained in
this Agreement to be performed or complied with by it prior to
the Effective Time;
(c) InterCAP shall have received the opinion of
counsel to Intergraph in form and substance reasonably
satisfactory to InterCAP; and
(d) InterCAP shall have received certificates dated as
of the Closing, executed by an appropriate officer of Intergraph,
certifying, in such detail as InterCAP may reasonably request, to
the effect described in Sections 7.3(a) and (b).
ARTICLE VIII.
TERMINATION; AMENDMENT; WAIVER
SECTION 8.1 Termination. This Agreement may be
terminated and the Merger contemplated hereby may be abandoned,
notwithstanding approval thereof by the stockholders of InterCAP:
(a) at any time prior to the Effective Time by mutual
written consent duly authorized by the Boards of Directors of
Intergraph and InterCAP;
(b) by Intergraph if any of the conditions to Closing
contained in Section 7.1 or 7.2 are not satisfied (or waived in
writing by Intergraph) by December 31, 1994;
(c) by InterCAP if the conditions to Closing contained
in Section 7.1 or 7.3 are not satisfied (or waived in writing by
InterCAP) by December 31, 1994;
(d) by Intergraph or InterCAP if the Effective Time
shall not have occurred on or before midnight local time in
Huntsville, Alabama, on December 31, 1994, or such later date
agreed to in writing by Intergraph and InterCAP;
(e) by Intergraph or InterCAP if any court of
competent jurisdiction in the United States or other United
States (federal or state) governmental body shall have issued an
order, decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the Merger and such order,
decree, ruling or other action shall have been final and
nonappealable; or
(f) by InterCAP, if prior to the Effective Time, the
InterCAP Board of Directors determines, in good faith, to pursue
or accept a bona fide proposal or offer from any Third Party
concerning any merger, sale of assets, sale of additional
securities or any similar transaction, and certifies in writing
to Intergraph that (i) in the judgment of the Board of Directors
such proposal or offer is more favorable to InterCAP and the
Stockholders than the Merger, and (ii) the Board of Directors has
determined, with the written advice of counsel, that it must
accept or pursue such proposal or offer in the exercise of its
fiduciary duties (any such offer or proposal is referred to as
the "Superior Offer").
SECTION 8.2 Effect of Termination. In the event of the
termination and abandonment of this Agreement pursuant to Section
8.1 hereof, this Agreement shall forthwith become void and have
no effect, without any liability on the part of any party or its
directors, officers or stockholders, other than the provisions of
Sections 6.6, 8.2, 8.3, 8.4 and 9.3.
SECTION 8.3 Reimbursement of Expenses. Provided that
neither Intergraph or Intergraph Subsidiary is then in material
breach of this Agreement, if this Agreement is terminated by
Intergraph following any intentional breach by InterCAP of its
covenants contained in Article IV of this Agreement, or any
intentional or reckless material misstatement or omission by
InterCAP contained in the representations in Article III of this
Agreement, then in any such case, InterCAP shall reimburse
Intergraph (not later than three business days after submission
of a statement therefor) for all reasonable, actual documented
out-of-pocket fees or expenses (including but not limited to
reasonable fees and expenses of counsel, accounting fees, travel
expenses, registration or filing fees and the like) actually
incurred in good faith by Intergraph or on its behalf in
connection with the proposed Merger or the negotiation,
structuring, evaluation or consummation of the transactions
contemplated by this Agreement (collectively, the "Designated
Expenses").
SECTION 8.4 Termination Fee. Provided that neither
Intergraph nor Intergraph Subsidiary is then in material breach
of this Agreement and that Intergraph and Intergraph Subsidiary
have satisfied the conditions of Section 7.1 (the satisfaction or
performance of which are in the exclusive control of Intergraph)
and Section 7.3, if this Agreement is terminated (i) by InterCAP
pursuant to Section 8.1(f), (ii) by Intergraph as a result of the
withdrawal or material modification by the InterCAP Board of
Directors of its recommendation to the Stockholders with respect
to the Merger (but only if such withdrawal arises out of, relates
to or follows any inquiry, contact or proposal to InterCAP from a
Third Party concerning any Superior Offer or other proposed
merger, sale of assets, sale of additional securities or similar
transaction), or (iii) by either party and any Superior Offer is
approved by the requisite vote of the holders of InterCAP Stock
within 180 days of such termination if such Superior Offer or the
reasonable possibility of such Superior Offer was known to
InterCAP or its directors at the time this Agreement was
terminated, then in any such case, InterCAP shall pay to
Intergraph, at Intergraph's election, an amount (the "Termination
Fee") equal to the greater of (i) the Designated Expenses plus an
amount equal to the fully allocated, reasonable documented cost
of time (consisting of salary and benefits) actually expended by
Intergraph officers and employees in investigating, negotiating,
and taking steps necessary to consummate, the transactions
contemplated by this Agreement, but in no event to exceed
$300,000 in the aggregate, (ii) $200,000 in cash, or (iii) 10% of
the excess over $7,500,000 of the total consideration (whether in
the form of cash, securities or other property, or assumption of
options or warrants) to be paid to InterCAP or its security
holders in connection with the Superior Offer. The applicable
Termination Fee shall be paid to Intergraph within 10 days of
termination unless the amount specified in clause (iii) is
selected by Intergraph, in which case such amount shall be
payable upon consummation of the transaction contemplated by the
Superior Offer.
SECTION 8.5 Amendment. To the extent permitted by
applicable law, this Agreement may be amended by action taken by
or on behalf of the Boards of Directors of Intergraph and
InterCAP at any time before or after adoption of this Agreement
(but prior to the Effective Time), by the stockholders of
InterCAP; provided, however, that after any submission of this
Agreement to such stockholders for approval, no amendment shall
be made which reduces the applicable Merger Consideration or
which materially and adversely affects the rights of InterCAP's
Stockholders hereunder without the approval of such Stockholders.
This Agreement may not be amended except by an instrument in
writing signed on behalf of all the parties.
SECTION 8.6 Extension; Waiver. At any time prior to the
Effective Time, the parties may (i) extend the time for the
performance of any of the obligations or other acts of the other
parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any
document, certificate or writing delivered pursuant hereto, or
(iii) waive compliance with any of the agreements or conditions
contained herein. Any agreement on the part of any party to any
such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
ARTICLE IX.
SURVIVAL; INDEMNIFICATION; REMEDIES
SECTION 9.1 Survival of Representations and Warranties.
All representations, warranties, covenants and agreements of
InterCAP contained in this Agreement or in any instrument
delivered pursuant to this Agreement or at Closing shall survive
the Closing to the extent specified in Section 9.2(d),
notwithstanding any investigation, audit or inspection at any
time made by or on behalf of Intergraph. All statements
contained in any certificate or other instrument executed and
delivered by InterCAP or its authorized officers or
representatives in accordance with this Agreement shall be deemed
representations by InterCAP. All representations, warranties,
covenants and agreements of Intergraph shall terminate at the
Effective Time and be of no further force and effect, and
Intergraph shall have no liability with respect thereto;
provided, however, that for the benefit of InterCAP and its
Stockholders the covenants and agreements contained in Sections
2.3(d), 6.6, 6.7 and 9.2 of this Agreement shall survive the
Closing.
SECTION 9.2 Indemnification.
(a) Subject to Section 9.2(e), the Stockholders,
jointly and severally, shall indemnify the Indemnified Persons
for, and hold each of them harmless from and against, any and all
Losses arising from or in connection with any Event of
Indemnification, up to that amount constituting the Escrow Fund
(as defined in the Escrow Agreement), which indemnification
pursuant to this Section 9.2(a) shall be effected solely in
accordance with the terms and provisions of the Escrow Agreement
and shall be subject to the qualifications and limitations set
forth therein. In connection therewith, the Stockholders shall
have no liability to the Indemnified Persons in respect of Losses
arising from or in connection with any Event of Indemnification
over and above the amounts from time to time representing their
respective interests in the Escrow Fund; and the Indemnified
Persons, and each of them, shall look for indemnification in
respect of any such claim under this Section 9.2(a) solely to the
Escrow Fund in accordance with the terms and provisions of the
Escrow Agreement (it being understood that nothing contained in
this Section 9.2(a) shall in any way limit, impair, modify or
otherwise affect the rights of the Indemnified Persons, including
rights available under the Securities Act or the Exchange Act (A)
to bring any claim, demand, suit or cause of action otherwise
available to the Indemnified Persons based upon an allegation or
allegations that InterCAP or the Stockholders, or any of them,
had an intent to defraud or made a willful misrepresentation or
willful omission of a material fact in connection with this
Agreement or any related agreements and the transactions
contemplated hereby or thereby or (B) to enforce any judgment of
a court of competent jurisdiction or decision of an arbitrator
which finds or determines that InterCAP or the Stockholders, or
any of them, had an intent to defraud or made a willful
misrepresentation or omission of a material fact in connection
with this Agreement and the transactions contemplated hereby or
thereby).
(b) No claim shall be brought under Section 9.2(a)
hereof unless the Indemnified Persons, or any of them, at any
time prior to the applicable Survival Date, give the
Stockholders' Committee (a) written notice of the existence of
any such claim, specifying the nature and basis of such claim and
the amount thereof, to the extent known or (b) written notice
pursuant to Section 9.2(d) of any third party claim, the
existence of which might give rise to such a claim. Upon the
giving of such written notice as aforesaid, the Indemnified
Persons, or any of them, shall have the right to commence
appropriate proceedings subsequent to the Survival Date for the
enforcement of their rights under Section 9.2(a).
(c) The obligations and liabilities of a Stockholder
with respect to Losses resulting from the assertion of liability
by third parties (each, a "Third Party Claim") shall be subject
to the following terms and conditions:
(i) The Indemnified Persons shall promptly
(and, in any event, within ten (10) business days) give
written notice to the Stockholders' Committee of any Third
Party Claim which might give rise to any loss by the
Indemnified Persons, stating the nature and basis of such
Third Party Claim, and the amount thereof to the extent
known. Such notice shall be accompanied by copies of all
relevant documentation with respect to such Third Party
Claim, including, without limitation, any summons, complaint
or other pleading which may have been served, any written
demand or any other document or instrument.
(ii) The Indemnified Persons shall assume the
defense of any Third Party Claims with counsel of their own
choosing, which counsel shall be reasonably satisfactory to
the Stockholders' Committee, and shall act reasonably and in
accordance with their good faith business judgment in
handling such Third Party Claims and shall not effect any
settlement without the consent of the Stockholders'
Committee, which consent shall not unreasonably be withheld
or delayed. The Stockholders' Committee (and the
Stockholders) and the Indemnified Persons shall make
available to each other and their counsel and accountants
all books and records and information relating to any Third
Party Claims, keep each other fully apprised as to the
details and progress of all proceedings relating thereto and
render to each other such assistance as may be reasonably
required to ensure the proper and adequate defense of any
and all Third Party Claims.
(d) Subject to the further provisions of this Section
9.2(d), the representations and warranties of Intergraph and
Intergraph Subsidiary shall be deemed to be a condition to the
Merger and shall not survive beyond the Effective Time, and the
representations and warranties made by InterCAP in Article III
hereof shall survive the Effective Time until the ninetieth
(90th) day after the Closing Date. The representations and
warranties made by the parties hereto to counsel in connection
with the opinions to be delivered (a) pursuant to Article VII
hereof at the Closing or (b) in connection with the preparation
of the registration statement on Forms S-4 and S-8 for the
Intergraph Common Stock shall survive the Effective Time;
provided, however, that such representations and warranties shall
only be deemed to speak as of the later of the date such
representations and warranties were made or the Closing Date.
For convenience of reference, the date upon which any
representation and warranty contained herein shall terminate is
referred to herein as the "Survival Date". Anything contained
herein to the contrary notwithstanding, the representations and
warranties of InterCAP contained in this Agreement (i) are being
given by InterCAP on behalf of the Stockholders and for the
purpose of binding the Stockholders to the terms and provisions
of this Section 9.2 and the Escrow Agreement, and as an
inducement to Intergraph and Intergraph Subsidiary to enter into
this Agreement and to approve the Merger (and InterCAP
acknowledges that Intergraph and Intergraph Subsidiary have
expressly relied thereon) and (ii) are solely for the benefit of
the Indemnified Persons and each of them. Accordingly, no third
party (including, without limitation, the Stockholders) or any
other holder of InterCAP Common Stock or anyone acting on behalf
of any thereof) other than the Indemnified Persons, and each of
them, shall be a third party or other beneficiary of such
representations and warranties and no such third party shall
have any rights of contribution against InterCAP or the Surviving
Corporation with respect to such representations or warranties or
any matter subject to or resulting in indemnification under this
Section 9.2 or otherwise.
(e) Anything to the contrary contained in Section 9.2
notwithstanding:
(i) The Stockholders shall not be obligated
to indemnify the Indemnified Persons pursuant to this
Section 9.2 with respect to any Losses until the aggregate
amount of such Losses exceeds $150,000 (the "Basket
Amount"), whereupon the Stockholders shall be obligated to
indemnify the Indemnified Persons for all Losses in excess
of the Basket Amount (up to their respective pro rata
interest in the Escrow Fund as provided below in Section
9.2(e)(ii)).
(ii) The maximum aggregate liability of each
Stockholder for indemnification under this Section 9.2 shall
not exceed its or their pro rata share of the aggregate
amount of the Escrow Fund, determined on the basis of the
proportion which the number of Escrow Shares contributed
into escrow by or on behalf of such Stockholder pursuant to
Section 2.2(a) hereof bears to the total number of Escrow
Shares contributed into escrow by or on behalf of all
Stockholders pursuant to Section 2.2(a) hereof.
(f) (i) Upon approval of the Merger, the
Stockholders shall be deemed, for themselves and their personal
representatives and other successors, to have constituted and
appointed, effective from and after the Effective Time, a
committee of three persons initially to consist of Joy E.
Binford, A.G.W. Biddle, III, and John C. Gebhardt, as their
agents and attorneys-in-fact (the "Stockholders' Committee") to
take all action required or permitted under this Agreement and
the Escrow Agreement (including, without limitation, the
execution and delivery of the Escrow Agreement on behalf of the
Stockholders, the giving and receiving of all notices and
consents and the execution and delivery of all documents,
including any amendments of any non-material term or provision
hereof or the Escrow Agreement, and the execution and delivery of
any agreements and releases in connection with the settlement of
any dispute or claim under Section 9.2 hereof or the Escrow
Agreement). The vote of a majority of the Stockholders'
Committee shall be required to take any action on behalf of the
Stockholders pursuant to the authority granted to them under this
Section 9.2(f).
(ii) In the event of the death, physical or mental
incapacity or resignation of any of the members of any of the
Stockholders' Committee or a vacancy thereon for any other
reason, the remaining members of the Stockholders' Committee
shall promptly appoint a further substitute or substitutes and
shall advise Intergraph thereof. As between the Stockholders'
Committee and the Stockholders, the members of the Stockholders'
Committee shall not be liable for, and shall be indemnified by
the Stockholders or provided with insurance against, any good
faith error of judgment on their part or any other act done or
omitted by them in good faith in connection with their duties as
members of such Committee, except for gross negligence or willful
misconduct. The Stockholders' Committee may consult with
professional advisors of its choice. The Stockholders' Committee
shall not be responsible for the genuineness or validity of any
document and shall have no liability for acting in accordance
with any written instructions given to them and believed by them
to be signed by the proper parties. The reasonable expenses
incurred by the members of the Stockholders' Committee in
performing their duties (including fees and expenses of
professional advisors) and any indemnification to be provided to
the Stockholders' Committee, up to a maximum of $5000, shall be
borne by the Surviving Corporation.
SECTION 9.3 Remedies. In the event InterCAP breaches or
wrongfully terminates this Agreement or the additional agreements
contemplated thereby, Intergraph may, (i) terminate this
Agreement or such other agreements and shall have no further
obligation to InterCAP thereunder, or (ii) require specific
performance of InterCAP's obligations under this Agreement or
such other agreements(including without limitation, InterCAP's
obligations under Articles VIII and IX), or seek actual damages
arising from such breach or wrongful termination in lieu of such
specific performance. In the event Intergraph breaches or
wrongfully terminates this agreement or the additional agreements
contemplated thereby, InterCAP may (i) terminate this Agreement
or such other agreements and shall have no further obligation to
Intergraph thereunder, or (ii) require specific performance of
Intergraph's obligations under this Agreement of such other
agreements, or seek actual damages arising from such breach or
wrongful termination in lieu of such specific performance. Each
party's rights to terminate such agreements and be relieved of
its obligations thereunder, or require specific performance or
recover actual damages shall be such party's sole and exclusive
remedies for breach or termination of such agreements.
Intergraph and InterCAP acknowledge and agree that the foregoing
limitation of remedies is not intended as a penalty, and that the
exclusive remedies prescribed above shall be in lieu of all
actual, direct, special, incidental, consequential, punitive or
other damage remedies therefor, whether arising in tort, contract
or otherwise, or any other right or remedy under applicable law.
ARTICLE X.
MISCELLANEOUS
SECTION 10.1 Entire Agreement; Assignment. This Agreement
(including the agreements expressly contemplated hereby) (a)
constitutes the entire agreement among the parties with respect
to the subject matter hereof and supersedes all other prior
agreements and understandings both written and oral, among the
parties or any of them with respect to the subject matter hereof,
and (b) shall not be assigned by operation of law or otherwise,
provided that Intergraph may assign its rights and obligations to
any direct or indirect, wholly-owned subsidiary of Intergraph,
but no such assignment shall relieve Intergraph of its
obligations hereunder if such assignee does not perform such
obligations.
SECTION 10.2 Severability. The invalidity or
unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provisions of
this Agreement, which shall remain in full force and effect.
SECTION 10.3 Notices. All notices, requests, claims,
demands and other communications hereunder shall be in writing
and shall be deemed to have been duly given when delivered in
person, by cable, telegram or telex, or by registered or
certified mail (postage prepaid, return receipt requested) to the
respective parties as follows:
if to Intergraph: with a copy to:
Intergraph Corporation Intergraph Corporation
Mail Stop HQ011 Mail Stop HQ034
Huntsville, Alabama 35894-0001 Huntsville, Alabama 35894-0001
Attention: John W. Wilhoite Attention: B. Judson Hennington III
If to Intergraph Subsidiary: with a copy to:
Intergraph DC Corporation - Subsidiary 7 Intergraph Corporation
Mail Stop HQ011 Mail Stop, HQ034
Huntsville, Alabama 35894-0001 Huntsville, Alabama 35894-0001
Attention: John W. Wilhoite Attention: B. Judson Hennington III
if to InterCAP: with a copy to:
InterCAP Graphics Systems, Inc. Womble Carlyle Sandridge & Rice, PLLC
116 Defense Highway 1600 Southern National Financial Center
Annapolis, Maryland 21401 200 West Second Street
Attention: A.G.W. Biddle, III Winston-Salem, North Carolina 27102
Attention: Jeffrey C. Howland
or to such other address as the person to whom notice is given
may have previously furnished to the others in writing in the
manner set forth above (provided that notice of any change of
address shall be effective only upon receipt thereof).
SECTION 10.4 Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the
State of Delaware, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
SECTION 10.5 Descriptive Headings. The descriptive
headings are inserted for convenience of reference only and are
not intended to be part of or to affect the meaning or
interpretation of this Agreement.
SECTION 10.6 Parties in Interest. This Agreement shall be
binding upon and inure solely to the benefit of each party
hereto, and nothing in this Agreement, express or implied, is
intended to confer upon any other person any rights or remedies
of any nature whatsoever under or by reason of this Agreement.
SECTION 10.7 Counterparts. This Agreement may be executed
in two or more counterparts, including, but not limited to,
facsimiles which are promptly confirmed by counterparts delivered
via overnight courier, each of which shall be deemed to be an
original, but all of which shall constitute one and the same
agreement.
SECTION 10.8 Incorporation by Reference. Any and all
schedules, exhibits, annexes, statements, reports, certificates
or other documents or instruments referred to herein or attached
hereto are incorporated herein by reference hereto as though
fully set forth at the point referred to in the Agreement.
SECTION 10.9 Certain Definitions.
(a) "Material Adverse Effect" shall mean any material
adverse change in the financial condition, assets, liabilities
(absolute, accrued, contingent or otherwise), reserves, business,
prospects or results of operations of InterCAP and its
subsidiaries, taken as a whole.
(b) "Environmental Laws" shall mean laws, including,
without limitation, federal, state or local laws, ordinances,
rules, regulations, interpretations and orders of courts or
administrative agencies or authorities relating to pollution or
protection of the environment (including, without limitation,
ambient air, surface water, ground water, land surface, and
subsurface strata), including, without limitation, the
Comprehensive Environmental Response Compensation and Liability Act
of 1980, as amended ("CERCLA"), the Superfund Amendments and
Reauthorization Act of 1987, as amended ("SARA"), the Resource
Conservation and Recovery Act of 1976, as amended ("RCRA"),
Hazardous and Solid Waste Amendments of 1984, as amended ("HSWA"),
the Hazardous Materials Transportation Act, as amended ("HMTA"),
the Toxic Substance Control Act ("TSCA"), National Emissions
Standard for Hazardous Pollutants ("NESHAP"), Occupational Safety
and Health Act ("OSHA"), Federal Water Pollution Control Act, Clean
Air Act, Department of Transportation, and Consumer Product Safety
Commission, and other laws relating to pollution or protection of
the environment, or to the manufacture, processing, distribution,
use, treatment, handling, storage, disposal or transportation of
Polluting Substances.
(c) "Polluting Substances" shall mean (i) asbestos, (ii)
urea formaldehyde foam insulation, (iii) oil and gasoline products
or wastes, and (iv) all pollutants, contaminants, chemicals, or
industrial, toxic or hazardous substances or wastes and shall
include, without limitation, any flammable explosives, radioactive
materials, oil, hazardous materials, hazardous or solid wastes,
hazardous or toxic substances or other regulated materials defined
in CERCLA, SARA, RCRA, HSWA, HMTA, TSCA, OSHA, NESHAP and/or any
other Environmental Laws, as amended, and in the regulations
adopted and publications promulgated thereto; provided to the
extent that the laws of the State of Maryland or Delaware establish
a meaning for "hazardous substance," "hazardous waste," "hazardous
materials," "solid waste," or "toxic substance," which is broader
than that specified in any of CERCLA, SARA, RCRA, HSWA, HMTA, TSCA,
OSHA or other Environmental Laws such broader meaning shall apply.
(d) "Knowledge" or "known" -- An individual shall be
deemed to have "knowledge" of or to have "known" a particular fact
or other matter if (i) such individual is actually aware of such
fact or other matter, or (ii) a prudent individual could be
expected to discover or otherwise become aware of such fact or
other matter in the course of conducting a reasonably comprehensive
investigation concerning the truth or existence of such fact or
other matter. A corporation shall be deemed to have "knowledge" of
or to have "known" a particular fact or other matter if any
individual who is serving, or who has at any time served, as a
director or officer (or in any similar capacity) of the
corporation, has, or at any time had, knowledge of such fact or
other matter. InterCAP is understood to have undertaken a separate
investigation in connection with the transactions contemplated
hereby to determine the existence or absence of facts or other
matters in the statement qualified as "known" by, or to the
"knowledge" of, InterCAP as applicable.
(e) "Affiliate" as to any person means any entity,
directly or indirectly, through one or more intermediaries,
controlling, controlled by or under common control with such
person.
(f) "Event of Indemnification" shall mean the untruth,
inaccuracy or breach of any representation or warranty of InterCAP
contained in Article III (or any facts or circumstances
constituting any such untruth, inaccuracy or breach).
(g) "Indemnified Persons" shall mean and include
Intergraph, Intergraph Subsidiary and the Surviving Corporation and
their respective Affiliates, successors and assigns, and the
respective officers and directors of each of the foregoing.
(h) "Losses" shall mean any and all losses, claims,
shortages, costs, damages, liabilities, expenses (including
reasonable attorneys' and accountants' fees), assessments, tax
deficiencies and taxes (including interest or penalties thereon)
sustained, suffered or incurred by any Indemnified Person arising
from or in connection with any such matter which is the subject of
indemnification under Section 9.2 hereof.
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed on its behalf by its officers thereunto
duly authorized, all as of the day and year first above written.
ATTEST: INTERGRAPH CORPORATION
By By
------------------------- --------------------------------
Its John W. Wilhoite
Vice President and Controller
ATTEST: INTERGRAPH DC CORPORATION -
SUBSIDIARY 7
By By
------------------------- -------------------------------
Its John W. Wilhoite
President
ATTEST: INTERCAP GRAPHICS SYSTEMS, INC.
