UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to _____
Commission file number 0-9722
INTERGRAPH CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 63-0573222
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Intergraph Corporation
Huntsville, Alabama 35894-0001
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (205) 730-2000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.10 per share
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. ( )
As of January 31, 1996, there were 46,889,138 shares of Intergraph
Corporation Common Stock $0.10 par value outstanding. The aggregate
market value of the voting stock held by non-affiliates of the
registrant was approximately $792,182,000 based on the closing sale
price of such stock as reported by NASDAQ on January 31, 1996,
assuming that all shares beneficially held by executive officers
and members of the registrant's Board of Directors are shares owned
by "affiliates," a status which each of the executive officers
and directors individually disclaims.
DOCUMENTS INCORPORATED BY REFERENCE
Documents Form 10-K Reference
- --------- -------------------
Portions of the Annual Report to Shareholders
for the year ended December 31, 1995 Part II, Part IV
Portions of the Proxy Statement for the
May 16, 1996 Annual Shareholders' Meeting Part III
==========================================================================
PART I
ITEM 1. BUSINESS
Overview
Intergraph Corporation, founded in 1969, is a vendor of
software, hardware, and services for technical computing
professionals who require automated systems for functions such as
design, drafting, mapping, modeling, analysis, and creation of
documentation. These users, from a variety of industries and from
government, are involved in a range of technical disciplines,
including computer-aided design, manufacturing, and engineering,
mapping and geographic information services, electronic publishing
and technical information management, in technical fields such as
utilities, facilities management, architecture, engineering,
construction, mechanical and electronics design, mapping and
geographic information systems, and public safety. The Company's
products are sold worldwide, with United States and European
revenues representing approximately 82% of the total for 1995.
In support of users in these disciplines, Intergraph offers
software applications and tools, workstations and servers, and a
range of services. Graphics workstations, servers, and peripheral
hardware manufactured by the Company and others are combined with
operating systems developed by others and application specific
software programs developed by the Company and third party
applications software developers. Depending on user requirements,
Intergraph provides point solutions as well as integrated
solutions that include all necessary software, hardware, and
services.
All Intergraph workstations and servers are based on Intel
microprocessors with the Windows/DOS or Windows NT operating
system or the Company's microprocessor with a UNIX operating
system (see "Intergraph Hardware" regarding the Company's
microprocessor). In addition, the Company offers interoperability
products that allow Windows NT and UNIX applications to work
together in a mixed environment.
Intergraph Hardware
The Company believes that Intel Corporation's hardware
architecture has an important role in the computing markets it
serves. During the last half of 1993, the Company began to offer
a hardware platform (in addition to its own) based on Intel
microprocessors. Previously, the Company's hardware platform
offering had been based on its own microprocessor. The Company
ceased design of its microprocessor at the end of 1993, and Intel-
based systems grew to represent 74% of hardware unit sales in 1994
and 95% in 1995. See "Manufacturing and Sources of Supply" below.
The Company offers workstation products for a range of technical
users. Intel Pentium processor-based TD Series personal
workstations are designed for computer-aided-design professionals
operating Windows NT, Windows 95, or Windows/DOS. Intergraph TDZ
three dimensional graphics workstations offer high-end,industry-standard
graphics and computing power on price competitive Intel Pentium
Pro-based systems running Windows NT. All Intergraph workstations
offer numerous options that permit customers to order systems that
meet their unique needs, including a selection of display
monitors, upgradeable memory, and specialized peripherals.
Intergraph workstations are general purpose computer systems that
can run Intergraph and third party applications, and data
management, data processing, personal productivity, and office
automation software packages.
Intergraph offers a range of symmetric multiprocessing servers
for use by workgroups, departments, or an entire company.
InterServe systems are equipped with two to six Intel
microprocessors and support the Windows NT Server and UNIX
operating environments. Intergraph's servers offer user
selectable configurations and performance levels.
The Company offers other systems for specialized needs.