By By
------------------------- -------------------------------
Its A. G. W. Biddle, III
President
Exhibit A
CERTIFICATE OF MERGER
of
INTERGRAPH DC CORPORATION - SUBSIDIARY 7
(a Delaware Corporation)
and
INTERCAP GRAPHICS SYSTEMS, INC.
(a Delaware Corporation)
-----------------
InterCAP Graphics Systems, Inc., a corporation duly
organized and existing under the laws of the State of Delaware,
desiring to merge with Intergraph DC Corporation - Subsidiary 7,
a corporation duly organized and existing under the laws of the
State of Delaware pursuant to the provisions of Section 251(c) of
the General Corporation Law of Delaware, does hereby certify
that:
FIRST: THE names and places of incorporation of each
party to the Merger (defined below) are "InterCAP Graphics
Systems, Inc.," a Delaware corporation ("InterCAP"), and
"Intergraph DC Corporation - Subsidiary 7," a Delaware
corporation ("Intergraph Sub").
SECOND: InterCAP and Intergraph Sub have agreed that
Intergraph Sub shall be merged with and into InterCAP (the
"Merger"), pursuant to the terms and conditions of this
Certificate of Merger and that certain Agreement and Plan of
Reorganization dated as of September ___, 1994 (the "Agreement"),
by and between InterCAP, Intergraph Sub and Intergraph
Corporation, a Delaware corporation ("Intergraph"). Intergraph
Sub is a wholly-owned subsidiary of Intergraph. The Agreement
has been approved, adopted, certified, executed and acknowledged
by each of InterCAP and Intergraph Sub in accordance with the
provisions of Section 251(c) of the General Corporation Law of
Delaware.
THIRD: The name of the surviving corporation shall be
"InterCAP Graphics Systems, Inc."
FOURTH: The certificate of incorporation of Intergraph
Sub shall be the charter of the surviving corporation, and
Article ___ thereof shall be amended to read, in its entirety, as
follows: "The name of the corporation [(which is hereinafter
called the `Corporation')] is:
INTERCAP GRAPHICS SYSTEMS, INC."
In all other respects, the certificate of incorporation of
Intergraph Sub as the certificate of incorporation of the
surviving corporation shall remain unchanged and in full force
and effect.
FIFTH: An executed copy of the Agreement is on file at
116 Defense Highway, Annapolis, Maryland 21401, the principal
place of business of the surviving corporation.
SIXTH: An executed copy of the Agreement shall be
furnished by the surviving corporation, upon request and without
cost, to any stockholder of InterCAP or Intergraph Sub.
SEVENTH: The Merger shall become effective upon [some
date not later than 90 days following the filing of the
Certificate of Merger with the Delaware Secretary of State].
IN WITNESS WHEREOF, InterCAP Graphics Systems, Inc., has
caused these presents to be signed in its corporate name and on
its behalf by its president and attested by its secretary on
______________, 1994.
InterCAP Graphics Systems, Inc.
(a Delaware corporation)
By:
---------------------------------
Its: President
[Seal]
Attested and Certified by:
By:
----------------------------
Its: Secretary
Exhibit B
PREFERRED STOCK AGREEMENT
-------------------------
THIS PREFERRED STOCK AGREEMENT ("Agreement") is made
effective this _____ day of September, 1994, between and among
InterCAP Graphics Systems, Inc., a Delaware corporation
("InterCAP"), Venture First II L.P., a Delaware limited
partnership ("Venture First"), A.G.W. Biddle, III ("Biddle") and
GeoCapital II L.P., a Delaware limited partnership
("GeoCapital").
WITNESSETH:
-----------
WHEREAS, Venture First and Biddle are the holders of all of
the issued and outstanding shares of Series A Convertible
Preferred Stock, $.01 par value per share, of InterCAP (the
"Series A Stock"); and
WHEREAS, Venture First and Biddle are the holders of
approximately 98.85% of the issued and outstanding shares of
Series B Convertible Preferred Stock, $.01 par value per share,
of InterCAP (the "Series B Stock"); and
WHEREAS, GeoCapital is the holder of all of the issued and
outstanding shares of Series C Convertible Preferred Stock, $.01
par value per share, of InterCAP (the "Series C Stock"); and
WHEREAS, Venture First is the holder of a Stock Purchase
Warrant issued by InterCAP (the "Warrant") pursuant to which
Venture First is entitled to purchase an aggregate of 50,000
shares (the "Warrant Shares") of InterCAP Common Stock, for a
purchase price of $.25 per Warrant Share or an aggregate purchase
price of $12,500.00 (the "Aggregate Warrant Price"); and
WHEREAS, pursuant to an Agreement and Plan of Reorganization
of even date herewith (the "Merger Agreement") among InterCAP,
Intergraph Corporation, a Delaware corporation ("Intergraph"),
and Intergraph DC Corporation - Subsidiary 7, a Delaware
corporation and wholly owned subsidiary of Intergraph
("Intergraph Sub"), subject to the performance (or waiver) of the
conditions stated therein, Intergraph Sub will be merged with and
into InterCAP on the terms set forth in the Merger Agreement, and
InterCAP will become a wholly owned subsidiary of Intergraph (the
"Merger"); and
WHEREAS, the execution of this Agreement (the capitalized
terms of which shall have the meanings ascribed to them in the
Merger Agreement if not otherwise defined herein) is a condition
to the execution of the Merger Agreement and to Intergraph's
obligation to consummate the Merger;
NOW, THEREFORE, in consideration of the premises and the
mutual covenant and agreements hereinafter set forth, and such
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties,
intending to be legally bound, hereby agree as follows:
1. Amendment to Certificate of Incorporation. Each of
Venture First, Biddle and GeoCapital irrevocably covenant and
agree to each other and InterCAP to vote all of the shares of
capital stock of InterCAP they now own and hereafter acquire, or
to execute a written consent of stockholders in lieu of meeting,
in favor of approving the Certificate of Amendment to the
Certificate of Incorporation of InterCAP, as amended (the
"Certificate") in substantially the form of Exhibit A attached
hereto (the "Amendment"). Venture First, Biddle and GeoCapital
further agree to do or cause to be done all such other acts and
things and to execute and deliver all such agreements,
certificates, undertakings or other documents and instruments
necessary or required to adopt and approve the Amendment.
Venture First, Biddle and GeoCapital intend that their covenants
in this Section 1 constitute an enforceable voting agreement
among stockholders under Section 218 of the GCL.
2. Election to Take Series A Stock Liquidation Preference.
So long as the Effective Time occurs on or before January 15,
1995, Venture First and Biddle irrevocably agree, and do hereby
elect pursuant to Article Fourth, Section IA, paragraphs 4(c)
and 6(i) of the Certificate to receive the liquidation preference
of $1.475 per share of Series A Stock (without further adjustment
of any kind after the date of this Agreement) pursuant to the
Merger in respect of all shares of Series A Stock owned by them,
such liquidation preference to be paid in shares of Intergraph
Common Stock as provided in the Merger Agreement. The execution
and delivery of this Agreement shall constitute irrevocable
notice of such election for purposes of Article Fourth, Section
1A, paragraph 6(i) of the Certificate.
3. Exercise of Warrant. Venture First agrees to exercise
the Warrant in full immediately prior to the Effective Time, the
parties agreeing that the execution and delivery of this
Agreement constitutes sufficient notice of such exercise. In
connection with the exercise by Venture First of the Warrant,
InterCAP and Venture First agree that, in lieu of the delivery by
Venture First to InterCAP of cash in an amount equal to the
Aggregate Warrant Price, Venture First shall and does hereby
relinquish the right to purchase a number of Warrant Shares at
the price set forth in the Warrant such that, upon such exercise,
Venture First shall receive 36,260 shares of InterCAP Common
Stock plus cash in lieu of fractional shares as provided in the
Merger Agreement. InterCAP and Venture First further agree that
the exercise of the Warrant upon the foregoing terms shall be in
full satisfaction of InterCAP's obligations to deliver shares of
InterCAP Common Stock upon exercise of the Warrant.
4. Conversion of Series B Stock and Series C Stock. So
long as the Effective Time of the Merger occurs on or before
January 15, 1995, (i) Venture First and Biddle irrevocably agree
to convert each share of Series B Stock owned by them into one
share of InterCAP Common Stock prior to the Effective Time in
accordance with Article Fourth, Section IB, paragraph 6(a) of
the Certificate; and (ii) GeoCapital irrevocably agrees to
convert each share of Series C Stock owned by it into one share
of InterCAP Common Stock prior to the Effective Time in
accordance with Article Fourth, Section IC, paragraph 6(a) of the
Certificate. The execution and delivery of this Agreement
constitutes irrevocable notice to InterCAP (i) by Venture First
and Biddle to convert all shares of Series B Stock owned by them
into InterCAP Common Stock as required by Article Fourth, Section
1B, paragraph 6(d) of the Certificate and (ii) by GeoCapital to
convert all shares of Series C Stock owned by it into InterCAP
Common Stock as required by Article Fourth, Section 1C, paragraph
6(d) of the Certificate.
5. Full Satisfaction of Rights. Venture First and Biddle
agree that the shares of Intergraph Common Stock and any cash in
lieu of fractional shares to be delivered to each of Venture
First and Biddle in accordance with the terms of the Merger
Agreement in exchange for their respective shares of Series A
Stock and Series B Stock shall be in full satisfaction of all
rights pertaining to such shares of Series A Stock and Series B
Stock and all rights and preferences attendant thereto
(including, by way of illustration and not limitation, rights to
receive accrued but unpaid dividends, rights to receive a
liquidation preference other than $1.475 per share for the Series
A Stock in the Merger and rights to receive a different number of
shares of InterCAP Common Stock upon conversion of the Series B
Stock), and until surrendered as contemplated by the Certificate
or the Merger Agreement, as the case may be, each certificate
representing their respective shares of Series A Stock and
Series B Stock shall be deemed, on and after the Effective Time,
to represent only the right to receive upon such surrender, New
Certificates representing the applicable number of shares of
Intergraph Common Stock (based on the applicable Exchange Ratio)
as set forth in the Merger Agreement (in all cases without
interest). GeoCapital agrees that the shares of Intergraph
Common Stock and any cash in lieu of fractional shares to be
delivered to GeoCapital in accordance with the terms of the
Merger Agreement in exchange for its shares of Series C Stock
shall be in full satisfaction of all rights pertaining to such
shares of Series C Stock and all rights and preferences attendant
thereto (including, by way of illustration and not limitation,
rights to receive accrued but unpaid dividends and the rights to
receive a different number of shares of InterCAP Common Stock
upon conversion of the Series C Stock), and until surrendered as
contemplated by the Merger Agreement each certificate
representing its shares of Series C Stock shall be deemed, on and
after the Effective Time, to represent only the right to receive
upon such surrender, New Certificates representing the applicable
number of shares of Intergraph Common Stock (based on the
applicable Exchange Ratio) as set forth in the Merger Agreement
(in all cases without interest).
6. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State
of Delaware applicable to agreements made and to be performed
entirely within such State without giving effect to the
principles of conflicts of laws thereof.
7. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
8. Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective
successors and permitted assigns. This Agreement may not be
assigned by any of the parties hereto without the prior written
consent of all other parties hereto, and any purported assignment
without such consent shall be null and void and of no force or
effect.
9. Third Party Beneficiaries. None of the provisions of
this Agreement or any document contemplated hereby is intended to
grant any right or benefit to any person or entity which is not a
party to this Agreement except that the parties hereto
acknowledge that Intergraph is relying on this Agreement in
entering into the Merger Agreement.
10. Headings. The section headings contained in this
Agreement are solely for the purpose of reference, are not part
of this Agreement and shall not in any way affect the meaning or
interpretation of this Agreement.
11. Amendments. Any waiver, amendment, modification or
supplement of or to any term or condition of this Agreement shall
be effective only if in writing and signed by all parties hereto,
and the parties hereto waive the right to amend the provisions of
this Section orally. This Agreement shall be null and void and
of no force or effect in the event that the Merger Agreement is
terminated prior to the Effective Time of the Merger or if the
Merger Agreement is hereafter amended if as a result of such
amendment, the rights of the holders of Series A Stock, Series B
Stock or Series C Stock are adversely affected in any manner
whatsoever.
12. Severability. In the event that any provision in this
Agreement shall be determined to be invalid, illegal or
unenforceable in any respect, the remaining provisions of this
Agreement shall not be in any way impaired, and the illegal,
invalid or unenforceable provision shall be fully severed from
this Agreement and there shall be automatically added in lieu
thereof a provision as similar in terms and intent to such
severed provisions as may be legal, valid and enforceable.
13. Entire Agreement. This Agreement sets forth our entire
understanding concerning the transactions and related matters
discussed herein and shall represent a legally binding agreement
upon execution by each of us. This Agreement will be enforceable
against each party hereto and its successors and assigns
(including any transferee of any shares of Series A Stock and
Series B Stock of Venture First or Biddle and including any
transferee of any shares of Series C Stock of GeoCapital) in
accordance with its terms. If requested by InterCAP, Venture
First, Biddle and GeoCapital agree to submit all certificates
representing the Series A Stock, the Series B Stock and the
Series C Stock to InterCAP for the placement thereon of a legend
referencing the existence and restrictions in this Agreement.
Pending the placement of such legends on such certificates,
Venture First, Biddle and GeoCapital shall not sell, transfer,
pledge, hypothecate or otherwise dispose of their shares of
Series A Stock, Series B Stock or Series C Stock, in whole or in
part, in any manner whatsoever other than in connection with the
Merger or as may be contemplated by this Agreement. The parties
hereto each hereby consent to specific performance of their
obligations hereunder by the other parties hereto.
IN WITNESS WHEREOF, each of the parties hereto has caused
this Agreement to be signed as of the date first above written.
INTERCAP GRAPHICS SYSTEMS, INC.
By:
------------------------------------
Title
VENTURE FIRST II L.P.
By: Venture First Associates II L.P.
General Partner
By:
-----------------------------
W. Andrew Grubbs
General Partner
-------------------------------------
A.G.W. BIDDLE, III
GEOCAPITAL II L.P.
By:
---------------------------------
James J. Harrison
General Partner
Exhibit A
to
Preferred Stock Agreement
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
INTERCAP GRAPHICS SYSTEMS, INC.
InterCAP Graphics Systems, Inc., a corporation duly
organized and existing under and by virtue of the General
Corporation Law of the State of Delaware (the "Company"), hereby
certifies as follows:
1. That the Board of Directors of the Company has
duly adopted the following resolutions at a meeting duly called
and convened on September ___, 1994:
RESOLVED, that the Board of Directors of the
Company hereby declares it advisable that, subject to
receipt of requisite stockholder approval, ARTICLE
FOURTH, Section IA, paragraph 4(a) of the Certificate
of Incorporation of the Company, as heretofore amended,
be further amended by deleting "October 1, 1994" and
replacing it with "January 15, 1995."
2. That the aforementioned amendment was duly adopted
in accordance with the applicable provisions of Section 242 of
the General Corporation Law of the State of Delaware.
3. That the capital of the Company will not be
reduced under or by reason of said amendments.
IN WITNESS WHEREOF, InterCAP Graphics Systems, Inc., has
caused this Certificate of Amendment to be executed by A.G.W.
Biddle, III, its President, and to be attested to by John C.
Gebhardt, its Secretary, this ____ day of _____________, 1994.
ATTEST: InterCAP Graphics Systems, Inc.
By: By:
--------------------------- ----------------------------
John C. Gebhardt A.G.W. Biddle, III
Secretary President
Exhibit C
ESCROW AGREEMENT
THIS ESCROW AGREEMENT ("Agreement"), dated as of __________
____, 1994, among Intergraph Corporation, a Delaware corporation
("Parent"), A.G.W. Biddle, III, John C. Gebhardt and Joy E.
Binford (the "Stockholders' Committee") and ____________________,
in its capacity as Escrow Agent hereunder (the "Escrow Agent",
which term shall also include any successor escrow agent
appointed in accordance with Section 10(b) hereof).
Reference is made to the Agreement and Plan of
Reorganization dated as of September ___, 1994 (the
"Reorganization Agreement"), among Parent, Intergraph DC
Corporation-Subsidiary-7, a Delaware corporation and a wholly-
owned subsidiary of Parent (the "Acquisition Sub"), and InterCAP
Graphics Systems, Inc., a Delaware corporation (the "Company"),
providing for, among other things, the merger (the "Merger") of
Acquisition Sub with and into the Company, with the Company
surviving the Merger as a wholly-owned subsidiary of Parent and
the stockholders of the Company receiving shares of Intergraph
Common Stock in exchange for shares of InterCAP Stock, in the
manner provided in the Reorganization Agreement. As used herein,
the term "Reorganization Agreement" shall be deemed to mean and
include the Reorganization Agreement and all of the schedules and
exhibits thereto and all other agreements executed and delivered
in connection therewith. All capitalized terms used but not
defined herein shall have the meanings ascribed thereto in the
Reorganization Agreement.
This Agreement is designed to implement the provisions of
the Reorganization Agreement pursuant to which Parent, on behalf
of the Stockholders, is depositing with the Escrow Agent shares
of Intergraph Common Stock issued in the Merger to the
Stockholders as security for the satisfaction of the
indemnification obligations of the Stockholders pursuant to
Section 9.2 of the Reorganization Agreement.
NOW, THEREFORE, to induce Parent to enter into, and in
consideration of Parent entering into, the Reorganization
Agreement, and in consideration of the premises and the
representations and warranties and agreements contained herein,
the parties hereto agree as follows:
1. Appointment of Escrow Agent. The Escrow Agent is
hereby appointed to act as escrow agent hereunder and the Escrow
Agent agrees to act as such.
2. Stockholders' Committee. Pursuant to Section 9.2(f) of
the Reorganization Agreement, the Stockholders have, by their
approval of the Merger, constituted and appointed as their agents
and attorneys-in-fact (who, by execution of this Agreement, will
be deemed to accept such appointment) a committee of three
persons, to consist initially of A.G.W. Biddle, III, John C.
Gebhardt and Joy E. Binford and such other persons as from time
to time may be designated in substitution therefor as the
"Stockholders' Committee", with full power and authority to take
all action required or permitted under this Agreement (including,
but not limited to, the giving and receipt of all notices and
consents and the execution and delivery of all documents,
including any amendments hereto and any agreements and releases
in connection with the settlement of disputes hereunder). The
vote of a majority of the Stockholders' Committee shall be
required to take any action on behalf of the Stockholders
pursuant to the authority granted to them under Section 9.2(f) of
the Reorganization Agreement and this Section 2. The reasonable
expenses incurred by the Stockholders' Committee in performing
its duties as the Stockholders' Committee as well as the costs of
indemnifying or insuring the Stockholders' Committee pursuant to
the Reorganization Agreement (including reasonable legal fees and
expenses of counsel thereto) shall be borne (i) by the Company up
to an aggregate amount not to exceed $5,000; and (ii) severally
by the Stockholders, pro rata based upon the relative number of
shares of Intergraph Common Stock delivered into escrow hereunder
by or on behalf of such Stockholders to the extent such expenses
exceed $5,000 in the aggregate.
3. Escrow Fund and Escrow Account.
(a) On the date hereof, in accordance with
Section 2.2(a) of the Reorganization Agreement, Parent is
delivering (or causing the Exchange Agent to deliver) to the
Escrow Agent one or more certificates representing the Escrow
Shares and the Escrow Agent is accepting such certificates in
escrow for the benefit of the Stockholders and the Indemnified
Persons pursuant to the provisions of this Agreement. The shares
of Intergraph Common Stock delivered to the Escrow Agent pursuant
to this Section 3(a), together with any dividends or
distributions in cash, stock or property or any securities of
Parent issued in respect thereof (including, without limitation,
any shares issued pursuant to any stock dividend, stock split,
reverse stock split, combination or reclassification thereof)
shall become part of, and are hereinafter referred to
collectively as, the "Escrow Fund."
(b) The Escrow Agent shall establish a segregated
account (the "Escrow Account") at its office located at its
address set forth in Section 11(a) of this Agreement in which to
hold the Escrow Fund.
4. Rights to the Escrow Fund. The Escrow Fund shall be
for the exclusive benefit of the Stockholders and the Indemnified
Persons and their respective successors and assigns, as provided
herein and in the Reorganization Agreement, and no other person
or entity shall have any right, title or interest therein.
5. Distribution of the Escrow Fund. The Escrow Agent
shall continue to hold the Escrow Fund in its possession until
authorized hereunder to distribute the Escrow Fund. The Escrow
Agent shall distribute the Escrow Fund as follows:
(a) In the event any Indemnified Person (the "Claiming
Person") asserts a right of indemnity against the Stockholders
under Section 9.2 of the Reorganization Agreement, the Claiming
Person shall execute and deliver to the Escrow Agent (with a copy
being sent simultaneously to the Stockholders' Committee) a
written notice to such effect (a "Notice of Claim"; and the right
of indemnity asserted in a Notice of Claim being hereinafter
referred to as a "Claim") and instructing the Escrow Agent to
deliver that portion of the Escrow Fund the Fair Market Value (as
defined in Section 6 hereof) of which shall equal the amount of
the Claim (or, if the amount of the Claim shall be greater than
the Fair Market Value of the Escrow Fund, the balance of the
Escrow Fund) to such Claiming Person and the following shall
apply:
(i) a Notice of Claim delivered to the
Escrow Agent pursuant to this Section 5(a) shall set
forth the nature and details of such Claim (to the
extent known), and the amount thereof (or if not
ascertainable, a reasonable maximum amount thereof);
and
(ii) if within 10 business days after receipt
of any Notice of Claim by the Escrow Agent pursuant to
this Section 5(a), the Stockholders' Committee fails to
notify the Escrow Agent that the Claim, or the amount
thereof, is disputed, the Escrow Agent shall, within 5
days after the expiration of such 10-day period,
deliver to the Claiming Person that portion of the
Escrow Fund the Fair Market Value of which shall equal
the amount of the Claim as set forth in such Notice of
Claim (or, if the amount of the Claim shall be greater
than the Fair Market Value of the entire Escrow Fund as
of such date, the balance of the Escrow Fund) (the date
of any such delivery being referred to herein as a
"Release Date"). If the Stockholders' Committee does
so notify the Escrow Agent of such dispute (a copy of
such notice being simultaneously sent to the Claiming
Person), the Escrow Agent shall not deliver such amount
to such Claiming Person (or to the Stockholders
pursuant to Section 5(c) hereof) until 5 days after
such dispute has been settled as provided in Section 11
hereof and notice of such settlement and of the amount,
if any, to be paid in respect of the disputed Claim has
been delivered to the Escrow Agent and the
Stockholders' Committee (the date of receipt of any
such notice being referred to herein as a "Settlement
Notice Date"; and a Release Date or a Settlement Notice
Date being referred to herein as a "Determination
Date").
(b) Anything contained herein to the contrary
notwithstanding, if the Escrow Agent is authorized, at any time
pursuant to Section 5(a) hereof, to deliver all or any portion of
the Escrow Fund to Parent with respect to a Claim or Claims, then
such delivery shall be made regardless of the Escrow Agent's
prior or subsequent receipt of any Notice of Claim or Notice of
Dispute with respect to any other Claim or Claims.
(c) Subject to Section 5(a) hereof, on the ninetieth
(90th) day after the Closing Date, the Escrow Agent shall
distribute to the Stockholders the entire balance, if any, of the
Escrow Fund, that is in excess of the aggregate amounts specified
in all Notices of Claim which, prior to such date, have not been
paid to Parent or otherwise discharged pursuant to this
Section 5. Any portion of the Escrow Fund which shall continue
to be held by the Escrow Agent pursuant to the preceding sentence
shall be so held until such time as all disputed Claims hereunder
have been settled and notice of such settlement or settlements
setting forth the amounts to be paid to Parent, on the one hand,
and the Stockholders, on the other hand, have been delivered to
the Escrow Agent. If a portion of the Escrow Fund is to be
delivered to the Stockholders as provided in this Section 5(c),
the Escrow Agent shall disburse such portion of the Escrow Fund
as follows:
FIRST, to each Stockholder who has previously
exchanged his or its Old Certificates of InterCAP Stock
in the manner provided in Section 2.2(b) of the
Reorganization Agreement, that number of shares of
Intergraph Common Stock (the "Distributable Shares") as
shall equal such Stockholders pro rata portion of the
Escrow Fund based on his or its relative contribution
of the Escrow Shares to the Escrow Fund, together with
any cash, property or securities of Parent issued in
respect of such Distributable Shares (including,
without limitation, any shares issued pursuant to any
stock split, reverse stock split, combination or
reclassification thereof); and
SECOND, to Parent (to hold for the benefit of
such Stockholders pursuant to Section 2.2(e) of the
Reorganization Agreement) the balance thereof with
respect to those Stockholders, if any, who have failed
to exchange their Old Certificates in the manner
contemplated by Section 2.2(b) of the Reorganization
Agreement.
(c) Notwithstanding anything in this Agreement to the
contrary, if the Stockholders' Committee executes and delivers to
the Escrow Agent (with a copy being sent simultaneously to the
Parent) a written notice instructing the Escrow Agent to
distribute that portion of the Escrow Fund as is attributable to
each Stockholder on whose behalf thirty (30) or fewer Escrow
Shares were initially contributed to the Escrow Account, the
Escrow Agent shall distribute such portion of the Escrow Fund to
such Stockholders, pro rata based on this relative contribution
of Escrow Shares to the Escrow Fund.
(d) To facilitate the distribution of Escrow Shares
from the Escrow Account in accordance with the terms of this
Section 5, the Escrow Agent is authorized to present certificates
representing the Escrow Shares to the Exchange Agent for split-
up, reissuance and delivery by the Exchange Agent to Parent,
Claiming Person or Stockholders, as the case may be.
6. Valuation. For all purposes of this Agreement, the
"Fair Market Value" of any property (other than cash and shares
of Intergraph Common Stock) contained in the Escrow Fund as of
any date shall be the fair market value of such property as of
such date as determined by the Board of Directors of Parent in
the good faith exercise of its reasonable business judgment, and
the "Fair Market Value" per share of Intergraph Common Stock
shall be the Share Determination Market Price.
7. Stockholder Rights. Anything contained herein to the
contrary notwithstanding, the holder of shares of Intergraph
Common Stock held in the Escrow Account shall at all times retain
and have the full and absolute right to exercise, all rights and
indicia of ownership, including, without limitation, voting and
consensual rights, other than the right to receive dividends and
other distributions in respect of, and the right to transfer or
otherwise dispose of, such shares while such shares remain
subject to this Agreement. If any such shares of Intergraph
Common Stock are transferred to the Parent pursuant to Section 5
hereof in satisfaction of a Claim or Claims, all rights and
indicia of ownership shall thereupon reside with the Parent or
any subsequent holders thereof.
8. Termination. This Agreement may be terminated at any
time by and upon the receipt by the Escrow Agent of 10 days'
prior written notice of termination executed by Parent and the
Stockholders' Committee directing the distribution of all
property then held by the Escrow Agent under and pursuant to this
Agreement. This Agreement shall automatically terminate if and
when all amounts in the Escrow Account (including all the
securities in which any funds contained in the Escrow Account
shall have been invested) shall have been distributed by the
Escrow Agent in accordance with the terms of this Agreement.
9. Escrow Agent.
(a) Obligations.
(i) The obligations of the Escrow Agent are those
specifically provided in this Agreement, and the Escrow Agent
shall have no liability under, or duty to inquire into the terms
and provisions of, any agreement among the other parties hereto.
The duties of the Escrow Agent are purely ministerial in nature,
and it shall not incur any liability whatsoever, except for
willful misconduct or gross negligence. The Escrow Agent may
consult with counsel of its choice, and shall not be liable for
following the advice of such counsel.
(ii) The Escrow Agent shall not have any
responsibility for the genuineness of validity of any document or
other item deposited with it or of any signature thereon and
shall not have any liability for acting in accordance with any
written instructions or certificates given to it hereunder and
believed by it to be signed by the proper parties.
(b) Resignation and Removal. The Escrow Agent may
resign and be discharged from its duties hereunder at any time by
giving at least 30 days' prior written notice of such resignation
to Parent and the Stockholders' Committee, specifying a date upon
which such resignation shall take effect; provided, however, that
the Escrow Agent shall continue to serve until its successor
accepts the Escrow Fund. Upon receipt of such notice, a
successor escrow agent shall be appointed by Parent and the
Stockholders' Committee, such successor escrow agent to become
the Escrow Agent hereunder on the resignation date specified in
such notice. If a written instrument of acceptance by a
successor escrow agent shall not have been delivered to the
Escrow Agent within 40 days after the giving of such notice of
resignation, the resigning Escrow Agent may at the expense of
Parent petition any court of competent jurisdiction for the
appointment of a successor escrow agent. Parent and the
Stockholders' Committee, acting jointly, may at any time
substitute a new escrow agent by giving 10 days' prior written
notice thereof to the Escrow Agent then acting and by Parent
paying all fees and expenses of such Escrow Agent.
(c) Indemnification. Parent shall hold the Escrow
Agent harmless and indemnify the Escrow Agent against any loss,
liability, expense (including attorneys' fees and expenses),
claim or demand (a "Loss") that may be incurred by the Escrow
Agent arising out of or in connection with the performance of its
obligations in accordance with the provisions of this Agreement
as a consequence of Parent's action; the Stockholders (to the
extent of their rights in the Escrow Fund) shall severally hold
the Escrow Agent harmless and indemnify the Escrow Agent against
any Loss that may be incurred by the Escrow Agent arising out of
or in connection with the performance of its obligations in
accordance with the provisions of this Agreement as a consequence
of the Stockholders' action; and each of the Parent, on the one
hand, and the Stockholders, on the other hand (which Stockholders
shall be severally liable therefor, pro rata based upon the
relative number of shares of Intergraph Common Stock held in
escrow hereunder by or on behalf of such Stockholders) shall hold
the Escrow Agent harmless and indemnify the Escrow Agent against
50% of any Loss arising out of or in connection with the
performance of its obligations in accordance with the provisions
of this Agreement which are not the consequence of any action of
any other party hereto, except for any of the foregoing arising
out of the gross negligence of willful misconduct of the Escrow
Agent. The foregoing indemnities in this paragraph shall survive
the resignation or substitution of any Escrow Agent or the
termination of this Agreement.
(d) Fees of Escrow Agent. Parent shall pay the Escrow
Agent 100% of the fees set forth on Schedule I hereto from and
after the date hereof as compensation for the ordinary
administrative services to be rendered hereunder and all other
reasonable fees and expenses of the Escrow Agent, including
reasonable attorneys' fees and expenses, if any, which it may
incur in connection with the performance of its duties under this
Agreement.
10. Disputes. If any dispute should arise with respect to
the payment or ownership or right of possession of the Escrow
Fund, or the duties of the Escrow Agent hereunder, the Escrow
Agent is authorized and directed to retain in its possession,
without liability to anyone, all or any part of the Escrow Fund
until such dispute shall have been settled either by mutual
agreement of Parent and the Stockholders' Committee (evidenced by
appropriate instructions in writing to the Escrow Agent signed by
Parent and the Stockholders' Committee) or by the final order,
decree or judgment of a court of competent jurisdiction in the
United States of America (the time for appeal having expired with
no appeal having been taken) in a proceeding to which Parent and
the Stockholders' Committee are parties, but the Escrow Agent
shall be under no duty whatsoever to institute or defend any such
proceedings. In the event of any dispute between or among any of
the parties to this Agreement, or between or among them or any of
them and any other person, resulting in adverse claims or demand
being made upon the Escrow Fund, or in the event that the Escrow
Agent, in good faith, is in doubt as to what action it should
take hereunder, the Escrow Agent may, at its option, file a suit
in interpleader in a court of competent jurisdiction, or refuse
to comply with any claims or demands on it, or refuse to take any
other action hereunder, so long as such dispute shall continue or
such doubt shall exist. The Escrow Agent shall be entitled to
continue to so refrain from acting until (a) the rights of all
parties have been fully and finally adjudicated by the final
order, decree or judgment of a court of competent jurisdiction in
the United States of America (the time for appeal having expired
with no appeal having been taken) or (b) all differences shall
have been adjusted and all doubt resolved by agreement among all
of the interested persons, and in each case the Escrow Agent
shall have been notified thereof in a writing signed by all such
persons.
11. Miscellaneous.
(a) All notices, claims, certificates, requests,
demands and other communications hereunder shall be in writing
and shall be deemed to have been duly given if personally
delivered or if sent by telecopier, nationally-recognized
overnight courier or by registered or certified mail, return
receipt requested and postage prepaid, addressed as follows:
(i) if to the Stockholders' Committee, then to:
InterCAP Graphics Systems, Inc.
116 Defense Highway
Annapolis, Maryland 21401
Attention: A.G.W. Biddle, III
Telecopier: 301/261-8358
with a copy to:
Womble Carlyle Sandridge & Rice, P.L.L.C.
1600 Southern National Financial Center
200 West Second Street
Winston-Salem, North Carolina 27101
Attention: Jeffrey C. Howland, Esquire
Telecopier: 910/721-3660
(ii) if to Parent, to:
Intergraph Corporation
Mail Stop HQ011
Huntsville, Alabama 35894-0001
Attention: John W. Wilhoite
Telecopier: (205) 730-2164
with a copy to:
Intergraph Corporation
Mail Stop HQ034
Huntsville, Alabama 35894-0001
Attention: B. Judson Hennington, III, Esquire
Telecopier: 205/730-2247
(iii) if to the Escrow Agent, to:
or to such other address as the party to whom notice is to be
given may have furnished to the other parties hereto in writing
in accordance herewith. Any such notice or communication shall
be deemed to have been received (a) in the case of personal
delivery or delivery by telecopier, on the date of such delivery,
(b) in the case of nationally-recognized overnight courier, on
the next business day after the date when sent and (c) in the
case of mailing, on the third business day following that on
which the piece of mail containing such communication is posted.
(b) Counterparts. This Agreement may be executed in a
number of counterparts, and each such counterpart hereof shall be
deemed to be an original instrument, but all such counterparts
together shall constitute but one agreement.
(c) Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of
Delaware applicable to agreements made and to be wholly performed
within such State without giving effect to the principles of
conflicts of laws thereof.
(d) Parties in Interest. This Agreement shall be
binding upon, inure to the benefit of, and be enforceable by, the
parties hereto and their respective successors and assigns.
Anything contained herein to the contrary notwithstanding, this
Agreement shall not be assigned by any party hereto without the
consent of the other parties hereto.
(e) Amendments. This Agreement may be amended only by
a written instrument duly executed by the parties hereto.
(f) Headings. The section and paragraph headings
contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Escrow Agreement to be executed and delivered on the date first
above written.
INTERGRAPH CORPORATION:
By:
------------------------------
Name:
Title:
STOCKHOLDERS' COMMITTEE:
---------------------------------
A.G.W. Biddle, III, as agent and
attorney-in-fact for the
Stockholders pursuant to
Section 9.2(f) of the
Reorganization Agreement
--------------------------------
John C. Gebhardt, as agent and
attorney-in-fact for the
Stockholders pursuant to
Section 9.2(f) of the
Reorganization Agreement
-------------------------------
Joy E. Binford, as agent and
attorney-in-fact for the
Stockholders pursuant to
Section 9.2(f) of the
Reorganization Agreement
Accepted and Agreed to as of
the Date First Written Above:
ESCROW AGENT:
[ ]
By:
------------------------------
Name:
Title:
EXHIBIT D
InterCAP Graphics Systems, Inc.
1989 Employee Stock Option Agreement
THIS EMPLOYEE STOCK OPTION AGREEMENT entered into this
6th day of June, 1994 between InterCAP Graphics Systems, Inc., a
Delaware corporation, having its principal office at 116 Defense
Highway, Annapolis, Maryland 21401 (hereinafter referred to as
"Company") and __________________, an individual residing in the
state of Maryland (hereafter referred to as the "Optionee").
WITNESSETH:
-----------
WHEREAS, the Optionee is now engaged in the performance
of services for the Company as an employee of the Company, and
WHEREAS, the Company desires that the Optionee continue
to engage in services on behalf of the Company and the Company
desires to afford the Optionee an additional incentive pursuant
to its 1989 Employee Stock Option Plan (the "Plan"), a copy of
which is attached hereto as Exhibit A and the terms of which are
incorporated herein by reference, to either acquire or increase,
as the case may be, his proprietary interest in the success of
the Company;
NOW, THEREFORE, in consideration of the premises and of
the mutual agreements hereinafter set forth, the parties hereto
hereby mutually agree as follows:
1. Grant of Option. Subject to the terms and conditions
hereinafter set forth, the Company hereby grants to the Optionee,
in consideration of his continued service on behalf of the
Company, the option to purchase during the period specified in
Section 2, and at the purchase price specified in Section 3, all
of or any part of 10,000 shares (the "Shares") of the Common
Stock of the Company, which Shares when issued upon the exercise
of such option and paid for in accordance with the terms hereof
shall be fully paid and nonassessable. This option shall be an
incentive stock option ("ISO") within the meaning of Section 422A
of the Internal Revenue Code of 1986, as amended (the "Code").
2. Period and Exercise.
A. No part of this option may be exercised (i) before
the first anniversary of issuance (the "Date of Grant"), or (ii)
more than ten years from the date of issue. The minimum number
of Shares with respect to which this option may be exercised in
part at one time shall be 100. Subject to the foregoing and to
the provisions of Sections 4 and 5 hereof, the Optionee may
exercise this option as follows:
(i) at any time or times from the Date of Grant
through the first anniversary of the Date of Grant, the
Optionee may exercise this option as to any number of Shares
up to 25% of the total number of Shares covered hereby;
(ii) at any time or times from the first
anniversary of the Date of Grant through the second
anniversary of the Date of Grant, the Optionee may exercise
this option as to any number of Shares which, when added to
the Shares as to which the Optionee has theretofore
exercised this option, will not exceed 50% of the total
number of Shares covered hereby;
(iii) at any time or times from the second
anniversary through the third anniversary of the Date of
Grant, the Optionee may exercise this option as to any
number of Shares which, when added to the Shares as to which
the Optionee has theretofore exercised this option will not
exceed 75% of the total number of Shares covered hereby; and
(iv) at any time or times from after the third
anniversary of the Date of Grant through the tenth year
after the original issue, the Optionee may exercise this
option as to any number of Shares which, when added to the
Shares as to which the Optionee has theretofore exercise
this option, will not exceed the total number of Shares
covered hereby.
B. Except as otherwise provided in Sections 4 or 5,
this option shall be exercisable only if the Optionee has
remained in continuous employment with the Company from the Date
of Grant until the date of the proposed exercise. For the
purpose of this Agreement, a period of engagement as an employee
or officer shall be considered continuing intact for any period
that the Optionee is on military or sick leave or other bona fide
leave of absence, provided that the period of such leave does not
exceed ninety days, or, if longer, as long as the Optionee's
right to re-employment is guaranteed either by statute or by
contract. The period of engagement as an employee or officer
shall also be considered continuing intact while the Optionee is
not in active service because of disability. For purposes of
this Section 2(B), "disability" shall mean the inability of the
Optionee to engage in any substantial gainful activity by reason
of any medically determinable physical or mental impairment which
can be expected to result in death, or which has lasted or can be
expected to last for a continuous period of not less than twelve
months. The Committee (as defined below) shall determine whether
the Optionee is disabled within the meaning of this Section 2(B).
Subject to the limitations of this Section 2(B) above with
respect to the permissible length of a leave of absence, in
authorizing a leave of absence the Board of Directors of the
Company (the "Board") or the Compensation Committee of the Board
(the "Committee") may, in its discretion, give credit for the
time of such leave in computing whether sufficient time has
elapsed for the option or any part thereof to be exercised.
Termination of a period of engagement as an employee or officer
of the Company to enter the employ or serve as an officer of a
subsidiary corporation (as defined in Section 425(f) of the Code)
of the Company, as the case may be, shall not be deemed to
interrupt continuous employment.
C. This option may be exercised pursuant to its terms
by the Optionee's giving written notice thereof to the Secretary
or Treasurer of the Company at its then principal office. Such
notice shall state the number of Shares with respect to which the
option is being exercised and shall be accompanied by payment in
full of the purchase price for such Shares in cash, by certified
or bank cashier's check payable to the order of the Company.
In the event this option shall be exercised, pursuant to
Section 5, by any person other than the Optionee, the aforesaid notice
shall also be accompanied by appropriate proof of the right of such
person to exercise the same.
D. The stock certificates evidencing the Shares
acquired upon exercise of the option, if such Shares are not
covered by a registration statement under the Securities Act of
1933, as amended (the "Securities Act"), and are not registered
under applicable state securities laws, shall bear the following
legend:
"These securities have not been registered under
the Securities Act of 1933, as amended, or under
any applicable state securities laws. They may
not be sold, offered for sale, pledged,
hypothecated or otherwise transferred unless
registered under said Act and under any applicable
state securities laws or unless, in the opinion of
counsel for the Company, such registration is not
required."
E. The Company may in its discretion require,
regardless of whether a registration statement under the
Securities Act and under applicable state securities laws is then
in effect with respect to the Shares issuable upon such exercise,
or the offer and sale of such Shares are exempt from the
registration provisions of the Securities Act and of any
applicable state securities laws, that as a condition precedent
to the exercise of this option, the person exercising the option
give to the Company a written representation and undertaking,
satisfactory in form and substance to the Company, that he or she
is acquiring the Shares for his or her own account for investment
and not with a view to the distribution or resale thereof and
otherwise establish to the Company's satisfaction that the offer
or sale of the Shares issuable upon exercise of the option will
not constitute or result in any breach or violation of the
Securities Act, any applicable state securities laws, or any
similar act or statute or any rulings or regulations thereunder.
3. Option Price. Subject to the provisions of Section 8,
the option price per Share shall be $_________. Such price has
been found by the Board to be not less than 100% of the fair
market value per Share as of the Date of Grant.
4. Termination of Option. In the event of the termination
of the service of the Optionee as an officer or employee: (i)
involuntarily, for cause (which shall include, without
limitation, termination for breach of his or her employment
agreement, if any), or voluntarily, for any reason, this option
and all rights hereunder will automatically terminate
simultaneously with the occurrence of such termination; or (ii)
for any reason, except death, this option and all rights
hereunder will automatically terminate on the earlier of (a) 90
days from the date of termination (as fixed and determined by the
Committee) or (b) the tenth anniversary of the original issue.
5. Non-Assignability and Death of Optionee.
A. Notwithstanding anything to the contrary herein
contained, neither this option nor any rights represented hereby
shall be transferable or assignable by the Optionee otherwise
than by will or by the laws of descent and distribution, and this
option shall be exercisable during the Optionee's lifetime only
by the Optionee, and any attempt to transfer or assign this
option in violation of the foregoing shall be void and of no
force or effect.
B. In the event the Optionee's employment by the
Company is terminated because of death: (i) the option may be
exercised only to the extent exercisable by the Optionee on the
date of the death of the Optionee; (ii) the option shall be
exercisable only by the executor or administrator of the Optionee
or the person to whom the Optionee's rights under the option
shall pass by the will of the Optionee or the laws of descent and
distribution; and (iii) the option may only be exercised within
one year of the date of death of the Optionee, but in no event
after the tenth anniversary of the original issue.
6. Repurchase of Shares.
A. If, for any reason, including, without limitation,
discharge, retirement, disability or death, the Optionee ceases
to be an employee of the Corporation or a related corporation
within three years of the Date of Grant, the Corporation shall
have the right (but shall not be obligated) to repurchase all
Shares acquired pursuant to this Agreement, including Shares
acquired following termination of the Optionee's employment
pursuant to the exercise of the option granted hereunder by the
Optionee, the Optionee's estate, or any person acquiring the
Option by will or the laws of intestate succession (the
"Repurchase Shares").
B. If the Corporation desires to repurchase the
Repurchase Shares, the Corporation shall provide written notice
of its desire to repurchase within ninety days following
termination of the Optionee's employment by the Corporation (or,
with respect to Shares acquired through the exercise of options
following the close of such ninety-day period, within thirty days
following the date of such exercise). Such notice shall be
provided to the Optionee, the Optionee's estate or such other
person as may then be the registered holder of such Repurchase
Shares (collectively referred to herein as the "Registered
Holder"). When the Corporation provides such notice to the
Registered Holder, the Registered Holder shall tender the stock
certificate or certificates representing the Repurchase Shares to
the Corporation at a Closing to be held on the tenth business day
following the date of the Corporation's notice at 10:00 a.m. at
the Corporation's principal place of business, or at such other
time and place as the parties shall agree. At the Closing, the
Corporation shall tender the purchase price of the Repurchase
Shares as provided in Section 6(C). If the Corporation shall
fail to provide such notice with respect to any Repurchase
Shares, the provisions of this Section 6 shall be inapplicable
with respect to such Shares.
C. The purchase price of the Repurchase Shares
purchased pursuant to this Section 6 (the "Purchase Price") shall
be an amount per Share to be determined according to the
following equation:
Purchase Price = (R +/- NI) - PSLP
-----------------
CSE
where:
R = the Company's gross revenues
from operations for the 12-month period
ending as of the last day of the calendar
quarter immediately preceding the date of
termination of Optionee's employment,
computed in accordance with generally
accepted accounting principles
NI = the Company's net income (or
net loss) for the 12-month period ending as
of the last day of the calendar quarter
immediately preceding the date of termination
of Optionee's employment, computed in
accordance with generally accepted accounting
principles; in the case of net income, such
amount shall be added to R and in the case of
net loss, such amount shall be subtracted
from R
PSLP = the full aggregate liquidation
preference to which the holders of the
Company's outstanding shares of preferred
stock would be entitled as of the date of the
termination of Optionee's employment if the
Company were deemed to have been subjected to
a transaction triggering such a liquidation
preference on such date
CSE = the number of shares of Common
Stock outstanding as of the date of
termination of Optionee's employment
calculated on a fully diluted basis assuming
the conversion and exchange of all
outstanding securities of the Company
convertible into or exchangeable for shares
of Common Stock and the exercise in full of
all outstanding warrants, options or similar
rights that are exercisable on the date of
such termination without further contingency
The Purchase Price of the Repurchase Shares shall be determined
by the Committee in good faith. Payment of the Purchase Price
for the Repurchase Shares shall be in cash unless otherwise
agreed by the Committee and the Registered Holder.
D. Unless the Committee shall otherwise agree, the
aggregate Purchase Price for any Repurchase Shares purchased
hereunder shall be reduced by the amount of any advances or loans
made to the Registered Holder by the Corporation which have not
been repaid in full as of the date of the Closing. If the
aggregate amount of such advances or loans exceeds the Purchase
Price of the Repurchase Shares under this Section 6, the excess
shall be and remain until paid the obligation of the Optionee or
his estate.
E. The provisions 6(A) through 6(D) shall terminate
if the company is sold as defined in Section (8).
7. Listing, Registration and Other Legal Requirements.
A. In the event shares of the Common Stock shall be
listed on any national securities exchange, the Company shall not
be required to issue or deliver any certificate for Shares
purchased upon the exercise of this option prior to completion of
listing of such Shares on such national securities exchange and
any other exchange on which the shares of the Common Stock may
then be listed, and prior to the registration of the same under
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and any similar act or statute. In such event, and in the
further event of the exercise of this option with respect to any
Shares subject hereto, the Company at its own cost shall make
prompt application for completion of such listing and/or
registration of such Shares as may be necessary.
B. The granting and exercise of this option and the
Company's obligation to deliver Shares pursuant to an exercise of
this option shall be subject to all applicable federal and state
laws, rules and regulations, and listing requirements of any
stock exchange, and to such approvals by a regulatory or
governmental agency as may be required. Accordingly, if in the
opinion of the Company, Shares subject to this option are
required to be registered under the Exchange Act or under any
applicable state securities laws, and such registration has not
been effected or a prospectus complying with the requirements of
Section 10 of the Securities Act is not available for delivery
upon exercise of this option, the Company shall not be required
to deliver the Shares subject to the option to the extent being
exercised until the registration has been effected and the
prospectus made available. Pending the satisfaction of the
foregoing such exercise shall be deemed suspended and there shall
be returned to the person exercising this option the proceeds
representing the exercise price. In such event, the Company
shall provide notice to the Optionee or his representative of the
satisfaction of the foregoing registration condition, whereupon
the right to exercise this option shall be reinstated.
C. In no event shall there first become exercisable
by the Optionee in any one calendar year incentive stock options
granted under the Plan or any other incentive stock option plan
of the Company or any parent or subsidiary corporation (as
defined in Sections 425(e) and (f) of the Code) of the Company
with respect to shares having an aggregate fair market value
(determined at the time an option is granted) greater than
$100,000.