Intergraph's Intel microprocessor/Windows NT-based Web Servers are
systems that include hardware as well as software to establish and
manage a customer's site on the World Wide Web. The newly formed
Digital Media Division of the Company has announced a product
offering aimed at computer generated image animators and video
content creators in the entertainment and broadcast markets. The
Company also offers large format production scanners, imaging
systems for scanning and plotting images, and laser imagesetters
for electronic publishing. Additional special purpose peripherals
such as disk and tape drivers, printers, and other devices may be
manufactured in house or sold as original equipment from third
parties.
The Company supports industry standards for operating systems,
windowing, graphics, peripherals, and communication networks,
allowing its systems to operate in computing environments with
products from other vendors who support the same industry
standards.
Intergraph Systems Software
In November 1992, the Company announced its decision to port its
technical software applications to Microsoft Corporation's Windows
NT operating system, and to make Windows NT available on
Intergraph workstations. Microsoft's standard Windows system has
been widely accepted in the personal computing market, and Windows
NT is Microsoft's operating system for high-end computing. The
effect of this decision has been to expand the availability of the
Company's workstations and software applications to Windows-based
computing environments not previously addressed by the Company,
including those of other hardware vendors that use the Windows NT
operating system. Prior to this decision, the Company's software
applications operated principally on Intergraph hardware
platforms. At the same time, the Company has continued to enhance
and maintain products in the UNIX operating system environment,
the foundation for its software applications prior to Windows NT,
thereby offering existing and potential customers a choice of UNIX
or Windows NT operating systems as well as a path to the Windows
NT system if and when the customer chooses. Limited shipments of
Windows NT-based software began in the fourth quarter of 1993. As
of the end of 1994, the Company had completed the port of its
applications software to Windows NT for all applications scheduled
for conversion, and sales of Windows-based software grew to
represent 48% of software revenues in 1994 and 70% in 1995.
While the Company believes Windows NT will become the dominant
operating system in the markets it serves, acceptance of this
system by customers has been slower than anticipated, and adoption
of any new operating system requires considerable effort by
customers, the timing of which is unpredictable. Competing
operating systems are available in the market, and several
competitors of the Company offer or are adopting Windows NT
operating systems for their products. There can be no assurance
that the Windows NT operating system will become dominant in the
markets served by the Company or that the Company's new operating
system and hardware architecture strategies will restore
profitability.
At the systems software level, Intergraph develops software to
provide graphics and database management capabilities on
Intergraph systems, advanced compilers for Intergraph systems, and
utilities to enable interoperability with systems from other
vendors.
The graphics software foundation for many Intergraph Windows-,
Windows NT-, and UNIX-based software applications is MicroStation,
a graphics software product owned by Bentley Systems, Inc., an
Intergraph affiliate. MicroStation provides fundamental graphics
element creation, maintenance, and display functions for
Intergraph's UNIX and Intel-based workstations. MicroStation is
also available on Apple Macintosh, Sun SPARCstations, and Hewlett-
Packard HP700 workstations. A Japanese language version of
MicroStation runs on the NEC personal computer. See Management's
Discussion and Analysis of Financial Condition and Results of
Operations and Note 11 of Notes to Consolidated Financial
Statements contained in the Company's 1995 Annual Report, portions
of which are incorporated by reference in this Form 10-K Annual
Report, for further discussion of the Company's affiliation with
Bentley Systems, Inc.
In 1995, the Company introduced its Jupiter technology, a
Windows-based component software architecture that will be the
foundation of new computer-aided-design/computer-aided-
manufacturing/computer-aided-engineering (CAD/CAM/CAE) and
geographic information systems applications. This technology
creates a Windows-native environment where information from
competing CAD systems comes together without translation to form
unified design models and drawings. Several new software products
based on this technology were introduced in 1995, including a 32-
bit two dimensional technical drawing and concept tool and a three
dimensional system for mechanical assembly and part modeling.
Other Jupiter-based software applications will be introduced in
1996.
To facilitate the use of Intergraph systems with those of other
vendors, the Company develops software for translating data into
Intergraph formats, imputing large volumes of text into graphics
and attribute files, and communicating with other computer
systems. Additionally, Intergraph provides interfaces to various
models of electrostatic and pen plotters (both online and
offline), online typesetters, units producing computer output
microfilm, and other output devices such as those used in the
electronic publishing industry.