8. Capital Adjustment and Sale of the Company.
A. If prior to the expiration of this option there
shall be any stock dividend, stock split, combination or exchange
of shares, merger, consolidation, recapitalization, separation,
reorganization, liquidation, extraordinary dividend payable in
stock of a corporation other than the Company, or otherwise than
in cash, or any other like event by or of the Company, and as
often as the same shall occur, then the number, class and kind of
shares of stock then subject to this option and the purchase
price per share of such stock shall be appropriately adjusted by
the Committee or the Board to reflect such event so that the
Optionee shall be entitled to receive such number of shares or
other securities which the Optionee would have been entitled to
receive had this option been exercised prior to the occurrence of
such event. The determination of the Committee or the Board in
respect thereof shall be conclusive.
B. In the event of (a) the sale of all or
substantially all of the Company's assets, (b) the sale by the
Company's stockholders in a single transaction or a series of
related transactions of more than 50% of the Company's
outstanding capital stock, or (c) a merger to which the Company
is a party but in which the Company is not the surviving
corporation, or a consolidation of the Company with another
entity, as a result of which the stockholders of the Company,
immediately after such merger or consolidation, hold less than
50% of the equity securities of the surviving or resulting
corporation (the events described in clauses (a)-(c) above being
hereinafter referred to as the "Subject Events") prior to the
full vesting of these options, then this option shall be deemed
immediately exercisable in full as of the day immediately
preceding the date of such Subject Event.
C. In the event of (i) the sale by the Company's
stockholders in a single transaction or a series of related
transactions of all of the Company's outstanding capital stock,
or (ii) a merger or consolidation as described in clause (c) of
Section 8(B) (the events described in clauses (i) and (ii) above
being hereinafter referred to as the "Sale Events") prior to July
1, 1994, with respect to all Shares purchased by the Optionee on
the day immediately preceding the date of such Sale Event which
Shares became purchasable by the Optionee solely because of the
operation of Section 8(B) hereof (the "Accelerated Shares"), the
amount of cash, securities or other property or consideration
(the "Consideration") payable by the purchaser of the Accelerated
Shares (the "Purchaser") with respect to its purchase of the
Accelerated Shares in connection with the Sale Event shall be
payable by the Purchaser to the Optionee on terms no less
favorable than the following:
(1) One-half of the Consideration (in
corresponding increments of cash, stock or other property)
shall be delivered by the Purchaser to the Optionee on the
date of closing of the Sale Event (the "Closing"); and
(2) One-half of the Consideration shall be
delivered by the Purchaser to an escrow account maintained
at a bank or with any other third party acceptable to the
Purchaser and the Company, such Consideration to be
disbursed to the Optionee (or to the Purchaser) as follows:
(a) If the Optionee has not
voluntarily terminated his or her employment
with the Company prior to the first
anniversary of the Closing (the "First
Anniversary"), one-half of the remaining
Consideration together with "Interest"
thereon as hereinafter provided, shall be
delivered by the Purchaser to the Optionee on
the First Anniversary.
(b) If the Optionee has not
voluntarily terminated his or her employment
with the Company prior to the second
anniversary of the Closing (the "Second
Anniversary"), all the remaining
Consideration, together with all remaining
"Interest" thereon as hereinafter provided,
shall be delivered by the Purchaser to the
Optionee on the Second Anniversary; and
(c) If the Optionee
voluntarily terminates his employment with
the Company prior to the First Anniversary or
the Second Anniversary (other than by reason
of his or her death or disability), all
Consideration remaining in the escrow
account, together with all remaining
"Interest" thereon, shall be returned to the
Purchaser as of the date of such termination.
All cash Consideration deposited in the escrow account
shall bear interest, payable by the Purchaser, at the rate of ten
percent (10%) per annum, compounded annually. Any interest
earned in the escrow account on cash Consideration deposited
therein shall be applied towards payment of "Interest" as
described below. In the case that shares of stock, other
securities, notes or other evidences of indebtedness or other
property constitute some or all of the Consideration, the
Purchaser shall deposit in the escrow account at the Closing a
number of shares of stock or other units of ownership, or a note
or other evidence of indebtedness with a face value or principal
amount, or other property with a fair market value as determined
by the Board, as the case may be, reasonably expected to be equal
to one hundred twenty-one percent (121%) of the value of shares
of stock, or the face value or principal amount of the note or
other evidence of indebtedness, or the fair market value of any
other property otherwise deliverable to the Optionee with respect
to the Accelerated Shares so placed in escrow as it is paid out.
Specifically, the intent of this provision is that 50% of the
face value of the consideration for accelerated shares shall be
paid at closing at 100%. 25% of the consideration shall be paid
on the first anniversary with interest of 10%. 25% of the
consideration shall be paid on the second anniversary plus 21%.
This provision shall apply to cash and cash like investments. It
shall be assumed that pure equity securities shall appreciate by
10% annually and no provision for interest shall be made, though
all dividends on those shares shall be added to the escrow
account. The amount of blended securities (debt and equity like
securities) to be placed in escrow at closing shall be determined
by the Board of Directors to meet the intent of the proceeding,
and shall then be forever fixed and not subject to later
adjustment. Any distribution to the Optionee of Consideration on
the First Anniversary shall include all cash Consideration to be
distributed pursuant to clause (2)(a) above together with
interest earned through the First Anniversary on such cash
portion as described above, plus one hundred ten percent (110%)
of the securities or other property constituting the
Consideration to be distributed from the escrow account pursuant
to clause (2)(a). As used herein, the term "Interest" shall mean
interest earned on all cash Consideration pursuant to this
paragraph and all additional shares of stock, notes or other
property required to be deposited by the Purchaser in the escrow
account at the Closing.
9. No Other Adjustments. Except as provided in
Section 8, no adjustments shall be made for dividends or other
rights for which the record shall be prior to the issuance of a
stock certificate to the Optionee by reason of his exercise of
this option.
10. Rights in Option Stock. The Optionee shall not be
considered a record holder of any of the Shares in respect of
which he shall exercise this option until the date on which he
shall actually be recorded as the holder of such Shares upon the
stock records of the Company and full payment shall have been
made for the Shares.
11. Stock Reserved. The Company shall at all times
during the term of this Option Agreement reserve and keep
available such number of Shares as will be sufficient to satisfy
the requirements of this Option Agreement and shall pay all
original issue taxes, if any, on the exercise option, and all
other fees and expenses necessarily incurred by the Company in
connection therewith.
12. Not Employment Agreement. This Agreement does not
constitute an employment agreement and shall not confer on the
Optionee any right to continue in the employ of the Company, or
prevent, or in any way impair the right of the Company at any
time to terminate the employment of the Optionee as, if
applicable, an officer or employee, with or without cause.
13. Termination, Modification, or Amendment of Plan.
The rights of the Optionee, or the personal representative of the
Optionee, or of a beneficiary of the Optionee who acquires the
right to exercise this option by bequest or inheritance on the
death of the Optionee shall not be adversely affected in any
termination, modification, or amendment of the Plan pursuant to
which this option is granted, without the consent of the Optionee
or of such personal representative or beneficiary.
14. Liability of Board. No member of the Board or of
the Committee shall be liable for any action or determination
made in good faith in respect of the Plan or this option.
15. Successors. This Option Agreement shall be
binding upon any successor of the Company.
16. Notices. All notice which are provided for under
any of the provisions of this Option Agreement shall be in
writing, and shall be given by registered or certified mail,
return receipt requested. Any such notice shall be deemed to
have been given on, and such notice shall be deemed dated, the
date when the same shall have been deposited for mailing, postage
prepaid, in a United States Post Office (except for any notice of
change of address, which shall be deemed given on, and dated, the
date the same shall be received). All notices provided to be
given to the Company shall be addressed to the attention of the
Secretary or Treasurer of the Company at the address of the
Company set forth above, or at such other address as the Company
may designate by notice hereunder. All notices provided to be
given to the Optionee or to his personal representative or
beneficiary, shall be addressed to him or her at the address of
the Optionee set forth above, or at such other address as he or
she may designate by notice hereunder.
17. Fractional Shares. The Company shall not be
required to issue any fractional Share upon exercise of this
option, but it shall pay to the Optionee, or to his personal
representative or beneficiary who acquires the right to exercise
this option by bequest or inheritance on the death of the
Optionee, the cash equivalent of any fractional share interests,
as determined in the sole discretion of the Board or the
Committee.
18. Governing Law. This Option Agreement shall be
deemed made in the State of Delaware and shall be governed by and
construed and enforced in accordance with the laws of such State
applicable to contracts made and to be performed in such State
without giving effect to the principles of conflict of laws.
IN WITNESS WHEREOF, the parties hereto have caused this
Option Agreement to be duly executed on the day and year first
above written.
INTERCAP GRAPHICS SYSTEMS, INC.
By:
-----------------------------
A.G.W. Biddle, III, President
Attest:
- ------------------------------------
John C. Gebhardt
Secretary
OPTIONEE:
(SEAL)
--------------------------
Exhibit E
InterCAP Graphics Systems, Inc.
Nonqualified Stock Option Agreement
THIS NONQUALIFIED STOCK OPTION AGREEMENT ("Agreement")
entered into this ____ day of September, 1994, between InterCAP
Graphics Systems, Inc., a Delaware corporation, having its
principal office at 116 Defense Highway, Annapolis, Maryland
21401 (hereafter referred to as "Company") and _________________,
an individual residing in the state or country, as the case may be,
of __________________ (hereafter referred to as the "Optionee").
WITNESSETH:
-----------
WHEREAS, the Optionee is now engaged in the performance of
services for the Company as an employee of the Company; and
WHEREAS, pursuant to the Company's 1994 Non-Qualified Stock
Option Program the Board of Directors of the Company has
authorized and directed the Company to issue to the Optionee an
option to acquire shares of the Company's Common Stock, $.01 par
value per share (the "Common Stock"), in recognition of past
service to the Company and to induce the present option holders
to remain in the employ of the Company following its merger with
Intergraph DC Corporation - Subsidiary 7 ("Intergraph Sub"), a
Delaware corporation and a wholly-owned subsidiary of Intergraph
Corporation ("Intergraph"), a Delaware corporation;
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements hereinafter set forth, the parties hereto
hereby mutually agree as follows:
1. Grant of Option. Subject to the terms and
conditions hereinafter set forth, the Company hereby grants to
the Optionee, in consideration of the Optionee's prior service to
the Company and the Optionee's continued service on behalf of the
Company and its successor, the option to purchase during the
period specified in Section 2, and at the purchase price
specified in Section 3, all of or any part of __________ shares
(the "Shares") of the Common Stock of the Company, which Shares
when issued upon the exercise of such option and paid for in
accordance with the terms hereof shall be fully paid and
nonassessable. The effectiveness of the foregoing grant is
expressly conditioned on and subject to the consummation of the
merger of Intergraph Sub with and into the Company and the other
transactions (collectively, the "Transactions") contemplated by
that certain Agreement and Plan of Reorganization by and among
Intergraph, Intergraph Sub and the Company dated September _____,
1994 (the "Merger Agreement"). Provided the Transactions are
consummated pursuant to the Merger Agreement, the foregoing grant
shall be deemed to have been made immediately before the
consummation of the Transactions. This option shall be a
nonqualified option under the Internal Revenue Code of 1986, as
amended (the "Code").
2. Period and Exercise.
A. No part of this option may be exercised
(i) before the effective date of the consummation of the
Transactions pursuant to the Merger Agreement (the "Date of
Grant"), or (ii) after the tenth anniversary of the Date of Grant
(the "Expiration Date"). The minimum number of Shares with
respect to which this option may be exercised in part at one time
shall be one-fourth (1/4) of the Shares. Subject to the
foregoing and to the provisions of Sections 4 and 5 hereof, the
Optionee may exercise this option as follows:
(i) at any time or times from the Date
of Grant through the first anniversary of the Date of
Grant, the Optionee may purchase up to one-half (1/2)
of the Shares;
(ii) at any time or times from the first
anniversary of the Date of Grant through the second
anniversary of the Date of Grant, the Optionee may
purchase up to three-fourths (3/4) of the Shares; and
(iii) at any time or times from the
second anniversary of the Date of Grant through the
Expiration Date, the Optionee may purchase all of the
Shares.
B. Except as otherwise provided in Sections 4 or
5, this option shall be exercisable only if the Optionee has
remained in continuous employment with the Company from the date
of this Agreement until the date of the proposed exercise. For
purposes of this Agreement, a period of engagement as an employee
or officer shall be considered continuing intact for any period
that the Optionee is on military or sick leave or other bona fide
leave of absence, provided that the period of such leave does not
exceed ninety days, or, if longer, as long as the Optionee's
right to re-employment is guaranteed either by statute or by
contract. The period of engagement as an employee or officer
shall also be considered continuing intact while the Optionee is
not in active service because of disability. For the purposes of
this Section 2(B), "disability" shall mean the inability of the
Optionee to engage in any substantial gainful activity by reason
of any medically determinable physical or mental impairment which
can be expected to result in death, or which has lasted or can be
expected to last for a continuous period of not less than twelve
months. The Board shall determine whether the Optionee is
disabled within the meaning of this Section 2(B). Subject to the
limitations of this Section 2(B) above with respect to the
permissible length of a leave of absence, in authorizing a leave
of absence the Board of Directors of the Company may, in its
discretion, give credit for the time of such leave in computing
whether sufficient time has elapsed for the option or any part
thereof to be exercised. Termination of a period of engagement
as an employee or officer of the Company to enter the employ or
serve as an officer of a subsidiary or parent corporation (as
defined in Section 424(f) of the Code) of the Company, as the
case may be, shall not be deemed to interrupt continuous
employment.
C. This option may be exercised pursuant to its
terms by the Optionee's giving written notice thereof to the
Treasurer of the Company at its then principal office, or as
otherwise directed by the Company. Such notice shall state the
number of Shares with respect to which the option is being
exercised and shall be accompanied by payment in full of the
purchase price for such Shares in cash, or by certified or bank
cashier's check payable to the order of the Company.
In the event this option shall be exercised,
pursuant to Section 5, by any person other than the Optionee, the
aforesaid notice shall also be accompanied by proof reasonably
acceptable to the Company of the right of such person to exercise
the same.
D. The stock certificates evidencing the Shares
acquired upon exercise of the option, if such Shares are not
covered by a registration statement under the Securities Act of
1933, as amended (the "Securities Act") and are not registered
under applicable state securities laws, shall bear the following
legend:
"These securities have not been
registered under the Securities Act of 1933,
as amended, or under any applicable state
securities laws. They may not be sold,
offered for sale, pledged, hypothecated or
otherwise transferred unless registered under
said Act and under any applicable state
securities laws or unless, in the opinion of
counsel for the Company, such registration is
not required."
E. The Company may in its discretion require,
regardless of whether a registration statement under the
Securities Act and under applicable state securities laws is then
in effect with respect to the Shares issuable upon such exercise,
or the offer and sale of such Shares are exempt from the
registration provisions of the Securities Act and of any
applicable state securities laws, that as a condition precedent
to the exercise of this option, the person exercising the option
give to the Company a written representation and undertaking,
satisfactory in form and substance to the Company, that he or she
is acquiring the Shares for his or her own account for investment
and not with a view to the distribution or resale thereof and
otherwise establish to the Company's satisfaction that the offer
or sale of the Shares issuable upon exercise of the option will
not constitute or result in any breach or violation of the
Securities Act, any applicable state securities laws, or any
similar act or statute or any rulings or regulations thereunder.
3. Exercise Price. Subject to the provisions of
Section 7, the exercise price per Share shall be $______.____
(the "Exercise Price").
4. Non-Assignability. Notwithstanding anything to
the contrary herein contained, neither this option nor any rights
represented hereby shall be transferable or assignable by the
Optionee otherwise than by will or by the laws of descent and
distribution, and this option shall be exercisable during the
Optionee's lifetime only by the Optionee, and any attempt by the
Optionee to transfer or assign this option in violation of the
foregoing shall be void and of no force or effect.
5. Termination of Option.
A. In the event of the termination of the
service of the Optionee as an officer or employee by the Company
for Cause (as hereinafter defined) or voluntarily by the Optionee
for any reason other than breach by the Company of any written
employment agreement (if any) between Optionee and the Company:
(i) the option may be exercised only to the extent exercisable on
the date of such termination; and (ii) the option may only be
exercised within 90 days of the date of such termination, but in
no event after the Expiration Date. As used in this Agreement,
the term "Cause" shall mean (i) "cause" as defined in any written
employment agreement (if any) between Optionee and the Company,
or (ii) in the absence of such an employment agreement, any of
the following: (A) conviction of the Optionee of a felony
involving moral turpitude, (B) gross malfeasance in the
performance of the Optionee's duties, or (C) intentional
substantial damage, theft or destruction by the Optionee of
property of the Company.
B. In the event the Optionee's employment by the
Company is terminated because of death: (i) on the date of the
death of the Optionee, the vesting period for the numbers of
Shares as to which the option may be exercised shall accelerate
and the option shall become fully exercisable as to any
unpurchased Shares; (ii) the option shall be exercisable only by
the executor or administrator of the Optionee or the person to
whom the Optionee's rights under the option shall pass by the
will of the Optionee or the laws of descent and distribution; and
(iii) the option may only be exercised within one year of the
date of death of the Optionee, but in no event after the
Expiration Date.
C. In the event the Optionee's employment is
terminated by the Company other than for Cause or by the Optionee
due to breach by the Company of a written employment agreement
(if any) between Optionee and the Company: (i) on the date of
such event, the vesting period for the number of Shares as to
which the option may be exercised shall accelerate and the option
shall become fully exercisable as to any unpurchased Shares; and
(ii) the option may only be exercised within 90 days following
such termination, but in no event after the Expiration Date.
6. Capital Adjustment; Sale of the Company Subsequent
to the Transactions.
A. If following the consummation of the
Transactions and prior to the expiration of this option there
shall be any stock dividend, stock split, combination or exchange
of shares, recapitalization, separation, reorganization,
liquidation, extraordinary dividend payable in stock of a
corporation other than the Company, or otherwise than in cash, or
any other like event by or of the Company, and as often as the
same shall occur, then the number, class and kind of shares of
stock then subject to this option and the purchase price per
share of such stock shall be appropriately adjusted by the Board
to reflect such event so that the Optionee shall be entitled to
receive such number of shares or other securities which the
Optionee would have been entitled to receive had this option been
exercised prior to the occurrence of such event. The
determination of the Board in respect thereof shall be
conclusive.
B. If the Company is merged with or consolidated
into any other corporation (otherwise than as part of the
Transactions), or if all or substantially all of the business or
property of the Company is sold, or if the Company is liquidated
or dissolved, or if a tender or exchange offer is made for all or
any part of the Company's voting securities, or if any other
actual or threatened change in control of the Company occurs, the
Board, with or without the consent of the option recipient, may
(but shall not be obligated to), either at the time of or in
anticipation of any such transaction, take any of the following
actions that the Board may deem appropriate in its sole and
absolute discretion: (i) cancel any option by providing for the
payment to the option recipient of the excess of the closing sale
price of the Shares as reported on the National Association of
Securities Dealers, Inc. Automated Quotations National Market
System on the day immediately prior to such cancellation, over
the Exercise Price of the option (provided, however, that such
alternative shall only be available to the Board if the vesting
of all previously unvested options held by the option recipient
under this Agreement is first accelerated), (ii) substitute a new
option of substantially equivalent value for any option or (iii)
accelerate the exercise terms of any option.
7. No Other Adjustments. Except as provided in
Section 7, no adjustments shall be made for dividends or other
rights for which the record date shall be prior to the issuance
of a stock certificate to the Optionee by reason of the exercise
of this option.
8. Rights in Option Stock. The Optionee shall not be
considered a record holder of any of the Shares in respect of
which he or she shall exercise this option until the date on
which the Optionee shall actually be recorded as the holder of
such Shares upon the stock records of the Company and full
payment shall have been made for the Shares.
9. Stock Reserved. The Company shall at all times
during the term of this Option Agreement keep available such
number of Shares as will be sufficient to satisfy the
requirements of this Agreement and shall pay all original issue
taxes, if any, on the exercise of this option, and all other fees
and expenses necessarily incurred by the Company in connection
therewith.
10. Not Employment Agreement. This Agreement does not
constitute an employment agreement and shall not confer on the
Optionee any right to continue in the employ of the Company, or
prevent, or in any way impair the right of the Company at any
time to terminate the employment of the Optionee as, if
applicable, an officer or employee, with or without cause.
11. Liability of Board. No member of the Board shall
be liable for any action or determination made in good faith in
respect of this option.
12. Successors. This Agreement shall be binding upon
any successor of the Company. Optionee and the Company
acknowledge and agree that upon consummation of the Transactions,
Intergraph will assume the rights and obligations of the Company
under this Agreement. In connection with such assumption, (i)
references in this Agreement to "Shares" shall be deemed to refer
to shares of Intergraph common stock, $.10 par value per share
(adjusted as set forth in (ii) below), (ii) the number of Shares
covered by this option and the Exercise Price shall be adjusted
as set forth in Section 2.3 of the Merger Agreement, (iii)
references to the Company shall be deemed to refer to Intergraph,
and (iv) references to the Board shall be deemed to be references
to the Board of Directors of Intergraph. Optionee hereby
consents to the foregoing assumptions.
13. Notices. All notices which are provided for under
any of the provisions of this Option Agreement shall be in
writing, and shall be given by registered or certified mail,
return receipt requested. Any such notice shall be deemed to
have been given on, and such notice shall be deemed dated, the
date when the same shall have been deposited for mailing, postage
prepaid, in a United States Post Office (except for any notice of
change of address, which shall be deemed given on, and dated, the
date the same shall be received). All notices provided to be
given to the Company shall be addressed to the attention of the
Treasurer of the Company at the Company's principal address, or
at such other address as the Company may designate by notice
hereunder. All notices provided to be given to the Optionee or
to his personal representative or beneficiary, shall be addressed
to him or her at the address of the Optionee set forth above, or
at such other address as he or she may designate by notice
hereunder.
14. Fractional Shares. The Company shall not be
required to issue any fractional Share upon exercise of this
option, but it shall pay to the Optionee, or to his personal
representative or beneficiary who acquires the right to exercise
this option by bequest or inheritance on the death of the
Optionee, the cash equivalent of any fractional share interests,
as determined in the sole discretion of the Board.
15. Withholding. Whenever the Company proposes or is
required to issue or transfer Shares, the Company shall have the
right to require the Optionee, prior to the issuance or delivery
of any certificates for such Shares, to remit to the Company, or
provide indemnification satisfactory to the Company for, an
amount sufficient to satisfy any federal, state, local, and
foreign withholding tax requirements incurred as a result of an
option exercise by such Optionee.
16. Governing Law. This Agreement shall be deemed
made in the State of Delaware and shall be governed by and
construed and enforced in accordance with the laws of such State
applicable to contracts made and to be performed in such State
without giving effect to the principles of conflict of laws.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed on the day and year first above
written.
INTERCAP GRAPHICS SYSTEMS, INC.
By:
---------------------------------
A.G.W. Biddle, III
President
Attest:
- -------------------------------
John C. Gebhardt
Secretary
OPTIONEE
(SEAL)
---------------------------------
--------------------------
EXHIBIT F-1
Individual Stockholder Certificate
----------------------------------
Intergraph Corporation
Mail Stop HQ011
Huntsville, Alabama 35894-0001
Attention: John W. Wilhoite
InterCAP Graphic Systems, Inc.
116 Defense Highway, Suite 400
Annapolis, Maryland 21401
Attention: A. G. W. Biddle, III
RE: Agreement and Plan of Reorganization
(the "Agreement"), dated as of September 30, 1994,
by and among Intergraph Corporation
("Intergraph"), Intergraph DC Corporation -
Subsidiary 7 ("Intergraph Subsidiary"), and
InterCAP Graphic Systems, Inc. ("InterCAP")
Ladies and Gentlemen:
This Certificate is supplied to you in connection with the
Merger provided for in the Agreement. Unless otherwise
indicated, capitalized terms not defined herein have the meanings
set forth in the Agreement.
The undersigned understands and agrees that it is intended
that the Merger will be treated as a "reorganization" for federal
income tax purposes. The undersigned has been informed that the
treatment of the Merger as a reorganization for federal income
tax purposes requires that a sufficient number of former
stockholders of InterCAP maintain a meaningful continuing equity
ownership interest in Intergraph after the Merger. The
undersigned understands that this Certificate will be relied upon
by Intergraph, InterCAP and their respective counsel and
accounting firms.