Intergraph Applications Software
Intergraph offers a broad suite of graphics and data management
applications software. In terms of broad market segments, the
Company's mapping/geographic information systems (GIS),
architecture/engineering/construction, and mechanical design,
engineering, and manufacturing product applications continue to
dominate the Company's product mix at approximately 43%, 34%,
and 14%, respectively, of total systems sales in 1995, representing
only a slight change in mix from the prior two years.
Following is a brief description of these major product
application areas.
Mapping and GIS. Intergraph offers a range of mapping and
GIS solutions to assist businesses, government, and academic
institutions in solving geography based problems. Intergraph's
mapping/GIS software tools address the life cycle of
mapping/GIS projects, from project and data management through
data collection and integration, spatial query and analysis,
output, and map production.
Intergraph's mapping/GIS solutions help companies address
workflows in government and several major industries. These
products support solutions for all levels of government
including infrastructure management, planning, growth
management, economic development, land information management,
public safety and security, public works, redistricting,
tactical and strategic defense applications (such as land-based
command and control operations), and hydrographic and
aeronautical charting systems. Transportation industry
applications range from decision support activities such as
policy, planning, and programming to the creation of operations
systems that support day-to-day tasks. Utility companies
utilize Intergraph's mapping/GIS products to automate
management and analysis applications such as market analyses,
long range planning and forecasting, corridor evaluation and
selection, right-of-way analysis, and environmental impact
studies for siting, permitting, contaminant studies, and risk
evaluation. Environmental and natural resource management
applications include monitoring, evaluating and managing,
conservation and remediation of the environment. Energy
exploration and production products assist geoscientists in
geological analysis related to energy exploration and
production and mineral extraction.
Intergraph also provides solutions for end-to-end digital map
and chart publishing, digital image processing, orthophoto
production, and digital photogrammetry.
Architecture/Engineering/Construction. Intergraph's
architectural, facility management, and engineering product
line automates the project design and management process. With
this software, users can develop and model building concepts,
produce construction documents, and manage space and assets in
a finished facility. The system serves the needs of
architecture/engineering firms and corporate or governmental
facility management offices. Included are capabilities for
producing three dimensional models of design concepts,
architectural drawings, reports, engineering plans, and
construction drawings. Packages are also offered for space
planning, facility layout, maintenance management, lease
management and asset tracking.
Intergraph's civil engineering software includes capabilities
for coordinate geometry and for site, water resources, bridge,
structural, geotechnical and transportation engineering.
Structural engineering software is used to create two- and
three-dimensional structural models that serve as the basis for
frame and finite element-based structural design and analysis
of steel and concrete structures. For construction needs, the
products support traditional drafting and report requirements.
The Company's highway, rail, site, and hydraulic/hydrologic
engineering products link traditional workflow activities from
data collection to plan and profile production to the
generation of construction drawings.
The Company's plant design software addresses the needs of
process and power plant design efforts. The plant design
system product supports process flow diagrams, piping and
instrumentation diagrams, instrumentation data management,
piping, equipment, heating/ventilation/air conditioning,
electrical, structural, and other design aspects of a plant.
Three dimensional modeling capabilities are also provided. The
system performs interference checking and provides reports,
materials lists, and drawings. A supporting product provides
"walk throughs" of three dimensional plant models.
Mechanical Design, Engineering and Manufacturing. For the
mechanical design and manufacturing market, Intergraph offers
software to automate the product development cycle from design
through analysis, manufacturing, and documentation. Customers
use the system to design mechanical parts and assemblies,
utilizing solid modeling software. Detailing, dimensioning,
and drafting capabilities are included for the production of
engineering drawings.
Engineering software evaluates product designs for functional
and structural integrity, predicting behavior under service or
test conditions. Finite element modeling and analysis software
evaluates designs by simulating stresses encountered in end
use. Intergraph's manufacturing products assist in optimizing
material usage and cutting cycles for metalworking and
fabrication. In addition, a data management system organizes
shared product databases for coordination and management of
product cycle phases.
Product Development
The Company believes a strong commitment to ongoing product
development is critical to success in the interactive computer
graphics industry. Significant resources are devoted to
development of Intergraph products, and the Company believes its
product offerings are responsive to market and competitive
demands.
Product development expenditures include all costs related to
designing new or improving existing equipment and software.
During the year ended December 31, 1995, the Company spent $111.6
million (10.2% of revenues) for product development activities
compared to $137.2 million (13.2% of revenues) in 1994, and $160.3
million (15.3% of revenues) in 1993. See Management's Discussion
and Analysis of Financial Condition and Results of Operations
contained in the Company's 1995 Annual Report, portions of which
are incorporated by reference in this Form 10-K Annual Report, for
further discussion of product development expenses, including
portions capitalized and their recoverability.
Over the past several years the industry in which the Company
competes has been characterized by rapidly changing technology, a
move to higher performance, lower priced product offerings,
intense price and performance competition, shorter product cycles,
and by development and support of software standards that result
in less specific hardware dependency by customers. The Company
believes the life cycle of its products to be less than two years,
and it is therefore engaged in continuous product development
activity. The operating results of the Company and others in the
industry will continue to depend on the ability to accurately
anticipate customer requirements and technological trends and to
rapidly and continuously develop and deliver new hardware and
software products that are competitively priced, offer enhanced
performance, and meet customers' requirements for standardization
and interoperability.
Manufacturing and Sources of Supply
The Company's primary manufacturing activities consist of the
manufacture of printed circuit boards used in the Company's
workstations and servers and the assembly and testing of
components and subassemblies manufactured by the Company and
others.
As described under "Intergraph Hardware" above, the Company has
ceased design and production of its microprocessor. Substantially
all of the Company's microprocessor needs are currently supplied
by Intel Corporation. The Company does not have a fixed quantity
commitment for microprocessors in its agreements with Intel, but
believes it has a good relationship with Intel and is unaware of
any reason that Intel might encounter difficulties in meeting the
Company's microprocessor needs. Other microprocessors are
available in the market, but a change by the Company from Intel to
another microprocessor would significantly disrupt the Company's
development and manufacturing activities and result in delayed or
lost sales, which could have a significant adverse effect on the
Company's results of operations and financial position.
In late November 1994, it was disclosed that a rare problem
existed with Intel's Pentium microprocessor, which is used in many
of the Company's workstations and servers. The problem related to
an unlikely sequence of operations that could produce a round-off
error when dividing certain numbers and carrying the answer to
several decimal places. The Company had shipped several thousand
Pentium processor-based workstations and servers at that date.
Although the Company had no reason to believe that its customers
would experience this problem, the Company in 1994 committed to a
plan of replacement of all such processors in its customer base.
That plan is at present approximately 80% completed. The
Company's business arrangement with Intel provides warranty
coverage of the Pentium microprocessor by Intel. Neither the
discovery of the Pentium problem or the replacement of the
affected units significantly affected the Company's results of
operations or cash flows in 1994 or 1995, and no significant
effects are expected through completion of the replacement plan in
1996. All shipments of the Company's workstations and servers
since January 1, 1995 have contained the corrected versions of the
Pentium processor.
The Company is not required to carry extraordinary amounts of
inventory to meet customer demands or to ensure allotment of parts
from its suppliers.
Sales and Support
Sales. The Company's systems are sold through a combination of
direct and indirect channels worldwide. Direct channel sales,
which represent the majority of the Company's systems revenues,
are generated by the Company's direct sales force through sales
offices in over 40 countries worldwide. The efforts of the direct
sales force are augmented by sales through indirect channels,
including dealers, value-added-resellers, distributors, and system
integrators. The Company believes that indirect channel sales are
a key to future growth in sales volume and profitability, and
expects that indirect channel sales will increase as a percentage
of total systems revenue.
The Company's selling efforts are organized along key industry
lines (transportation and local government, utilities, process and
building, manufacturing, federal government, electronics, etc.).
The Company believes an industry focus better enables it to meet
the specialized needs of customers. In general, the Company's
direct sales force is compensated on a combined base salary and
commission basis. Sales quotas are established along with certain
incentives for exceeding quota. Additional specific incentive
programs may be established periodically.