The undersigned hereby certifies to Intergraph and InterCAP
that the undersigned has, and as of the Effective Time of the
Merger will have, no present plan or intent to engage in a sale,
exchange, transfer, pledge or other disposition of more than
______ percent (____%) of the Intergraph Common Stock to be
received by the undersigned in the Merger. If the foregoing
certification ceases to be true at any time prior to the
Effective Time of the Merger, the undersigned will deliver to
each of Intergraph and InterCAP, promptly but in any event prior
to the Effective Time of the Merger, a written statement to that
effect, signed by the undersigned.
Dated this _____ day of _____________, 1994.
STOCKHOLDER
------------------------------
(Signature)
------------------------------
(Print Name)
EXHIBIT F-2
Entity Stockholder Certificate
------------------------------
Intergraph Corporation
Mail Stop HQ011
Huntsville, Alabama 35894-0001
Attention: John W. Wilhoite
InterCAP Graphic Systems, Inc.
116 Defense Highway, Suite 400
Annapolis, Maryland 21401
Attention: A. G. W. Biddle, III
RE: Agreement and Plan of Reorganization
(the "Agreement"), dated as of September 30, 1994,
by and among Intergraph Corporation
("Intergraph"), Intergraph DC Corporation -
Subsidiary 7 ("Intergraph Subsidiary"), and
InterCAP Graphic Systems, Inc. ("InterCAP")
Ladies and Gentlemen:
This Certificate is supplied to you in connection with the
Merger provided for in the Agreement. Unless otherwise
indicated, capitalized terms not defined herein have the meanings
set forth in the Agreement.
The undersigned understands and agrees that it is intended
that the Merger will be treated as a "reorganization" for federal
income tax purposes. The undersigned has been informed that the
treatment of the Merger as a reorganization for federal income
tax purposes requires that a sufficient number of former
stockholders of InterCAP maintain a meaningful continuing equity
ownership interest in Intergraph after the Merger. The
undersigned understands that this Certificate will be relied upon
by Intergraph, InterCAP and their respective counsel and
accounting firms.
The undersigned hereby certifies to Intergraph and InterCAP
as follows:
(a) The undersigned has, and as of the Effective Time
of the Merger will have, no present plan or intent to
engage in a sale, exchange, transfer, pledge or other
disposition (collectively, a "Sale") of more than
______ percent (___%) of the Intergraph Common Stock to
be received by the undersigned in the Merger. For
purposes of this clause (a), the term "Sale" shall not
include any mandatory distribution of shares of
Intergraph Common Stock required to be made by the
undersigned to its partners, shareholders or other
beneficial owners in accordance with the terms of the
undersigned's partnership agreement, certificate or
articles of incorporation or other governing instrument
(a "Required Distribution").
(b) To the best of the undersigned's knowledge and
after due investigation and inquiry, in the event the
undersigned has, or as of the Effective Time of the
Merger will have, a present plan or intention to make a
Required Distribution within two years of the Effective
Time of the Merger, each of the recipients of the
shares of Intergraph Common Stock in the Required
Distribution has, and as of the Effective Time of the
Merger will have, no present plan or intent to engage
in a Sale of more than ______ percent (___%) of the
shares of Intergraph Common Stock to be received by
them in the Required Distribution.
If any of the foregoing certifications cease to be true at
any time prior to the Effective Time of the Merger, the
undersigned will deliver to each of Intergraph and InterCAP,
promptly but in any event prior to the Effective Time of the
Merger, a written statement to that effect, signed by the
undersigned.
Dated this ____ day of ______________, 1994.
STOCKHOLDER
------------------------------
(Signature)
------------------------------
(Print Name)
------------------------------
(Print Title)
------------------------------
(Print Name of Company)
APPENDIX B
FORM OF AMENDMENT TO INTERCAP'S
CERTIFICATE OF INCORPORATION
APPENDIX B
Exhibit A
to
Preferred Stock Agreement
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
INTERCAP GRAPHICS SYSTEMS, INC.
InterCAP Graphics Systems, Inc., a corporation duly organized
and existing under and by virtue of the General Corporation Law of
the State of Delaware (the "Company"), hereby certifies as follows:
1. That the Board of Directors of the Company has duly
adopted the following resolutions at a meeting duly called and
convened on September ___, 1994:
RESOLVED, that the Board of Directors of the Company hereby
declares it advisable that, subject to receipt of requisite
stockholder approval, ARTICLE FOURTH, Section 1A, paragraph 4(a)
of the Certificate of Incorporation of the Company, as heretofore
amended, be further amended by deleting "October 1, 1994" and
replacing it with "January 15, 1995."
2. That the aforementioned amendment was duly adopted in
accordance with the applicable provisions of Section 242 of the
General Corporation Law of the State of Delaware.
3. That the capital of the Company will not be reduced
under or by reason of said amendments.
IN WITNESS WHEREOF, InterCAP Graphics Systems, Inc., has
caused this Certificate of Amendment to be executed by A.G.W.
Biddle, III, its President, and to be attested to by John C.
Gebhardt, its Secretary, this ___ day of_______________, 1994.
ATTEST: InterCAP GraphicsSystems, Inc.
By:
- ----------------------------- ---------------------------
John C. Gebhardt A.G.W. Biddle, III
Secretary President
APPENDIX C
SECTION 262 OF THE
DELAWARE BUSINESS CORPORATION ACT
APPENDIX C
SECTION 262 OF THE
DELAWARE BUSINESS CORPORATION ACT
262 APPRAISAL RIGHTS.--(a) Any stockholder of a corporation
of this State who holds shares of stock on the date of the making
of a demand pursuant to subsection (d) of this section with
respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has
otherwise complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor
consented thereto in writing pursuant to Section 228 of this title shall
be entitled to an appraisal by the Court of Chancery of the fair
value of his shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock
corporation; the words "stock" and "share" mean and include what
is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation.
(b) Appraisal rights shall be available for the shares of
any class or series of stock of a constituent corporation in a
merger or consolidation to be effected pursuant to Section 251, 252, 254,
257, 258 or 263 of this title:
(1) Provided, however, that no appraisal rights under this
section shall be available for the shares of any class or series
of stock which, at the record date fixed to determine the
stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of
Securities Dealers, Inc. or (ii) held of record by more than 2,000
stockholders; and further provided that no appraisal rights shall
be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for
its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection,
appraisal rights under this section shall be available for the
shares of any class or series of stock of a constituent
corporation if the holders thereof are required by the terms of an
agreement of merger or consolidation pursuant to Sections 251, 252, 254,
257, 258 and 263 of this title to accept for such stock anything
except:
a. Shares of stock of the corporation surviving or
resulting from such merger or consolidation;
b. Shares of stock of any other corporation which at the
effective date of the merger or consolidation will be either
listed on a national securities exchange or designated as a
national market system security on an interdealer quotation system
by the National Association of Securities Dealers, Inc. or held of
record by more than 2,000 stockholders;
c. Cash in lieu of fractional shares of the corporations
described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock and cash in lieu
of fractional shares described in the foregoing subparagraphs a.,
b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under Section 253 of this title is
not owned by the parent corporation immediately prior to the
merger, appraisal rights shall be available for the shares of the
subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of
incorporation that appraisal rights under this section shall be
available for the shares of any class or series of its stock as a
result of an amendment to its certificate of incorporation, any
merger or consolidation in which the corporation is a constituent
corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains
such a provision, the procedures of this section, including those
set forth in subsections (d) and (e) of this section, shall apply
as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which
appraisal rights are provided under this section is to be
submitted for approval at a meeting of stockholders, the
corporation, not less than 20 days prior to the meeting, shall
notify each of its stockholders who was such on the record date
for such meeting with respect to shares for which appraisal rights
are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy
of this section. Each stockholder electing to demand the appraisal
of his shares shall deliver to the corporation, before the taking
of the vote on the merger or consolidation, a written demand for
appraisal of his shares. Such demand will be sufficient if it
reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder
electing to take such action must do so by a separate written
demand as herein provided. Within 10 days after the effective
date of such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not
voted in favor of or consented to the merger or consolidation of
the date that the merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to
Section 228 or 253 of this title, the surviving or resulting corporation,
either before the effective date of the merger or consolidation or
within 10 days thereafter, shall notify each of the stockholders
entitled to appraisal rights of the effective date of the merger
or consolidation and that appraisal rights are available for any
or all of the shares of the constituent corporation, and shall
include in such notice a copy of this section. The notice shall
be sent by certified or registered mail, return receipt requested,
addressed to the stockholder at his address as it appears on the
records of the corporation. Any stockholder entitled to appraisal
rights may, within 20 days after the date of mailing of the
notice, demand in writing from the surviving or resulting
corporation the appraisal of his shares. Such demand will be
sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of his shares.
(e) Within 120 days after the effective date of the merger
or consolidation, the surviving or resulting corporation or any
stockholder who has complied with subsections (a) and (d) hereof
and who is otherwise entitled to appraisal rights, may file a
petition in the Court of Chancery demanding a determination of the
value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of
the merger or consolidation, any stockholder shall have the right
to withdraw his demand for appraisal and to accept the terms
offered upon the merger or consolidation. Within 120 days after
the effective date of the merger or consolidation, any stockholder
who has complied with the requirements of subsections (a) and (d)
hereof, upon written request, shall be entitled to receive from
the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of
shares not voted in favor of the merger or consolidation and with
respect to which demands for appraisal have been received and the
aggregate number of holders of such shares. Such written
statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the
surviving or resulting corporation or within 10 days after
expiration of the period for delivery of demands for appraisal
under subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder,
service of a copy thereof shall be made upon the surviving or
resulting corporation, which shall within 20 days after such
service file in the office of the Register in Chancery in which
the petition was filed a duly verified list containing the names
and addresses of all stockholders who have demanded payment for
their shares and with whom agreements as to the value of their
shares have not been reached by the surviving or resulting
corporation. If the petition shall be filed by the surviving or
resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by
the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the
surviving or resulting corporation and to the stockholders shown
on the list at the addresses therein stated. Such notice shall
also be given by 1 or more publications at least 1 week before the
day of the hearing, in a newspaper of general circulation
published in the City of Wilmington, Delaware or such publication
as the Court deems advisable. The forms of the notices by mail
and by publication shall be approved by the Court, and the costs
thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall
determine the stockholders who have complied with this section and
who have become entitled to appraisal rights. The Court may
require the stockholders who have demanded an appraisal for their
shares and who hold stock represented by certificates to submit
their certificates of stock to the Register in Chancery for
notation thereon of the pendency of the appraisal proceedings; and
if any stockholder fails to comply with such direction, the Court
may dismiss the proceedings as to such stockholder.
(h) After determining the stockholders entitled to an
appraisal, the Court shall appraise the shares, determining their
fair value exclusive of any element of value arising from the
accomplishment or expectation of the merger or consolidation,
together with a fair rate of interest, if any, to be paid upon the
amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In
determining the fair rate of interest, the Court may consider all
relevant factors, including the rate of interest which the
surviving or resulting corporation would have had to pay to borrow
money during the pendency of the proceeding. Upon application by
the surviving or resulting corporation or by any stockholder
entitled to participate in the appraisal proceeding, the Court
may, in its discretion, permit discovery or other pretrial
proceedings and may proceed to trial upon the appraisal prior to
the final determination of the stockholder entitled to an
appraisal. Any stockholder whose name appears on the list filed
by the surviving or resulting corporation pursuant to subsection
(f) of this section and who has submitted his certificates of
stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally
determined that he is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of
the shares, together with interest, if any, by the surviving or
resulting corporation to the stockholders entitled thereto.
Interest may be simple or compound, as the Court may direct.
Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders
of shares represented by certificates upon the surrender to the
corporation of the certificates representing such stock. The
Court's decree may be enforced as other decrees in the Court of
Chancery may be enforced, whether such surviving or resulting
corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the
Court and taxed upon the parties as the Court deems equitable in
the circumstances. Upon application of a stockholder, the Court
may order all or a portion of the expenses incurred by any
stockholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the
value of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or
consolidation, no stockholder who has demanded his appraisal
rights as provided in subsection (d) of this section shall be
entitled to vote such stock for any purpose or to receive payment
of dividends or other distributions on the stock (except dividends
or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or
consolidation); provided, however, that if no petition for an
appraisal shall be filed within the time provided in subsection
(e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of his
demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of
the merger or consolidation as provided in subsection (e) of this
section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal
proceeding in the Court of Chancery shall be dismissed as to any
stockholder without the approval of the Court, and such approval
may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to
which the shares of such objecting stockholders would have been
converted had they assented to the merger or consolidation shall
have the status of authorized and unissued shares of the surviving
or resulting corporation. (Last amended by Ch. 337, L. '92, eff.
7-1-92.)
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Article VIII(d) of the Certificate of Incorporation of
Intergraph permits indemnification of directors and officers to
the full extent permitted by the Delaware General Corporation
Law.
Article IX of the Certificate of Incorporation of Intergraph
eliminates a director's personal liability for monetary damages
for breaches of his fiduciary duty, except for liability for: (a)
breaches of the duty of loyalty to Intergraph or its
shareholders, (b) acts or omissions not in good faith or
involving intentional misconduct or knowing violations of the
law, (c) the payment of unlawful dividends or unlawful stock
repurchases or redemptions, or (d) transactions in which the
director received an improper personal benefit. Liability
arising out of acts or omissions which occurred before the
enactment of Article IX are not covered by the provision.
Article IX of the Certificate of Incorporation of Intergraph
also authorizes Intergraph to indemnify an officer, director,
employee, or agent of Intergraph for all expenses, liability, and
losses incurred in connection with any action, suit, or
proceeding in which he is or was a party or is threatened to be
made a party by reason of the fact that he is or was an officer
or director of Intergraph, whether the basis of such proceeding
is alleged action in an official capacity as a director, officer,
employee or agent, or in any other capacity while serving as a
director, officer, employee, or agent. This provision permits
indemnification only upon a finding by the disinterested
directors or the shareholders that he acted in good faith and in
a manner he reasonably believed to be in, or not opposed to, the
best interests of Intergraph. Article IX also authorizes
Intergraph to advance litigation expenses to an officer or
director prior to the final disposition of the action. The
making of such advance is conditioned upon the officer or
director giving Intergraph an undertaking to repay the amount
advanced if indemnification is ultimately deemed unavailable. If
indemnification or advancement of expenses is authorized, it will
not exclude any rights to indemnification or advancement of
expenses which a director, officer, employee, or agent may have
under a by-law, agreement, board or shareholder resolution, or
otherwise. The indemnification or advancement of expenses
provided by Article IX will continue as to a person who ceases to
be a director, officer, employee, or agent, and inures to the
benefit of his heirs, executors, and administrators.
Section 145 of the Delaware General Corporation Law permits
indemnification by Intergraph of any director, officer, employee
or agent of Intergraph or person who is serving or was serving at
Intergraph's request as a director, officer, employee or agent of
another corporation or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in
settlement, actually and reasonably incurred by him in connection
with the defense of any threatened, pending or completed action
(whether civil, criminal, administrative or investigative), to
which he is or may be a party by reason of having been such
director, officer, employee or agent, provided that he acted in
good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of Intergraph, and, with respect to
any criminal action or proceeding, he had no reasonable cause to
believe his conduct was unlawful. Intergraph also has the power
under Section 145 to indemnify the persons identified above from
threatened, pending or completed actions or suits by or in the
right of Intergraph to procure a judgment in its favor by reason
of the fact that such person was a director, officer, employee or
agent of Intergraph or is or was serving at the request of
Intergraph as a director, officer, employee or agent of another
corporation or enterprise against expenses actually and
reasonably incurred by him in connection with the defense or
settlement of the action if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interest of Intergraph, except that no indemnification can be
made with regard to any claim, issue or matter as to which the
person has been adjudged to be liable for negligence or
misconduct in the performance of his duty to Intergraph unless
and only to the extent that the Delaware Court of Chancery or the
court in which the action was brought determines that the person
was fairly and reasonably entitled to indemnity. Any
indemnification (unless ordered by a court) must be made by
Intergraph only as authorized in the specific case upon a
determination that indemnification of the person is proper under
the circumstances because he has met the applicable standards of
conduct. The determination must be made by the Board of
Directors by a majority vote of a quorum consisting of directors
who are not parties to the action, or if a quorum is not
obtainable or, even if obtainable, a quorum of disinterested
directors so directs, by independent counsel in a written
opinion, or by the stockholders. Intergraph may pay the expenses
of an action in advance of final disposition if authorized by the
Board of Directors in a specific case upon receipt of an
undertaking by the person to be indemnified to repay any such
advances unless it shall ultimately be determined that such
person is entitled to be indemnified by Intergraph as authorized
by law.
Article IX of the registrant's Bylaws provides for
indemnification of the registrant's directors, officers,
employees or agents to the extent permitted by Section 145 of the
Delaware General Corporation Law. Article IX of the registrant's
Bylaws further provides that the registrant may purchase and
maintain insurance on behalf of those persons described above as
eligible for indemnification for liability arising out of such
person's duties or status with the registrant whether or not
indemnification in respect of such liability would be
permissible.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of Intergraph pursuant to the foregoing
provisions, or otherwise, Intergraph has been advised that in the
opinion of the Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such
liabilities (other than the payment by Intergraph of expenses
incurred or paid by a director, officer or controlling person of
Intergraph in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered,
Intergraph will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
Item 21. Exhibits and Financial Statement Schedules.
Exhibit No. Exhibit
- ----------- -----------------------------------------------------
2 Agreement and Plan of Reorganization, dated as of
September 30, 1994, between Intergraph Corporation
("Intergraph"), Intergraph-DC Corporation
("Intergraph Sub") and InterCAP Graphics Systems,
Inc. ("InterCAP"), included as Appendix A to the
Prospectus/Proxy Statement.
3(a) Certificate of Incorporation of Intergraph
(Incorporated by reference to exhibits filed with
Intergraph's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1984, File No. 0-9722).
3(b) Certificate of Amendment to Certificate of
Incorporation of Intergraph (Incorporated by
reference to exhibits filed with Intergraph's
Quarterly Report on Form 10-Q for the quarter ended
March 31, 1987, File No. 0-9722).
3(c) Bylaws of Intergraph (Restated as of August 11, 1993)
(Incorporated by reference to exhibits filed with
Intergraph's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1993, File No. 0-9722).
4 Shareholder Rights Plan, dated August 25, 1993
(Incorporated by reference to exhibits filed with
Intergraph's Current Report on Form 8-K dated August
25, 1993, File No. 0-9722).
5 Opinion of B. Judson Hennington III as to the
validity of the shares of Intergraph Common Stock.
8(a) Opinion of Balch & Bingham as to certain federal
income tax matters.
8(b) Opinion of Womble Carlyle Sandridge & Rice, P.L.L.C.
as to certain federal income tax matters.
10(a) Intergraph Corporation 1990 Employee Stock Option
Plan (Incorporated by reference to exhibits filed
with Intergraph's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989, File No. 0-9722).
10(b) Intergraph Corporation 1992 Stock Option Plan
(Incorporated by reference to exhibits filed with
Intergraph's Annual Report on Form 10-K for the
fiscal year ended December 31, 1991, File No. 0-9722).
10(c) Employment contracts of Manfred Wittler, dated
November 1, 1989 and April 18, 1991 (Incorporated by
reference to exhibits filed with the Intergraph's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1992, File No. 0-9722).
10(d) Loan program for executive officers of Intergraph
(Incorporated by reference to exhibits filed with
Intergraph's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992, File No. 0-9722).
10(e) Consulting contract with Keith H. Schonrock, Jr.,
dated January 17, 1990 (Incorporated by reference to
exhibits filed with Intergraph's Annual Report on
Form 10-K for the fiscal year ended December 31,
1993, File No. 0-9722).
10(f) Agreement between Intergraph and Green Mountain,
Inc., dated February 23, 1994 (Incorporated by
reference to exhibits filed with Intergraph's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1993, File No. 0-9722).
21 Subsidiaries of Intergraph (Incorporated by reference
to exhibits filed with Intergraph's Annual Report on
Form 10-K for the fiscal year ended December 31,
1993, File No. 0-9722).
23(a) Consent of Balch & Bingham (included in the opinion
in Exhibit 8(a)).
23(b) Consent of Womble Carlyle Sandridge & Rice, P.L.L.C.
(included in the opinion in Exhibit 8(b)).
23(c) Consent of Ernst & Young LLP.
23(d) Consent of Ernst & Young LLP.
28 Form of Proxy for InterCAP.
Item 22. Undertakings.
(a) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of
1933, each filing of the registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of
1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(b) The undersigned registrant hereby undertakes to deliver
or cause to be delivered with the prospectus, to each person to
whom the prospectus is sent or given, the latest annual report to
security holders that is incorporated by reference in the
prospectus and furnished pursuant to and meeting the requirements
of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be
presented by Article 3 of Regulation S-X is not set forth in the
prospectus, to deliver, or cause to be delivered to each person
to whom the prospectus is sent or given, the latest quarterly
report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
(c) The undersigned registrant hereby undertakes as
follows: that prior to any public reoffering of the securities
registered hereunder through use of a prospectus which is a part
of this registration statement, by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c),
the issuer undertakes that such reoffering prospectus will
contain the information called for by the applicable registration
form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the
other items of the applicable form.
(d) The registrant undertakes that every prospectus (i)
that is filed pursuant to paragraph (c) immediately preceding, or
(ii) that purports to meet the requirements of Section 10(a)(3)
of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used
until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(e) The undersigned registrant hereby undertakes to respond
to requests for information that is incorporated by reference
into the prospectus pursuant to items 4.10(b), 11, or 13 of this
form, within one business day of receipt of such request, and to
send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the
registration statement through the date of responding to the
request.
(f) The undersigned registrant hereby undertakes to supply
by means of a post-effective amendment all information concerning
a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration
statement when it became effective.
SIGNATURE
Pursuant to the requirements of the Securities Act, the
Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Huntsville, State of Alabama, as of
the 26th day of October, 1994.
INTERGRAPH CORPORATION
By:/s/ James W. Meadlock
------------------------------------
James W. Meadlock
Chairman and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints John W. Wilhoite
his true and lawful attorney-in-fact, as agent with full power of
substitution and resubstitution for him and in his name, place
and stead, in any and all capacity, to sign any or all amendments
to this Registration Statement and to file the same, with all
exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and
perform each and every act and thing requisite and necessary to
be done in and about the premises, as fully and to all intents
and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorney-in-fact and agent, or his
substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following
persons in the capacities indicated as of October 26, 1994.
Signature Title Date
- ------------------------- ------------------------------ ----------------
/s/ James W. Meadlock Chairman of the Board, Chief October 26, 1994
- ----------------------- Executive Officer and a
James W. Meadlock Director (Principal Executive
Officer)
/s/ Larry J. Laster Executive Vice President and October 26, 1994
- ----------------------- Chief Financial Officer and a
Larry J. Laster Director (Principal Financial
Officer)
/s/ Roland E. Brown A Director October 26, 1994
- -----------------------
Roland E. Brown
/s/ Nancy B. Meadlock Executive Vice President and October 26, 1994
- ----------------------- a Director
Nancy B. Meadlock
/s/ Keith H. Schonrock, Jr. A Director October 26, 1994
- ---------------------------
Keith H. Schonrock, Jr.
/s/ James F. Taylor, Jr. A Director October 26, 1994
- ---------------------------
James F. Taylor, Jr.
/s/ Robert E. Thurber Executive Vice President and October 26, 1994
- -------------------------- a Director
Robert E. Thurber
/s/ John W. Wilhoite Vice President and Controller October 26, 1994
- -------------------------- (Principal Accounting
John W. Wilhoite Officer)
EXHIBIT INDEX
Exhibit Sequential
No. Exhibit Page Number
- ------- -------------------------------------------------------- -----------
2 Agreement and Plan of Reorganization, dated as of
September 30, 1994, between Intergraph Corporation
("Intergraph"), Intergraph-DC Corporation ("Intergraph
Sub") and InterCAP Graphics Systems, Inc. ("InterCAP"),
included as Appendix A to the Prospectus/Proxy Statement.
3(a) Certificate of Incorporation of Intergraph (Incorporated
by reference to exhibits filed with Intergraph's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1984,
File No. 0-9722).
3(b) Certificate of Amendment to Certificate of Incorporation
of Intergraph (Incorporated by reference to exhibits
filed with Intergraph's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1987, File No. 0-9722).
3(c) Bylaws of Intergraph (Restated as of August 11, 1993)
(Incorporated by reference to exhibits filed with
Intergraph's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1993, File No. 0-9722).
4 Shareholder Rights Plan, dated August 25, 1993
(Incorporated by reference to exhibits filed with
Intergraph's Current Report on Form 8-K dated
August 25, 1993, File No. 0-9722).
5 Opinion of B. Judson Hennington III as to the validity
of the shares of Intergraph Common Stock.
8(a) Opinion of Balch & Bingham as to certain federal income
tax matters.
8(b) Opinion of Womble Carlyle Sandridge & Rice, P.L.L.C.
as to certain federal income tax matters.
10(a) Intergraph Corporation 1990 Employee Stock Option Plan
(Incorporated by reference to exhibits filed with
Intergraph's Annual Report on Form 10-K for the fiscal
year ended December 31, 1989, File No. 0-9722).
10(b) Intergraph Corporation 1992 Stock Option Plan
(Incorporated by reference to exhibits filed with
Intergraph's Annual Report on Form 10-K for the fiscal
year ended December 31, 1991, File No. 0-9722).
10(c) Employment contracts of Manfred Wittler, dated November 1,
1989 and April 18, 1991 (Incorporated by reference to
exhibits filed with the Intergraph's Annual Report on Form
10-K for the fiscal year ended December 31, 1992,
File No. 0-9722).
10(d) Loan program for executive officers of Intergraph
(Incorporated by reference to exhibits filed with
Intergraph's Annual Report on Form 10-K for the fiscal
year ended December 31, 1992, File No. 0-9722).
10(e) Consulting contract with Keith H. Schonrock, Jr.,
dated January 17, 1990 (Incorporated by reference to
exhibits filed with Intergraph's Annual Report on
Form 10-K for the fiscal year ended
December 31, 1993, File No. 0-9722).
10(f) Agreement between Intergraph and Green Mountain, Inc.,
dated February 23, 1994 (Incorporated by reference to
exhibits filed with Intergraph's Annual Report on
Form 10-K for the fiscal year ended December 31, 1993,
File No. 0-9722).
21 Subsidiaries of Intergraph (Incorporated by reference
to exhibits filed with Intergraph's Annual Report on
Form 10-K for the fiscal year ended December 31, 1993,
File No. 0-9722).
23(a) Consent of Balch & Bingham (included in the opinion
in Exhibit 8(a)).
23(b) Consent of Womble Carlyle Sandridge & Rice, P.L.L.C.
(included in the opinion in Exhibit 8(b)).
23(c) Consent of Ernst & Young LLP.
23(d) Consent of Ernst & Young LLP.
28 Form of Proxy for InterCAP.
-----------------------------------
EXHIBIT 2
AGREEMENT AND PLAN OF
REORGANIZATION
dated as of September 30, 1994
Included as Appendix A to the
Prospectus/Proxy Statement
-----------------------------------
-----------------------------------
EXHIBIT 3(a)
CERTIFICATE OF INCORPORATION
OF
INTERGRAPH CORPORATION
(Incorporated by reference to exhibits
filed with Intergraph's Quarterly Report
on Form 10-Q for the quarter
ended June 30, 1984,
File No. 0-9722)
------------------------------------
------------------------------------
EXHIBIT 3(b)
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
INTERGRAPH CORPORATION
(Incorporated by reference to exhibits
filed with Intergraph's Quarterly Report
on Form 10-Q for the quarter
ended March 31, 1987,
File No. 0-9722)
-----------------------------------
-----------------------------------
EXHIBIT 3(c)
BY-LAWS OF
INTERGRAPH CORPORATION
RESTATED AS OF AUGUST 11, 1993
(Incorporated by reference to exhibits
filed with Intergraph's Quarterly Report
on Form 10-Q for the
quarter ended June 30, 1993,
File No. 0-9722)
-----------------------------------
-----------------------------------
EXHIBIT 4
SHAREHOLDER RIGHTS PLAN,
dated August 25, 1993
(Incorporated by reference to exhibits
filed with Intergraph's Current Report
on Form 8-K dated August 25, 1993,
File No. 0-9722)
----------------------------------
-----------------------------------
EXHIBIT 5.0
OPINION OF B. JUDSON HENNINGTON III
as to the validity of the shares
of Intergraph Common Stock
-----------------------------------
EXHIBIT 5
INTERGRAPH CORPORATION
ONE MADISON INDUSTRIAL PARK
HUNTSVILLE, ALABAMA 35894-0001
October 27, 1994
Board of Directors
Intergraph Corporation
One Madison Industrial Park
Huntsville, Alabama 35894-0001
Re: Intergraph Corporation -- Registration of up to
1,079,738 Shares of $.10 Par Value Common Stock on
Securities and Exchange Commission Form S-4
Gentlemen:
In connection with the registration under the Securities Act
of 1933, as amended, of up to 1,079,738 shares of common stock,
$.10 par value (the "Company Stock") of Intergraph Corporation, a
Delaware corporation (the "Company"), for issuance and sale in
the manner described in the Company's registration statement on
Form S-4 filed with the Securities and Exchange Commission, to
which this opinion will be an exhibit (the "Registration
Statement"), I, as Assistant General Counsel to the Company, have
examined such corporate records, certificates, other documents,
proceedings, and matters of law as I have considered necessary or
appropriate for the purposes of rendering this opinion.
Based on the foregoing, I am of the opinion that the shares
of Company Stock offered pursuant to the Registration Statement
have been duly and validly authorized and, when issued in
accordance with appropriate corporate proceedings and the terms
of the respective governing documents, will be duly and validly
issued, fully paid, and nonassessable.
I hereby consent to the filing of this opinion as an exhibit
to the Registration Statement.
Yours very truly,
/s/ B. Judson Hennington III
------------------------------------------
EXHIBIT 8(a)
OPINION OF BALCH & BINGHAM
as to certain federal income tax matters
------------------------------------------
EXHIBIT 8(a)
BALCH & BINGHAM
P. O. Box 306
Birmingham, Alabama 35201
October 27, 1994
Intergraph Corporation
Mail Stop HQ011
Huntsville, Alabama 35894-0001
Ladies and Gentlemen:
This opinion is being delivered to you in connection
with the filing of a Registration Statement on Form S-4 (the
"Registration Statement") with respect to certain transactions to
be undertaken pursuant to the Agreement and Plan of
Reorganization dated as of September 30, 1994 (the "Agreement")
by and among Intergraph Corporation ("Intergraph"), Intergraph DC
Corporation - Subsidiary 7 ("Intergraph Subsidiary"), and
InterCAP Graphics Systems, Inc. ("InterCAP"). Intergraph
Subsidiary will merge with and into InterCAP with InterCAP
surviving the merger and becoming a wholly owned subsidiary of
Intergraph (the "Merger") pursuant to the Agreement.
Except as otherwise provided, capitalized terms not
defined herein have the meanings set forth in the Agreement or in
certificates delivered to us by Intergraph and InterCAP (the
"Certificates"). All section references, unless otherwise
indicated, are to the Internal Revenue Code of 1986, as amended
(the "Code").
We have acted as special counsel to Intergraph in
connection with the Merger. As such, and for the purpose of
rendering this opinion, we have examined originals, certified
copies or copies otherwise identified to our satisfaction as
being true copies of the original of the following documents
(including all exhibits and schedules attached thereto):
(a) the Agreement;
(b) the Management Certificate dated of even
date herewith signed by an authorized officer of
Intergraph and attached as Exhibit A;
(c) the Management Certificate dated of even
date herewith signed by an authorized officer of
InterCAP and attached as Exhibit B;
(d) the Registration Statement; and
(e) such other instruments and documents
related to the formation, organization and
operation of Intergraph, Intergraph Subsidiary and
InterCAP and related to the consummation of the
Merger and the transactions contemplated thereby
as we have deemed necessary or appropriate. We
have not reviewed any organizational documents of
any entity stockholder of InterCAP.
In connection with rendering this opinion, we have
assumed (without any independent investigation or review
thereof):
1. that original documents (including signatures) are
authentic, documents submitted to us as copies conform to the
original documents, and there is (or will be prior to the
Closing) due execution and delivery of all documents where due
execution and delivery are a prerequisite to the effectiveness
thereof;
2. the truth and accuracy at all relevant times
(including the Effective Time), of all representations,
warranties and statements made or agreed to by Intergraph,
Intergraph Subsidiary and InterCAP, their managements, employees,
officers, directors and stockholders in connection with the
Merger, including but not limited to those set forth in the
Agreement (including the exhibits) and the Certificates; that any
such representation, warranty or statement made "to the best
knowledge of" or otherwise similarly qualified is correct without
such qualification; that all covenants contained in such
agreements are performed without waiver or breach of any material
provision thereof;
3. that, prior to the Effective Time, some or all of
the recipients of the Intergraph Common Stock to be issued in the
Merger will have executed and delivered certificates to
Intergraph and InterCAP in the form of Exhibit F-1 or Exhibit F-2
(as appropriate) to the Agreement (the "Continuity Certificates")
certifying as to the matters set forth therein with respect to at
least fifty percent (50%) of the Intergraph Common Stock to be
issued in the Merger; that all representations, warranties and
statements to be made by the InterCAP stockholders in the
Continuity Certificates are true and accurate at all relevant
times (including the Effective Time); that any such
representation, warranty or statement made "to the best knowledge
of" or otherwise similarly qualified is correct without such
qualification;
4. that following the Merger, InterCAP will continue
its historic business or use a significant portion of its
historic business assets in a business;
5. that no outstanding indebtedness of Intergraph,
Intergraph Subsidiary or InterCAP has or will represent equity
for tax purposes; no outstanding equity of Intergraph, Intergraph
Subsidiary or InterCAP has represented or will represent
indebtedness for tax purposes; no outstanding security,
instrument, agreement or arrangement that provides for, contains
or represents either a right to acquire InterCAP Stock or to
share in the appreciation thereof constitutes or will constitute
"stock" for purposes of Section 368(c) of the Code; and
6. that the Merger will be consummated pursuant to
the Agreement and will be effective under applicable state law.
Based on our examination of the foregoing items and
subject to the limitations, qualifications, assumptions and
caveats set forth herein, we are of the opinion that for federal
income tax purposes the Merger will qualify as a reorganization
within the meaning of Section 368(a) of the Code. The foregoing
opinion is subject to the additional qualification regarding the
continuity of proprietary interest requirement discussed below.
The Merger will only qualify as a reorganization for
federal income tax purposes if it satisfies, among other
requirements, the continuity of proprietary interest requirement,
which generally requires the former shareholders of the acquired
corporation to receive and retain a sufficient equity interest in
the acquiring corporation. Section 1.368-1(b) of the Income Tax
Regulations; Pinellas Ice & Cold Storage Co. v. Commissioner, 287
U.S. 462 (1933); Helvering v. Minnesota Tea Co., 296 U.S. 378
(1935). Judicial decisions and pronouncements of the Internal
Revenue Service (the "Service") indicate that if, pursuant to a
plan or intent existing at or prior to the time of the
acquisition, the former shareholders of the acquired corporation
sell, exchange or otherwise dispose of an aggregate amount of the
acquiring corporation's stock received in the acquisition, such
that the former shareholders, as a group, would no longer have a
sufficient equity interest in the acquiring corporation after the
acquisition, the continuity of proprietary interest requirement
will not be satisfied. McDonald's Restaurants of Illinois, Inc.
v. Commissioner, 688 F.2d 570 (7th Cir. 1982); R. M. Heintz v.
Commissioner, 25 T.C. 132 (1955); R. A. Penrod v. Commissioner,
88 T.C. 1415 (1987); Rev. Proc. 77-37, 1977-2 C.B. 568; Rev.
Proc. 86-42, 1986-2 C.B. 722.
The form of Continuity Certificate to be executed by an
entity stockholder of InterCAP permits such entity to distribute
shares of Intergraph Common Stock to the partners, stockholders
or other beneficial owners of the entity if such distribution is
required under the entity's partnership agreement, certificate or
articles of incorporation or other governing instrument. We
understand that two of the InterCAP stockholders, which are
limited partnerships, will receive approximately 58.8% of the
Intergraph Common Stock, and that they may be required under
their partnership agreements to distribute to their partners the
shares of Intergraph Common Stock to be received by such entities
in the Merger (the "Required Distributions").
As a result of the substantial percentage of Intergraph
Common Stock the two limited partnerships will receive in the
Merger, such limited partnerships will be required to execute the
Continuity Certificates in order to satisfy the closing condition
in Section 7.1(d) of the Agreement. Accordingly, if the Required
Distributions occur, an issue arises regarding whether the Merger
will satisfy the continuity of proprietary interest requirement.
Although the issue is not free from doubt, for the reasons
discussed below we believe that the Required Distributions should
not violate the continuity of proprietary interest requirement.
In Rev. Rul. 84-30, 1984-1 C.B. 114, the Service held
that the continuity of proprietary interest requirement was
satisfied when the stock of the acquiring corporation given in
exchange for the acquired corporation was distributed through its
100 percent parent corporation to such corporation's 100 percent
parent. The Service based its holding on Section 1.368-1(b) of
the Income Tax Regulations which provides that "[r]equisite to a
reorganization under the Code are a continuity of the business
enterprise under the modified corporate form, and (except as
provided in section 368(a)(1)(D)) a continuity of interest
therein on the part of those persons who, directly or indirectly,
were the owners of the enterprise prior to the reorganization."
(Emphasis added.) Because the ultimate parent corporation was
considered by the Service as an indirect owner of the acquired
corporation within the meaning of Section 1.368-1(b) of the
Income Tax Regulations, the Service concluded that the
distribution of the acquiring corporation's stock did not violate
the continuity of proprietary interest requirement.
We call your attention to the fact that the ultimate
recipient of the acquiring corporation's stock in Rev. Rul. 84-30
was a corporation, and not partners of a partnership. In
addition, we have been unable to locate any published authorities
or other guidance of the Service or judicial decisions concerning
whether the partners of a partnership which is a stockholder of
the acquired corporation should be considered "indirect owners"
within the meaning of Section 1.368-1(b) of the Income Tax
Regulations. We also note that at one time the Service had
adopted a position contrary to its position in Rev. Rul. 84-30.
See General Counsel Memorandum 35481. Nonetheless, in our
judgment, the reasoning of Rev. Rul. 84-30 should apply with
equal force in the case of partnership shareholders, and the
Required Distributions should not violate the continuity of
proprietary interest requirement.
In addition, we have reviewed the discussion contained
in the Registration Statement under "THE MERGER AND RELATED
TRANSACTIONS - Certain Federal Income Tax Considerations" (the
"Tax Discussion"). Subject to the qualifications and limitations
contained herein and in the Tax Discussion, we are of the opinion
that the Tax Discussion fairly presents the current federal
income tax law applicable to the Merger, and the material federal
income tax consequences to Intergraph, Intergraph Subsidiary,
InterCAP and its stockholders as a result of the Merger and
addresses the material federal income tax consequences of the
Merger to each such party.
This opinion does not address the various state, local
or foreign tax consequences that may result from the Merger. In
addition, no opinion is expressed as to any federal income tax
consequence of the Merger except as specifically set forth herein
and this opinion may not be relied upon except with respect to
the consequences specifically discussed herein. In particular,
we express no opinion regarding, among other things (i) the tax
consequences of the Merger that may be relevant to particular
securityholders of InterCAP such as dealers in securities,
foreign persons, holders of options or warrants, and holders of
shares acquired upon exercise of stock options or in other
compensatory transactions and (ii) the tax consequences to
InterCAP stockholders of other transactions effected prior to or
after the Merger (whether or not such transactions are
consummated in connection with the Merger).
No opinion is expressed as to any transactions other
than the Merger as described in the Agreement or to any other
transaction whatsoever including the Merger if all the
transactions described in the Agreement are not consummated in
accordance with the terms of such Agreement and without waiver of
any material provision thereof. To the extent any of the
representations, warranties, statements and assumptions material
to our opinion and upon which we have relied are not complete,
correct, true and accurate in all material respects at all
relevant times, our opinion would be adversely affected and
should not be relied upon.
This opinion only represents our best judgment as to
the federal income tax consequences of the Merger and is not
binding on the Internal Revenue Service or the courts. The
conclusions are based on the Code, existing judicial decisions,
administration regulations and published rulings. No assurance
can be given that future legislative, judicial or administrative
changes would not adversely affect the accuracy of the
conclusions stated herein. Nevertheless, by rendering this
opinion we undertake no responsibility to advise you of any new
developments in the application or interpretation of the federal
income tax laws.
We understand that counsel for InterCAP, Womble Carlyle
Sandridge & Rice, PLLC, has rendered a tax opinion substantially
similar to this opinion concerning the federal income tax
consequences of the Merger.
This opinion has been delivered to you for the purpose
of filing with the Registration Statement and may not be
distributed or otherwise made available to any other person or
entity without our prior written consent. We consent to the use
of this form of opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever
appearing in the Registration Statement.
Sincerely,
/s/ BALCH & BINGHAM
EXHIBIT A
MANAGEMENT CERTIFICATE
October 27, 1994
Balch & Bingham Womble Carlyle Sandridge& Rice, PLLC
1901 Sixth Avenue North Post Office Drawer 84
Suite 2600 Winston-Salem, North Carolina 27102
Birmingham, Alabama 35203
RE: Merger pursuant to that certain Agreement and
Plan of Reorganization (the "Agreement"), dated as
of September 30, 1994, by and among Intergraph
Corporation ("Intergraph"), Intergraph DC
Corporation - Subsidiary 7 ("Intergraph Subsidiary"),
and InterCAP Graphics Systems, Inc. ("InterCAP").
Ladies and Gentlemen:
This letter is supplied to you in connection with your
rendering of opinions regarding certain federal income tax
consequences of the Merger. Unless otherwise indicated,
capitalized terms not defined herein have the meanings set forth
in the Agreement.
A. Representations. After consulting with its counsel and
auditors regarding the meaning of and the factual support for the
following representations, the undersigned hereby certifies and
represents that the following facts are now true and will
continue to be true as of the Effective Time of the Merger and
thereafter where relevant:
1. Following the Merger, InterCAP will hold at least 90
percent of the fair market value of its net assets, at least 70
percent of the fair market value of its gross assets, at least 90
percent of the fair market value of Intergraph Subsidiary's net
assets, and at least 70 percent of the fair market value of
Intergraph Subsidiary's gross assets held immediately prior to
the Effective Time of the Merger. For purposes of this
representation, amounts paid by InterCAP or Intergraph Subsidiary
to dissenters, if any, amounts paid by InterCAP or Intergraph
Subsidiary to stockholders who or which receive cash or other
property, amounts used by InterCAP or Intergraph Subsidiary to
pay reorganization expenses, all redemptions and distributions
(except for regular normal dividends) made by Intergraph
Subsidiary and Intergraph Subsidiary assets disposed of by
Intergraph Subsidiary prior to the Merger and in contemplation
thereof will be included as assets of InterCAP or Intergraph
Subsidiary, respectively, immediately prior to the Effective Time
of the Merger.
2. Intergraph's principal reasons for participating in the
Merger are bona fide business reasons.
3. Prior to the Effective Time of the Merger, Intergraph
will be in Control of Intergraph Subsidiary. As used herein,
"Control" shall mean ownership of stock possessing at least
eighty percent (80%) of the total combined voting power of all
classes of stock entitled to vote and at least eighty percent
(80%) of the total number of shares of all other classes of stock
of the corporation. For purposes of determining Control, a
person shall not be considered to own voting stock if rights to
vote such stock (or to restrict or otherwise control the voting
of such stock) are held by a third party (including a voting
trust) other than an agent of such person.
4. In the Merger, shares of InterCAP Stock will be
exchanged solely for voting stock of Intergraph.
5. Intergraph will acquire Control of InterCAP in the
Merger. Control will be determined without regard to InterCAP
Stock, if any, held by Intergraph prior to the Effective Time of
the Merger.
6. Immediately following the Merger, Intergraph will be in
Control of InterCAP. Intergraph has no plan or intention to
cause InterCAP to issue, after the Merger, additional shares of
stock (or rights to acquire shares of InterCAP stock) that would
result in Intergraph losing Control of InterCAP.
7. Intergraph has no plan or intention to reacquire any of
its stock issued in the Merger.
8. Intergraph has no plan or intention to: (i) cause
InterCAP to sell, transfer or otherwise dispose of any of its
assets or of any of the assets acquired from Intergraph
Subsidiary except for dispositions made in the ordinary course of
business or for the payment of expenses incurred by InterCAP in
the Merger; (ii) liquidate InterCAP; (iii) merge InterCAP with or
into another corporation including Intergraph or its affiliates;
or (iv) sell, distribute or otherwise dispose of InterCAP Stock.
9. In the Merger, no liabilities of Intergraph Subsidiary
will be assumed by InterCAP, and Intergraph Subsidiary will not
transfer to InterCAP any assets subject to liabilities.
10. Intergraph intends that, following the Merger, InterCAP
will continue its historic business or use a significant portion
of its historic business assets in a business.
11. Neither Intergraph nor any Intergraph affiliate owns,
or has owned during the past five (5) years, directly or
indirectly, any shares of InterCAP Stock or the right to acquire
or vote any such stock.
12. Neither Intergraph nor Intergraph Subsidiary is an
investment company within the meaning of Section 368(a)(2)(F) of
the Code.
13. Neither Intergraph nor Intergraph Subsidiary is under
the jurisdiction of a court in a Title 11 or similar case within
the meaning of Section 368(a)(3)(A) of the Code.
14. The payment of cash in the Merger in lieu of fractional
shares of Intergraph Common Stock is solely for the purpose of
avoiding the expense and inconvenience to Intergraph of issuing
fractional shares and does not represent separately bargained-for
consideration. The Intergraph fractional share interests to
which each InterCAP stockholder may be entitled in the Merger
will be aggregated and no InterCAP stockholder will receive cash
in an amount equal to or greater than the value of one full share
of Intergraph Common Stock, except for any cases in which an
InterCAP stockholder holds beneficial interests in shares of
InterCAP through more than one account and such multiple accounts
cannot be aggregated either because the beneficial interest
cannot be identified or it would be improper to do so.
15. Except with respect to (i) payments of cash to InterCAP
stockholders in lieu of fractional shares of Intergraph Common
Stock, and (ii) payments of cash to InterCAP dissenting
stockholders, if any, one hundred percent (100%) of the InterCAP
Stock outstanding immediately prior to the Merger will be
exchanged solely for Intergraph Common Stock. Thus, except as
set forth in the preceding sentence, Intergraph Subsidiary and
Intergraph intend that no consideration be paid or received
(directly or indirectly, actually or constructively) for InterCAP
Stock other than Intergraph Common Stock.
16. The total fair market value of all consideration other
than Intergraph Common Stock received by InterCAP stockholders in
exchange for their InterCAP Stock in the Merger (including,
without limitation, cash paid to InterCAP dissenting
stockholders, if any, or in lieu of fractional shares of
Intergraph Common Stock) will be less than ten percent (10%) of
the aggregate fair market value of InterCAP Stock outstanding
immediately prior to the Merger. In addition, the total cash
consideration that will be paid in the Merger to InterCAP
stockholders in lieu of fractional shares of Intergraph Common
Stock will not exceed one percent (1%) of the total consideration
that will be issued in the Merger to InterCAP stockholders in
exchange for their shares of InterCAP Stock.
17. At the Effective Time of the Merger, the fair market
value of the Intergraph Common Stock and the other consideration
received by each InterCAP stockholder will be approximately equal
to the aggregate fair market value of the InterCAP Stock
surrendered by each such InterCAP stockholder in exchange
therefor.
18. No shares of Intergraph Subsidiary have been or will be
used as consideration or issued to stockholders of InterCAP in
the Merger.
19. There is no intercorporate indebtedness existing
between Intergraph and InterCAP or between Intergraph Subsidiary
and InterCAP that was issued, acquired, or will be settled at a
discount.
20. None of the compensation payments received by any
stockholder of InterCAP will be separate consideration for, or
attributable to, any of their shares of InterCAP Stock; none of
the shares of Intergraph Common Stock received by any stockholder
of InterCAP will be separate consideration for, or attributable
to, any employment agreement, consulting agreement or any
covenants not to compete; and the compensation paid to any
stockholder of InterCAP will be for services actually rendered
and will be commensurate with amounts paid to third parties
bargaining at arm's length for similar services.
B. Reliance by You in Rendering Opinions; Limitations on
Your Opinions.
1. The undersigned recognizes that (i) your opinions will
be based on, among other things, the representations and
statements set forth herein, in the Agreement (including exhibits
and schedules thereto) and in the documents related thereto, and
(ii) your opinions will be subject to certain limitations,
qualifications and assumptions including that the opinions may
not be relied upon if any such representations or statements are
not accurate in all material respects.
2. The undersigned recognizes that your opinions will not
address any tax consequences of the Merger or any action taken in
connection therewith except as expressly set forth in such
opinions.
Very truly yours,
Intergraph Corporation
a Delaware corporation
By: /s/ John W. Wilhoite
-------------------------------------
Name: John W. Wilhoite
Title: Vice President
EXHIBIT B
MANAGEMENT CERTIFICATE
October 27, 1994
Balch & Bingham Womble Carlyle Sandridge & Rice, PLLC
1901 Sixth Avenue North Post Office Drawer 84
Suite 2600 Winston-Salem, North Carolina 27102
Birmingham, Alabama 35203
RE: Merger pursuant to that certain
Agreement and Plan of Reorganization (the
"Agreement"), dated as of September 30, 1994, by
and among Intergraph Corporation ("Intergraph"),
Intergraph DC Corporation - Subsidiary 7
("Intergraph Subsidiary"), and InterCAP Graphics
Systems, Inc. ("InterCAP").
Ladies and Gentlemen:
This letter is supplied to you in connection with your
rendering of opinions regarding certain federal income tax
consequences of the Merger. Unless otherwise indicated,
capitalized terms not defined herein have the meanings set forth
in the Agreement.
A. Representations. After consulting with its counsel and
auditors regarding the meaning of and the factual support for the
following representations, the undersigned hereby certifies and
represents that the following facts are now true and will
continue to be true as of the Effective Time of the Merger and
thereafter where relevant:
1. At least ninety percent (90%) of the fair market value
of the net assets and at least seventy percent (70%) of the fair
market value of the gross assets held by InterCAP immediately
prior to the Effective Time of the Merger will continue to be
held by InterCAP immediately after the Effective Time of the
Merger. For the purposes of determining the percentage of the
net and gross assets held by InterCAP immediately following the
Merger for purposes of this representation, the following assets
will be treated as property held by InterCAP immediately prior
but not subsequent to the Effective Time of the Merger: (i)
assets disposed of by InterCAP prior to the Merger and in
contemplation thereof (including, without limitation, any asset
disposed of by InterCAP, other than in the ordinary course of
business, during the period beginning with the commencement of
negotiations (whether formal or informal) between InterCAP and
Intergraph regarding the Merger and ending on the Effective Time
of the Merger (the "Pre-Merger Period")), (ii) assets used by
InterCAP to pay dissenting stockholders, if any, or other
expenses or liabilities incurred in connection with the Merger
and (iii) assets used to make distributions (except for regular
and normal dividends), redemptions or other payments in respect
of InterCAP Stock or rights to acquire such InterCAP Stock
(including payments treated as such for tax purposes) that are
made in contemplation of the Merger or related thereto.
2. InterCAP has made no transfer of any of its assets
(including any distribution of assets with respect to, or in
redemption of, any InterCAP Stock) in contemplation of the Merger
or during the Pre-Merger Period other than (i) in the ordinary
course of business, (ii) cash paid to InterCAP dissenting
stockholders, if any, and (iii) payments for expenses incurred in
connection with the Merger.
3. InterCAP's principal reasons for participating in the
Merger are bona fide business reasons.
4. In the Merger, shares of InterCAP Stock representing
"Control" of InterCAP will be exchanged solely for voting stock
of Intergraph; at the Effective Time of the Merger, there will
exist no rights of any kind (including, without limitation,
warrants, options, convertible securities, contingent rights,
informal or unwritten rights) to acquire InterCAP Stock or to
vote (or restrict or otherwise control the vote of) InterCAP
Stock that, if exercised, could affect Intergraph's acquisition
and retention of Control of InterCAP. For purposes of this
representation, shares of InterCAP Stock exchanged in the Merger
for cash and other property (including, without limitation, cash
paid to InterCAP dissenting stockholders, if any, or in lieu of
fractional shares of Intergraph Common Stock) will be treated as
InterCAP Stock outstanding on the date of the Merger but not
exchanged for voting stock of Intergraph. As used herein,
"Control" shall mean ownership of stock possessing at least
eighty percent (80%) of the total combined voting power of all
classes of stock entitled to vote and at least eighty percent
(80%) of the total number of shares of all other classes of stock
of InterCAP. For purposes of determining Control, a person shall
not be considered to own voting stock if rights to vote such
stock (or to restrict or otherwise control the voting of such
stock) are held by a third party (including a voting trust) other
than an agent of such person.
5. The total fair market value of all consideration other
than Intergraph Common Stock received by InterCAP stockholders in
exchange for their InterCAP Stock in the Merger (including,
without limitation, cash paid to InterCAP dissenting
stockholders, if any, or in lieu of fractional shares of
Intergraph Common Stock), will be less than ten percent (10%) of
the aggregate fair market value of InterCAP Stock outstanding
immediately prior to the Merger.
6. InterCAP has no obligation, understanding, agreement or
intention to issue additional shares of InterCAP Stock after the
Merger that would result in Intergraph losing Control of
InterCAP.
7. InterCAP has no plan or intention, and is under no
obligation, to discontinue its business, to sell or otherwise
dispose of any of its assets or of any of the assets acquired
from Intergraph Subsidiary in the Merger, except for dispositions
made in the ordinary course of business or for the payment of
expenses incurred by InterCAP in connection with the Merger.
8. The liabilities of InterCAP have been incurred by
InterCAP in the ordinary course of its business.
9. The fair market value of InterCAP's assets will, at the
Effective Time, exceed the aggregate liabilities of InterCAP plus
the amount of liabilities, if any, to which such assets are
subject.
10. Other than shares of InterCAP Stock or options to
acquire such stock issued as compensation to present or former
service providers (including, without limitation, employees and
directors) of InterCAP in the ordinary course of business, if
any, no issuances of InterCAP Stock or rights to acquire such
stock have occurred or will occur during the Pre-Merger Period
other than pursuant to options, warrants or agreements
outstanding prior to the Pre-Merger Period.
11. Cash or other property paid to employees of InterCAP
during the Pre-Merger Period has been or will be in the ordinary
course of business or pursuant to agreements entered into prior
to the Pre-Merger Period and constitutes reasonable compensation
for services rendered.
12. InterCAP is not and will not be at the Effective Time
an "investment company" within the meaning of Section
368(a)(2)(F) of the Code.
13. InterCAP is not under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Section
368(a)(3)(A) of the Code.
14. To the best knowledge of InterCAP, there is no plan or
intention by the stockholders of InterCAP to sell, exchange or
otherwise dispose of a number of shares of Intergraph Common
Stock received in the Merger that would reduce the InterCAP
stockholders' ownership of Intergraph Common Stock to a number of
shares having a value, as of the Effective Time of the Merger, of
less than fifty percent (50%) of the value of all of the formerly
outstanding InterCAP Stock as of the Effective Time. For
purposes of this representation, shares of InterCAP Stock (or
portion thereof) (i) with respect to which a stockholder receives
cash in lieu of fractional shares of Intergraph Common Stock or
pursuant to the exercise of dissenters' rights and/or (ii) with
respect to which a sale occurs during the period beginning with
the commencement of negotiations (whether formal or informal)
between InterCAP and Intergraph regarding the Merger and ending
on the Effective Time of the Merger, shall be considered shares
of outstanding InterCAP Stock exchanged for Intergraph Common
Stock in the Merger and then disposed of pursuant to a plan. In
addition, the terms "sell, exchange or otherwise dispose" shall
not include any mandatory distribution of shares of Intergraph
Common Stock required to be made by a stockholder to its
partners, shareholders or other beneficial owners in accordance
with the terms of the stockholder's partnership agreement,
certificate or articles of incorporation or other governing
instrument, but such terms shall include a disposition by the
partners, shareholders or beneficiaries of such stockholders.
15. The payment of cash in lieu of fractional shares of
Intergraph Common Stock is solely for the purpose of avoiding the
expense and inconvenience to Intergraph of issuing fractional
shares and does not represent separately bargained-for
consideration. The total cash consideration that will be paid in
the Merger to InterCAP stockholders in lieu of fractional shares
of Intergraph Common Stock will not exceed one percent (1%) of
the total consideration that will be issued in the Merger to
InterCAP stockholders in exchange for their shares of InterCAP
Stock. The Intergraph fractional share interests to which each
InterCAP stockholder may be entitled in the Merger will be
aggregated, and no InterCAP stockholder will receive cash in an
amount equal to or greater than the value of one full share of
Intergraph Common Stock, except for any cases in which a InterCAP
stockholder holds beneficial interests in shares of InterCAP
through more than one account and such multiple accounts cannot
be aggregated either because the beneficial interest cannot be
identified or it would be improper to do so.
16. Except with respect to (i) payments of cash to InterCAP
stockholders in lieu of fractional shares of Intergraph Common
Stock, and (ii) payments of cash to InterCAP stockholders
perfecting dissenters' rights, one hundred percent (100%) of the
InterCAP Stock outstanding immediately prior to the Merger will
be exchanged solely for Intergraph Common Stock. Thus, except as
set forth in the preceding sentence, InterCAP intends that no
consideration be paid or received (directly or indirectly,
actually or constructively) for InterCAP Stock other than
Intergraph Common Stock.
17. At the Effective Time of the Merger, the fair market
value of the Intergraph Common Stock and other consideration
received by each InterCAP stockholder will be approximately equal
to the aggregate fair market value of the InterCAP Stock
surrendered by each such InterCAP stockholder.
18. No shares of Intergraph Subsidiary have been or will be
used as consideration or issued to stockholders of InterCAP in
the Merger.
19. Intergraph Subsidiary, Intergraph, InterCAP and the
stockholders of InterCAP will each pay separately its or their
own expenses in connection with the Merger as contemplated by the
Agreement; provided, however, that to the extent any expenses
relating to the Merger (or the "plan of reorganization" within
the meaning of Treas. Reg. 1.368-1(c) with respect to the
Merger) are funded directly or indirectly by a party other than
the incurring party, such expenses will be within the guidelines
established in Rev. Rul. 73-54, 1973-1 C.B. 187.
20. There is no intercorporate indebtedness existing
between Intergraph and InterCAP or between Intergraph Subsidiary
and InterCAP that was issued, acquired or will be settled at a
discount.
21. None of the compensation payments received by any
stockholder of InterCAP will be separate consideration for, or
allocable to, any of their shares of InterCAP Stock; none of the
shares of Intergraph Common Stock received by any stockholder of
InterCAP will be separate consideration for, or allocable to, any
employment agreement, consulting agreement, any covenants not to
compete or otherwise for the performance of services; and the
compensation paid to any stockholder of InterCAP will be for
services actually rendered and will be commensurate with amounts
paid to third parties bargaining at arm's length for similar
services.
B. Reliance by You in Rendering Opinions; Limitations on
Your Opinions.
1. The undersigned recognizes that (i) your opinions will
be based on the representations and statements set forth herein,
in the Agreement (including exhibits and schedules thereto) and
in the documents related thereto and (ii) your opinions will be
subject to certain limitations and qualifications and
assumptions, including that the opinions may not be relied upon
if any such representations or statements are not accurate in all
material respects.
2. The undersigned recognizes that your opinions will not
address any tax consequences of the Merger or any action taken in
connection therewith except as expressly set forth in such
opinions.
Very truly yours,
InterCAP Graphics Systems, Inc.
a Delaware corporation
By: /s/ A. G. W. Biddle, III
--------------------------------
Name: A. G. W. Biddle, III
Title: President and Chief Executive Officer
----------------------------------------
EXHIBIT 8(b)
OPINION OF WOMBLE CARLYLE
SANDRIDGE & RICE, P.L.L.C.
as to certain federal income tax matters
----------------------------------------
EXHIBIT 8(b)
WOMBLE CARLYLE SANDRIDGE & RICE,
a Professional Limited Liability Company
Post Office Drawer 84
Winston-Salem, North Carolina 27102
October 27, 1994
InterCAP Graphics Systems, Inc.
116 Defense Highway
Annapolis, Maryland 21401
Ladies and Gentlemen:
This opinion is being delivered to you in connection
with the filing of a Registration Statement on Form S-4 (the
"Registration Statement") with respect to certain transactions to
be undertaken pursuant to the Agreement and Plan of
Reorganization dated as of September 30, 1994 (the "Agreement")
by and among Intergraph Corporation ("Intergraph"), Intergraph DC
Corporation - Subsidiary 7 ("Intergraph Subsidiary"), and
InterCAP Graphics Systems, Inc. ("InterCAP"). Intergraph
Subsidiary will merge with and into InterCAP with InterCAP
surviving the merger and becoming a wholly owned subsidiary of
Intergraph (the "Merger") pursuant to the Agreement.
Except as otherwise provided, capitalized terms not
defined herein have the meanings set forth in the Agreement or in
certificates delivered to us by Intergraph and InterCAP (the
"Certificates"). All section references, unless otherwise
indicated, are to the Internal Revenue Code of 1986, as amended
(the "Code").
We have acted as special counsel to InterCAP in
connection with the Merger. As such, and for the purpose of
rendering this opinion, we have examined originals, certified
copies or copies otherwise identified to our satisfaction as
being true copies of the original of the following documents
(including all exhibits and schedules attached thereto):
(a) the Agreement;
(b) the Management Certificate dated of even
date herewith signed by an authorized officer of
Intergraph and attached as Exhibit A;
(c) the Management Certificate dated of even
date herewith signed by an authorized officer of
InterCAP and attached as Exhibit B;
(d) the Registration Statement; and
(e) such other instruments and documents
related to the formation, organization and
operation of Intergraph, Intergraph Subsidiary and
InterCAP and related to the consummation of the
Merger and the transactions contemplated thereby
as we have deemed necessary or appropriate. We
have not reviewed any organizational documents of
any entity stockholder of InterCAP.
In connection with rendering this opinion, we have
assumed (without any independent investigation or review
thereof):
1. that original documents (including signatures) are
authentic, documents submitted to us as copies conform to the
original documents, and there is (or will be prior to the
Closing) due execution and delivery of all documents where due
execution and delivery are a prerequisite to the effectiveness
thereof;
2. the truth and accuracy at all relevant times
(including the Effective Time), of all representations,
warranties and statements made or agreed to by Intergraph,
Intergraph Subsidiary and InterCAP, their managements, employees,
officers, directors and stockholders in connection with the
Merger, including but not limited to those set forth in the
Agreement (including the exhibits) and the Certificates; that any
such representation, warranty or statement made "to the best
knowledge of" or otherwise similarly qualified is correct without
such qualification; that all covenants contained in such
agreements are performed without waiver or breach of any material
provision thereof;
3. that, prior to the Effective Time, some or all of
the recipients of the Intergraph Common Stock to be issued in the
Merger will have executed and delivered certificates to
Intergraph and InterCAP in the form of Exhibit F-1 or Exhibit F-2
(as appropriate) to the Agreement (the "Continuity Certificates")
certifying as to the matters set forth therein with respect to at
least fifty percent (50%) of the Intergraph Common Stock to be
issued in the Merger; that all representations, warranties and
statements to be made by the InterCAP stockholders in the
Continuity Certificates are true and accurate at all relevant
times (including the Effective Time); that any such
representation, warranty or statement made "to the best knowledge
of" or otherwise similarly qualified is correct without such
qualification;
4. that following the Merger, InterCAP will continue
its historic business or use a significant portion of its
historic business assets in a business;
5. that no outstanding indebtedness of Intergraph,
Intergraph Subsidiary or InterCAP has or will represent equity
for tax purposes; no outstanding equity of Intergraph, Intergraph
Subsidiary or InterCAP has represented or will represent
indebtedness for tax purposes; no outstanding security,
instrument, agreement or arrangement that provides for, contains
or represents either a right to acquire InterCAP Stock or to
share in the appreciation thereof constitutes or will constitute
"stock" for purposes of Section 368(c) of the Code; and
6. that the Merger will be consummated pursuant to
the Agreement and will be effective under applicable state law.
Based on our examination of the foregoing items and
subject to the limitations, qualifications, assumptions and
caveats set forth herein, we are of the opinion that for federal
income tax purposes the Merger will qualify as a reorganization
within the meaning of Section 368(a) of the Code. The foregoing
opinion is subject to the additional qualification regarding the
continuity of proprietary interest requirement discussed below.
The Merger will only qualify as a reorganization for
federal income tax purposes if it satisfies, among other
requirements, the continuity of proprietary interest requirement,
which generally requires the former shareholders of the acquired
corporation to receive and retain a sufficient equity interest in
the acquiring corporation. Section 1.368-1(b) of the Income Tax
Regulations; Pinellas Ice & Cold Storage Co. v. Commissioner, 287
U.S. 462 (1933); Helvering v. Minnesota Tea Co., 296 U.S. 378
(1935). Judicial decisions and pronouncements of the Internal
Revenue Service (the "Service") indicate that if, pursuant to a
plan or intent existing at or prior to the time of the
acquisition, the former shareholders of the acquired corporation
sell, exchange or otherwise dispose of an aggregate amount of the
acquiring corporation's stock received in the acquisition, such
that the former shareholders, as a group, would no longer have a
sufficient equity interest in the acquiring corporation after the
acquisition, the continuity of proprietary interest requirement
will not be satisfied. McDonald's Restaurants of Illinois, Inc.
v. Commissioner, 688 F.2d 570 (7th Cir. 1982); R. M. Heintz v.
Commissioner, 25 T.C. 132 (1955); R. A. Penrod v. Commissioner,
88 T.C. 1415 (1987); Rev. Proc. 77-37, 1977-2 C.B. 568; Rev.
Proc. 86-42, 1986-2 C.B. 722.
The form of Continuity Certificate to be executed by an
entity stockholder of InterCAP permits such entity to distribute
shares of Intergraph Common Stock to the partners, stockholders
or other beneficial owners of the entity if such distribution is
required under the entity's partnership agreement, certificate or
articles of incorporation or other governing instrument. We
understand that two of the InterCAP stockholders, which are
limited partnerships, will receive approximately 58.8% of the
Intergraph Common Stock, and that they may be required under
their partnership agreements to distribute to their partners the
shares of Intergraph Common Stock to be received by such entities
in the Merger (the "Required Distributions").
As a result of the substantial percentage of Intergraph
Common Stock the two limited partnerships will receive in the
Merger, such limited partnerships will be required to execute the
Continuity Certificates in order to satisfy the closing condition
in Section 7.1(d) of the Agreement. Accordingly, if the Required
Distributions occur, an issue arises regarding whether the Merger
will satisfy the continuity of proprietary interest requirement.
Although the issue is not free from doubt, for the reasons
discussed below we believe that the Required Distributions should
not violate the continuity of proprietary interest requirement.
In Rev. Rul. 84-30, 1984-1 C.B. 114, the Service held
that the continuity of proprietary interest requirement was
satisfied when the stock of the acquiring corporation given in
exchange for the acquired corporation was distributed through its
100 percent parent corporation to such corporation's 100 percent
parent. The Service based its holding on Section 1.368-1(b) of
the Income Tax Regulations which provides that "[r]equisite to a
reorganization under the Code are a continuity of the business
enterprise under the modified corporate form, and (except as
provided in section 368(a)(1)(D)) a continuity of interest
therein on the part of those persons who, directly or indirectly,
were the owners of the enterprise prior to the reorganization."
(Emphasis added.) Because the ultimate parent corporation was
considered by the Service as an indirect owner of the acquired
corporation within the meaning of Section 1.368-1(b) of the
Income Tax Regulations, the Service concluded that the
distribution of the acquiring corporation's stock did not violate
the continuity of proprietary interest requirement.
We call your attention to the fact that the ultimate
recipient of the acquiring corporation's stock in Rev. Rul. 84-30
was a corporation, and not partners of a partnership. In
addition, we have been unable to locate any published authorities
or other guidance of the Service or judicial decisions concerning
whether the partners of a partnership which is a stockholder of
the acquired corporation should be considered "indirect owners"
within the meaning of Section 1.368-1(b) of the Income Tax
Regulations. We also note that at one time the Service had
adopted a position contrary to its position in Rev. Rul. 84-30.
See General Counsel Memorandum 35481. Nonetheless, in our
judgment, the reasoning of Rev. Rul. 84-30 should apply with
equal force in the case of partnership shareholders, and the
Required Distributions should not violate the continuity of
proprietary interest requirement.
In addition, we have reviewed the discussion contained
in the Registration Statement under "THE MERGER AND RELATED
TRANSACTIONS - Certain Federal Income Tax Considerations" (the
"Tax Discussion"). Subject to the qualifications and limitations
contained herein and in the Tax Discussion, we are of the opinion
that the Tax Discussion fairly presents the current federal
income tax law applicable to the Merger, and the material federal
income tax consequences to Intergraph, Intergraph Subsidiary,
InterCAP and its stockholders as a result of the Merger and
addresses the material federal income tax consequences of the
Merger to each such party.
This opinion does not address the various state, local
or foreign tax consequences that may result from the Merger. In
addition, no opinion is expressed as to any federal income tax
consequence of the Merger except as specifically set forth herein
and this opinion may not be relied upon except with respect to
the consequences specifically discussed herein. In particular,
we express no opinion regarding, among other things (i) the tax
consequences of the Merger that may be relevant to particular
securityholders of InterCAP such as dealers in securities,
foreign persons, holders of options or warrants, and holders of
shares acquired upon exercise of stock options or in other
compensatory transactions and (ii) the tax consequences to
InterCAP stockholders of other transactions effected prior to or
after the Merger (whether or not such transactions are
consummated in connection with the Merger).
No opinion is expressed as to any transactions other
than the Merger as described in the Agreement or to any other
transaction whatsoever including the Merger if all the
transactions described in the Agreement are not consummated in
accordance with the terms of such Agreement and without waiver of
any material provision thereof. To the extent any of the
representations, warranties, statements and assumptions material
to our opinion and upon which we have relied are not complete,
correct, true and accurate in all material respects at all
relevant times, our opinion would be adversely affected and
should not be relied upon.
This opinion only represents our best judgment as to
the federal income tax consequences of the Merger and is not
binding on the Internal Revenue Service or the courts. The
conclusions are based on the Code, existing judicial decisions,
administration regulations and published rulings. No assurance
can be given that future legislative, judicial or administrative
changes would not adversely affect the accuracy of the
conclusions stated herein. Nevertheless, by rendering this
opinion we undertake no responsibility to advise you of any new
developments in the application or interpretation of the federal
income tax laws.
We understand that counsel for Intergraph, Balch &
Bingham, has rendered a tax opinion substantially similar to this
opinion concerning the federal income tax consequences of the
Merger.
This opinion has been delivered to you for the purpose
of filing with the Registration Statement and may not be
distributed or otherwise made available to any other person or
entity without our prior written consent. We consent to the use
of this form of opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever
appearing in the Registration Statement.
Sincerely,
/s/ WOMBLE CARLYLE SANDRIDGE & RICE,
a Professional Limited Liability
Company
EXHIBIT A
MANAGEMENT CERTIFICATE
October 27, 1994
Balch & Bingham Womble Carlyle Sandridge & Rice, PLLC
1901 Sixth Avenue North Post Office Drawer 84
Suite 2600 Winston-Salem, North Carolina 27102
Birmingham, Alabama 35203
RE: Merger pursuant to that certain
Agreement and Plan of Reorganization (the
"Agreement"), dated as of September 30, 1994, by
and among Intergraph Corporation ("Intergraph"),
Intergraph DC Corporation - Subsidiary 7
("Intergraph Subsidiary"), and InterCAP Graphics
Systems, Inc. ("InterCAP").
Ladies and Gentlemen:
This letter is supplied to you in connection with your
rendering of opinions regarding certain federal income tax
consequences of the Merger. Unless otherwise indicated,
capitalized terms not defined herein have the meanings set forth
in the Agreement.
A. Representations. After consulting with its counsel and
auditors regarding the meaning of and the factual support for the
following representations, the undersigned hereby certifies and
represents that the following facts are now true and will
continue to be true as of the Effective Time of the Merger and
thereafter where relevant:
1. Following the Merger, InterCAP will hold at least 90
percent of the fair market value of its net assets, at least 70
percent of the fair market value of its gross assets, at least 90
percent of the fair market value of Intergraph Subsidiary's net
assets, and at least 70 percent of the fair market value of
Intergraph Subsidiary's gross assets held immediately prior to
the Effective Time of the Merger. For purposes of this
representation, amounts paid by InterCAP or Intergraph Subsidiary
to dissenters, if any, amounts paid by InterCAP or Intergraph
Subsidiary to stockholders who or which receive cash or other
property, amounts used by InterCAP or Intergraph Subsidiary to
pay reorganization expenses, all redemptions and distributions
(except for regular normal dividends) made by Intergraph
Subsidiary and Intergraph Subsidiary assets disposed of by
Intergraph Subsidiary prior to the Merger and in contemplation
thereof will be included as assets of InterCAP or Intergraph
Subsidiary, respectively, immediately prior to the Effective Time
of the Merger.
2. Intergraph's principal reasons for participating in the
Merger are bona fide business reasons.
3. Prior to the Effective Time of the Merger, Intergraph
will be in Control of Intergraph Subsidiary. As used herein,
"Control" shall mean ownership of stock possessing at least
eighty percent (80%) of the total combined voting power of all
classes of stock entitled to vote and at least eighty percent
(80%) of the total number of shares of all other classes of stock
of the corporation. For purposes of determining Control, a
person shall not be considered to own voting stock if rights to
vote such stock (or to restrict or otherwise control the voting
of such stock) are held by a third party (including a voting
trust) other than an agent of such person.
4. In the Merger, shares of InterCAP Stock will be
exchanged solely for voting stock of Intergraph.
5. Intergraph will acquire Control of InterCAP in the
Merger. Control will be determined without regard to InterCAP
Stock, if any, held by Intergraph prior to the Effective Time of
the Merger.
6. Immediately following the Merger, Intergraph will be in
Control of InterCAP. Intergraph has no plan or intention to
cause InterCAP to issue, after the Merger, additional shares of
stock (or rights to acquire shares of InterCAP stock) that would
result in Intergraph losing Control of InterCAP.
7. Intergraph has no plan or intention to reacquire any of
its stock issued in the Merger.
8. Intergraph has no plan or intention to: (i) cause
InterCAP to sell, transfer or otherwise dispose of any of its
assets or of any of the assets acquired from Intergraph
Subsidiary except for dispositions made in the ordinary course of
business or for the payment of expenses incurred by InterCAP in
the Merger; (ii) liquidate InterCAP; (iii) merge InterCAP with or
into another corporation including Intergraph or its affiliates;
or (iv) sell, distribute or otherwise dispose of InterCAP Stock.
9. In the Merger, no liabilities of Intergraph Subsidiary
will be assumed by InterCAP, and Intergraph Subsidiary will not
transfer to InterCAP any assets subject to liabilities.
10. Intergraph intends that, following the Merger, InterCAP
will continue its historic business or use a significant portion
of its historic business assets in a business.
11. Neither Intergraph nor any Intergraph affiliate owns,
or has owned during the past five (5) years, directly or
indirectly, any shares of InterCAP Stock or the right to acquire
or vote any such stock.
12. Neither Intergraph nor Intergraph Subsidiary is an
investment company within the meaning of Section 368(a)(2)(F) of
the Code.
13. Neither Intergraph nor Intergraph Subsidiary is under
the jurisdiction of a court in a Title 11 or similar case within
the meaning of Section 368(a)(3)(A) of the Code.
14. The payment of cash in the Merger in lieu of fractional
shares of Intergraph Common Stock is solely for the purpose of
avoiding the expense and inconvenience to Intergraph of issuing
fractional shares and does not represent separately bargained-for
consideration. The Intergraph fractional share interests to
which each InterCAP stockholder may be entitled in the Merger
will be aggregated and no InterCAP stockholder will receive cash
in an amount equal to or greater than the value of one full share
of Intergraph Common Stock, except for any cases in which an
InterCAP stockholder holds beneficial interests in shares of
InterCAP through more than one account and such multiple accounts
cannot be aggregated either because the beneficial interest
cannot be identified or it would be improper to do so.
15. Except with respect to (i) payments of cash to InterCAP
stockholders in lieu of fractional shares of Intergraph Common
Stock, and (ii) payments of cash to InterCAP dissenting
stockholders, if any, one hundred percent (100%) of the InterCAP
Stock outstanding immediately prior to the Merger will be
exchanged solely for Intergraph Common Stock. Thus, except as
set forth in the preceding sentence, Intergraph Subsidiary and
Intergraph intend that no consideration be paid or received
(directly or indirectly, actually or constructively) for InterCAP
Stock other than Intergraph Common Stock.
16. The total fair market value of all consideration other
than Intergraph Common Stock received by InterCAP stockholders in
exchange for their InterCAP Stock in the Merger (including,
without limitation, cash paid to InterCAP dissenting
stockholders, if any, or in lieu of fractional shares of
Intergraph Common Stock) will be less than ten percent (10%) of
the aggregate fair market value of InterCAP Stock outstanding
immediately prior to the Merger. In addition, the total cash
consideration that will be paid in the Merger to InterCAP
stockholders in lieu of fractional shares of Intergraph Common
Stock will not exceed one percent (1%) of the total consideration
that will be issued in the Merger to InterCAP stockholders in
exchange for their shares of InterCAP Stock.
17. At the Effective Time of the Merger, the fair market
value of the Intergraph Common Stock and the other consideration
received by each InterCAP stockholder will be approximately equal
to the aggregate fair market value of the InterCAP Stock
surrendered by each such InterCAP stockholder in exchange
therefor.
18. No shares of Intergraph Subsidiary have been or will be
used as consideration or issued to stockholders of InterCAP in
the Merger.
19. There is no intercorporate indebtedness existing
between Intergraph and InterCAP or between Intergraph Subsidiary
and InterCAP that was issued, acquired, or will be settled at a
discount.
20. None of the compensation payments received by any
stockholder of InterCAP will be separate consideration for, or
attributable to, any of their shares of InterCAP Stock; none of
the shares of Intergraph Common Stock received by any stockholder
of InterCAP will be separate consideration for, or attributable
to, any employment agreement, consulting agreement or any
covenants not to compete; and the compensation paid to any
stockholder of InterCAP will be for services actually rendered
and will be commensurate with amounts paid to third parties
bargaining at arm's length for similar services.
B. Reliance by You in Rendering Opinions; Limitations on
Your Opinions.
1. The undersigned recognizes that (i) your opinions will
be based on, among other things, the representations and
statements set forth herein, in the Agreement (including exhibits
and schedules thereto) and in the documents related thereto, and
(ii) your opinions will be subject to certain limitations,
qualifications and assumptions including that the opinions may
not be relied upon if any such representations or statements are
not accurate in all material respects.
2. The undersigned recognizes that your opinions will not
address any tax consequences of the Merger or any action taken in
connection therewith except as expressly set forth in such
opinions.
Very truly yours,
Intergraph Corporation
a Delaware corporation
By: /s/ John W. Wilhoite
----------------------------
Name: John W. Wilhoite
Title: Vice President
EXHIBIT B
MANAGEMENT CERTIFICATE
October 27, 1994
Balch & Bingham Womble Carlyle Sandridge & Rice, PLLC
1901 Sixth Avenue North Post Office Drawer 84
Suite 2600 Winston-Salem, North Carolina 27102
Birmingham, Alabama 35203
RE: Merger pursuant to that certain
Agreement and Plan of Reorganization (the
"Agreement"), dated as of September 30, 1994, by
and among Intergraph Corporation ("Intergraph"),
Intergraph DC Corporation - Subsidiary 7
("Intergraph Subsidiary"), and InterCAP Graphics
Systems, Inc. ("InterCAP").
Ladies and Gentlemen:
This letter is supplied to you in connection with your
rendering of opinions regarding certain federal income tax
consequences of the Merger. Unless otherwise indicated,
capitalized terms not defined herein have the meanings set forth
in the Agreement.
A. Representations. After consulting with its counsel and
auditors regarding the meaning of and the factual support for the
following representations, the undersigned hereby certifies and
represents that the following facts are now true and will
continue to be true as of the Effective Time of the Merger and
thereafter where relevant:
1. At least ninety percent (90%) of the fair market value
of the net assets and at least seventy percent (70%) of the fair
market value of the gross assets held by InterCAP immediately
prior to the Effective Time of the Merger will continue to be
held by InterCAP immediately after the Effective Time of the
Merger. For the purposes of determining the percentage of the
net and gross assets held by InterCAP immediately following the
Merger for purposes of this representation, the following assets
will be treated as property held by InterCAP immediately prior
but not subsequent to the Effective Time of the Merger: (i)
assets disposed of by InterCAP prior to the Merger and in
contemplation thereof (including, without limitation, any asset
disposed of by InterCAP, other than in the ordinary course of
business, during the period beginning with the commencement of
negotiations (whether formal or informal) between InterCAP and
Intergraph regarding the Merger and ending on the Effective Time
of the Merger (the "Pre-Merger Period")), (ii) assets used by
InterCAP to pay dissenting stockholders, if any, or other
expenses or liabilities incurred in connection with the Merger
and (iii) assets used to make distributions (except for regular
and normal dividends), redemptions or other payments in respect
of InterCAP Stock or rights to acquire such InterCAP Stock
(including payments treated as such for tax purposes) that are
made in contemplation of the Merger or related thereto.
2. InterCAP has made no transfer of any of its assets
(including any distribution of assets with respect to, or in
redemption of, any InterCAP Stock) in contemplation of the Merger
or during the Pre-Merger Period other than (i) in the ordinary
course of business, (ii) cash paid to InterCAP dissenting
stockholders, if any, and (iii) payments for expenses incurred in
connection with the Merger.
3. InterCAP's principal reasons for participating in the
Merger are bona fide business reasons.
4. In the Merger, shares of InterCAP Stock representing
"Control" of InterCAP will be exchanged solely for voting stock
of Intergraph; at the Effective Time of the Merger, there will
exist no rights of any kind (including, without limitation,
warrants, options, convertible securities, contingent rights,
informal or unwritten rights) to acquire InterCAP Stock or to
vote (or restrict or otherwise control the vote of) InterCAP
Stock that, if exercised, could affect Intergraph's acquisition
and retention of Control of InterCAP. For purposes of this
representation, shares of InterCAP Stock exchanged in the Merger
for cash and other property (including, without limitation, cash
paid to InterCAP dissenting stockholders, if any, or in lieu of
fractional shares of Intergraph Common Stock) will be treated as
InterCAP Stock outstanding on the date of the Merger but not
exchanged for voting stock of Intergraph. As used herein,
"Control" shall mean ownership of stock possessing at least
eighty percent (80%) of the total combined voting power of all
classes of stock entitled to vote and at least eighty percent
(80%) of the total number of shares of all other classes of stock
of InterCAP. For purposes of determining Control, a person shall
not be considered to own voting stock if rights to vote such
stock (or to restrict or otherwise control the voting of such
stock) are held by a third party (including a voting trust) other
than an agent of such person.
5. The total fair market value of all consideration other
than Intergraph Common Stock received by InterCAP stockholders in
exchange for their InterCAP Stock in the Merger (including,
without limitation, cash paid to InterCAP dissenting
stockholders, if any, or in lieu of fractional shares of
Intergraph Common Stock), will be less than ten percent (10%) of
the aggregate fair market value of InterCAP Stock outstanding
immediately prior to the Merger.
6. InterCAP has no obligation, understanding, agreement or
intention to issue additional shares of InterCAP Stock after the
Merger that would result in Intergraph losing Control of
InterCAP.
7. InterCAP has no plan or intention, and is under no
obligation, to discontinue its business, to sell or otherwise
dispose of any of its assets or of any of the assets acquired
from Intergraph Subsidiary in the Merger, except for dispositions
made in the ordinary course of business or for the payment of
expenses incurred by InterCAP in connection with the Merger.
8. The liabilities of InterCAP have been incurred by
InterCAP in the ordinary course of its business.
9. The fair market value of InterCAP's assets will, at the
Effective Time, exceed the aggregate liabilities of InterCAP plus
the amount of liabilities, if any, to which such assets are
subject.
10. Other than shares of InterCAP Stock or options to
acquire such stock issued as compensation to present or former
service providers (including, without limitation, employees and
directors) of InterCAP in the ordinary course of business, if
any, no issuances of InterCAP Stock or rights to acquire such
stock have occurred or will occur during the Pre-Merger Period
other than pursuant to options, warrants or agreements
outstanding prior to the Pre-Merger Period.
11. Cash or other property paid to employees of InterCAP
during the Pre-Merger Period has been or will be in the ordinary
course of business or pursuant to agreements entered into prior
to the Pre-Merger Period and constitutes reasonable compensation
for services rendered.
12. InterCAP is not and will not be at the Effective Time
an "investment company" within the meaning of Section
368(a)(2)(F) of the Code.
13. InterCAP is not under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Section
368(a)(3)(A) of the Code.
14. To the best knowledge of InterCAP, there is no plan or
intention by the stockholders of InterCAP to sell, exchange or
otherwise dispose of a number of shares of Intergraph Common
Stock received in the Merger that would reduce the InterCAP
stockholders' ownership of Intergraph Common Stock to a number of
shares having a value, as of the Effective Time of the Merger, of
less than fifty percent (50%) of the value of all of the formerly
outstanding InterCAP Stock as of the Effective Time. For
purposes of this representation, shares of InterCAP Stock (or
portion thereof) (i) with respect to which a stockholder receives
cash in lieu of fractional shares of Intergraph Common Stock or
pursuant to the exercise of dissenters' rights and/or (ii) with
respect to which a sale occurs during the period beginning with
the commencement of negotiations (whether formal or informal)
between InterCAP and Intergraph regarding the Merger and ending
on the Effective Time of the Merger, shall be considered shares
of outstanding InterCAP Stock exchanged for Intergraph Common
Stock in the Merger and then disposed of pursuant to a plan. In
addition, the terms "sell, exchange or otherwise dispose" shall
not include any mandatory distribution of shares of Intergraph
Common Stock required to be made by a stockholder to its
partners, shareholders or other beneficial owners in accordance
with the terms of the stockholder's partnership agreement,
certificate or articles of incorporation or other governing
instrument, but such terms shall include a disposition by the
partners, shareholders or beneficiaries of such stockholders.
15. The payment of cash in lieu of fractional shares of
Intergraph Common Stock is solely for the purpose of avoiding the
expense and inconvenience to Intergraph of issuing fractional
shares and does not represent separately bargained-for
consideration. The total cash consideration that will be paid in
the Merger to InterCAP stockholders in lieu of fractional shares
of Intergraph Common Stock will not exceed one percent (1%) of
the total consideration that will be issued in the Merger to
InterCAP stockholders in exchange for their shares of InterCAP
Stock. The Intergraph fractional share interests to which each
InterCAP stockholder may be entitled in the Merger will be
aggregated, and no InterCAP stockholder will receive cash in an
amount equal to or greater than the value of one full share of
Intergraph Common Stock, except for any cases in which a InterCAP
stockholder holds beneficial interests in shares of InterCAP
through more than one account and such multiple accounts cannot
be aggregated either because the beneficial interest cannot be
identified or it would be improper to do so.
16. Except with respect to (i) payments of cash to InterCAP
stockholders in lieu of fractional shares of Intergraph Common
Stock, and (ii) payments of cash to InterCAP stockholders
perfecting dissenters' rights, one hundred percent (100%) of the
InterCAP Stock outstanding immediately prior to the Merger will
be exchanged solely for Intergraph Common Stock. Thus, except as
set forth in the preceding sentence, InterCAP intends that no
consideration be paid or received (directly or indirectly,
actually or constructively) for InterCAP Stock other than
Intergraph Common Stock.
17. At the Effective Time of the Merger, the fair market
value of the Intergraph Common Stock and other consideration
received by each InterCAP stockholder will be approximately equal
to the aggregate fair market value of the InterCAP Stock
surrendered by each such InterCAP stockholder.
18. No shares of Intergraph Subsidiary have been or will be
used as consideration or issued to stockholders of InterCAP in
the Merger.
19. Intergraph Subsidiary, Intergraph, InterCAP and the
stockholders of InterCAP will each pay separately its or their
own expenses in connection with the Merger as contemplated by the
Agreement; provided, however, that to the extent any expenses
relating to the Merger (or the "plan of reorganization" within
the meaning of Treas. Reg. 1.368-1(c) with respect to the
Merger) are funded directly or indirectly by a party other than
the incurring party, such expenses will be within the guidelines
established in Rev. Rul. 73-54, 1973-1 C.B. 187.
20. There is no intercorporate indebtedness existing
between Intergraph and InterCAP or between Intergraph Subsidiary
and InterCAP that was issued, acquired or will be settled at a
discount.
21. None of the compensation payments received by any
stockholder of InterCAP will be separate consideration for, or
allocable to, any of their shares of InterCAP Stock; none of the
shares of Intergraph Common Stock received by any stockholder of
InterCAP will be separate consideration for, or allocable to, any
employment agreement, consulting agreement, any covenants not to
compete or otherwise for the performance of services; and the
compensation paid to any stockholder of InterCAP will be for
services actually rendered and will be commensurate with amounts
paid to third parties bargaining at arm's length for similar
services.
B. Reliance by You in Rendering Opinions; Limitations on
Your Opinions.
1. The undersigned recognizes that (i) your opinions will
be based on the representations and statements set forth herein,
in the Agreement (including exhibits and schedules thereto) and
in the documents related thereto and (ii) your opinions will be
subject to certain limitations and qualifications and
assumptions, including that the opinions may not be relied upon
if any such representations or statements are not accurate in all
material respects.
2. The undersigned recognizes that your opinions will not
address any tax consequences of the Merger or any action taken in
connection therewith except as expressly set forth in such
opinions.
Very truly yours,
InterCAP Graphics Systems, Inc.
a Delaware corporation
By: /s/ A. G. W. Biddle, III
-------------------------------
Name: A. G. W. Biddle, III
Title: President and Chief Executive Officer
--------------------------------------
EXHIBIT 10(a)
INTERGRAPH CORPORATION
1990 EMPLOYEE STOCK OPTION PLAN
(Incorporated by reference to exhibits
filed with Intergraph's Annual Report
on Form 10-K for the fiscal year
ended December 31, 1989,
File No. 0-9722)
--------------------------------------
--------------------------------------
EXHIBIT 10(b)
INTERGRAPH CORPORATION
1992 STOCK OPTION PLAN
(Incorporated by reference to exhibits
filed with Intergraph's Annual Report
on Form 10-K for the fiscal year
ended December 31, 1991,
File No. 0-9722)
--------------------------------------
--------------------------------------
EXHIBIT 10(c)
EMPLOYMENT CONTRACTS OF MANFRED WITTLER,
DATED NOVEMBER 1, 1989 AND APRIL 18, 1991
(Incorporated by reference to exhibits
filed with Intergraph's Annual Report
on Form 10-K for the fiscal year
ended December 31, 1992,
File No. 0-9722)
---------------------------------------
---------------------------------------
EXHIBIT 10(d)
LOAN PROGRAM FOR
EXECUTIVE OFFICERS OF INTERGRAPH
(Incorporated by reference to exhibits
filed with Intergraph's Annual Report
on Form 10-K for the fiscal year
ended December 31, 1992,
File No. 0-9722)
--------------------------------------
--------------------------------------
EXHIBIT 10(e)
CONSULTING CONTRACT WITH
KEITH H. SCHONROCK, JR.
DATED JANUARY 17, 1990
(Incorporated by reference to exhibits
filed with Intergraph's Annual Report
on Form 10-K for the fiscal year
ended December 31, 1993,
File No. 0-9722)
---------------------------------------
---------------------------------------
EXHIBIT 10(f)
AGREEMENT BETWEEN INTERGRAPH
AND GREEN MOUNTAIN, INC.,
DATED FEBRUARY 23, 1994
(Incorporated by reference to exhibits
filed with Intergraph's Annual Report
on Form 10-K for the fiscal year
ended December 31, 1993,
File No. 0-9722)
------------------------------------
------------------------------------
EXHIBIT 21
SUBSIDIARIES OF INTERGRAPH
(Incorporated by reference to exhibits
filed with Intergraph's Annual Report
on Form 10-K for the fiscal year
ended December 31, 1993,
File No. 0-9722)
------------------------------------
------------------------------------
EXHIBIT 23(a)
CONSENT OF BALCH & BINGHAM
(included in the opinion
in Exhibit 8(a))
-----------------------------------
-----------------------------------
EXHIBIT 23(b)
CONSENT OF WOMBLE CARLYLE
SANDRIDGE & RICE, P.L.L.C.
(included in the opinion
in Exhibit 8(b))
-----------------------------------
-----------------------------
EXHIBIT 23(c)
CONSENT OF ERNST & YOUNG LLP
-----------------------------
EXHIBIT 23(C)
CONSENT OF INDEPENDENT AUDITORS
We consent to the references to our firm under the captions
"Selected Financial Data" and "Experts" in the Registration
Statement (Form S-4) and related Prospectus of Intergraph
Corporation for the registration of 1,079,738 shares of its
common stock and to the incorporation by reference therein of our
report dated January 28, 1994 with respect to the consolidated
financial statements of Intergraph Corporation incorporated by
reference in its Annual Report (Form 10-K) for the year ended
December 31, 1993, and the related financial statement schedules
included therein, filed with the Securities and Exchange
Commission.
/s/ Ernst & Young LLP
Birmingham, Alabama
October 26, 1994
-----------------------------
EXHIBIT 23(d)
CONSENT OF ERNST & YOUNG LLP
-----------------------------
EXHIBIT 23(D)
CONSENT OF INDEPENDENT AUDITORS
We consent to the references to our firm under the captions
"Selected Financial Data" and "Experts" and to the use of our
report dated August 16, 1994, except for Note 11, as to which the
date is October 18, 1994, included in the Proxy Statement of
InterCAP Graphics Systems, Inc. which is made a part of
Intergraph Corporation's Registration Statement on Form S-4 and
Prospectus of Intergraph Corporation for the registration of
1,079,738 shares of its common stock.
/s/ Ernst & Young LLP
Vienna, Virginia
October 24, 1994
-----------------
EXHIBIT 28
FORM OF PROXY
FOR INTERCAP
-----------------
EXHIBIT 28
INTERCAP GRAPHICS SYSTEMS, INC.
116 DEFENSE HIGHWAY
ANNAPOLIS, MARYLAND 21401
-----------------------------------------
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS
-----------------------------------------
The undersigned stockholder of InterCAP Graphics Systems,
Inc. ("InterCAP") hereby appoints A.G.W. Biddle, III, John C.
Gebhardt or Joy E. Binford, or any of them with full power of
substitution, proxies to vote the shares of InterCAP's Common
Stock and Preferred Stock that the undersigned could vote if
personally present at the Special Meeting of Stockholders of
InterCAP to be held December ___, 1994, at 10:00 a.m., and at any
adjournment or adjournment thereof:
(1) To approve an amendment to the Certificate of
Incorporation of InterCAP to extend the date from October 1, 1994
to January 15, 1995 after which the liquidation preference of the
Series A Preferred Stock of InterCAP would be increased from
$1.475 per share to $1.475 per share plus one-half of all accrued
but unpaid dividends thereon.
___ VOTE FOR ___ VOTE AGAINST ___ ABSTAIN
(2) To adopt and approve the Agreement and Plan of
Reorganization (the "Reorganization Agreement"), dated as of
September 30, 1994, by and among InterCAP, Intergraph
Corporation, a Delaware corporation ("Intergraph"), and
Intergraph DC Corporation - Subsidiary 7, a Delaware corporation
and a wholly owned subsidiary of Intergraph ("Intergraph Sub"),
and the transactions contemplated thereby which will include,
without limitation (a) the merger of Intergraph Sub with and into
InterCAP (the "Merger"), in which, subject to the terms and
conditions set forth in the Reorganization Agreement, each
outstanding share of Common Stock, Series B Preferred Stock, and
Series C Preferred Stock of InterCAP will be converted into a
fraction of a share of Intergraph Common Stock, par value $.10
per share (the "Intergraph Common Stock") having a value before
the Merger of $0.90975693, and each share of Series A Preferred
Stock of InterCAP will be converted into a fraction of a share of
Intergraph Common Stock having a value before the Merger of
$1.475; and (b) an agreement by all InterCAP stockholders to
escrow fifteen percent of the shares of Intergraph Common Stock
to be received by them in the Merger as security for certain post-
closing InterCAP stockholder indemnification obligations
following the merger relating to breaches of representations,
warranties and covenants contained in the Reorganization
Agreement, and to appoint a Stockholders' Committee relating to
such shares.
___ VOTE FOR ___ VOTE AGAINST ___ ABSTAIN
(3) To vote, in the discretion of said proxies, upon such
other business as may properly come before the meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
AND WILL BE VOTED AS SPECIFIED BY THE STOCKHOLDER.
If no choice is indicated above with respect to a matter
where a ballot is provided, this proxy will be voted FOR such
matter.
Dated: ___________________, 1994
-----------------------------
(Signature)
-----------------------------
(Signature)
Please date and sign exactly
as name appears hereon. If
more than one name appears,
each person should sign.
Please add Social Security
Number or Zip Code, if not
shown, and change of address,
if any.
-------------------------------
-------------------------------
-------------------------------