Customer Support. The Company believes that a high level of
customer support is important to the sale of interactive graphics
systems. Customer support includes pre-installation guidance,
customer training, onsite installation, hardware preventive
maintenance, repair service, software help desk and technical
support services in addition to consultative professional
services. The Company employs engineers and technical specialists
to provide customer assistance, maintenance, and training.
Maintenance and repair of systems are covered by standard
warranties and by maintenance agreements to which most users
subscribe.
International Operations
International markets, particularly Europe, continue in
importance to the industry and to the Company. Sales outside the
U.S. represented 54% of total revenues in 1995 and 49% in 1994.
European revenues were 36% of total revenues in 1995 and 33% in
1994. The Company's operations are subject to and may be adversely
affected by a variety of risks inherent in doing business
internationally, such as government policies or restrictions,
currency exchange fluctuations, and other factors.
There are currently wholly-owned sales and support subsidiaries
of the Company located in every major European country. European
subsidiaries are supported by service and technical assistance
operations located in The Netherlands. Outside of Europe,
Intergraph systems are sold and supported through a combination of
subsidiaries and distributorships. At December 31, 1995, the
Company had approximately 1,500 employees in Europe and 1,300
employees in other international locations.
Fluctuations in the value of the U.S. dollar in international
markets can have a significant impact on the Company's results of
operations. The Company conducts business in all major markets
outside the U.S., but the most significant of these operations
with respect to currency risk are located in Europe, specifically
Germany, U.K., The Netherlands, France and Spain. Primarily but
not exclusively in these locations, the Company has certain
currency related asset and liability exposures against which
certain measures, primarily hedging, are taken to reduce currency
risk. With respect to these exposures, the objective of the
Company is to protect against financial statement volatility
arising from changes in exchange rates with respect to amounts
denominated for balance sheet purposes in a currency other than
the functional currency of the local entity. The Company
therefore enters into forward exchange contracts primarily related
to these balance sheet items (intercompany receivables, payables,
and formalized intercompany debt). Periodic changes in the value
of these contracts offset exchange rate-related changes in the
financial statement value of these balance sheet items. Forward
exchange contracts are purchased with maturities reflecting the
expected settlement dates of these balance sheet items (generally
three months or less), and only in amounts sufficient to offset
possible significant rate-related changes in the recorded values
of these balance sheet items, which represent a calculable
exposure for the Company from period to period. The Company does
not speculate or otherwise trade in foreign currencies or in
forward exchange contracts.
The Company has historically experienced slower collection
periods for its international accounts receivable than for similar
sales to customers in the United States. Slower collection
periods adversely affect liquidity. In addition, in 1994 the
Company wrote-off a receivable from a Middle Eastern customer in
the amount of $5.5 million, and is experiencing slow collection
periods throughout that region, particularly in Saudi Arabia.
Total accounts receivable from Middle Eastern customers as of the
end of 1995 was $21.5 million.
Based on its prior experience with product transitions and
knowledge of the international regions in which it conducts its
business, the Company believes that customer acceptance of its new
products based on the Windows NT operating system and Intel
microprocessors may more slowly develop in Europe than in other
regions in which the Company does business, although order
momentum was evident in Europe in the last half of 1995. Any
significant lag in acceptance of Windows NT and Intel-based
products in Europe would adversely affect the results of
operations of the Company.
See Management's Discussion and Analysis of Financial Condition
and Results of Operations and Notes 1, 3, and 10 of Notes to
Consolidated Financial Statements contained in the Company's 1995
Annual Report, portions of which are incorporated by reference in
this Form 10-K Annual Report, for further discussion of the
Company's international operations.
U.S. Government Business
Total revenue from the United States government was
approximately $159 million in 1995 (15% of total revenue) versus
approximately $167 million in both 1994 and 1993 (16% of total
revenue in both of these years). The Company sells to the U.S.
government under long-term contractual arrangements, primarily
indefinite delivery, indefinite quantity and cost-plus award fee
contracts, and through commercial sales of products not covered by
long-term contracts. Approximately 45% of total federal
government revenues are earned under long-term contracts. The
Company believes its relationship with the federal government to
be good. While it is fully anticipated that these contracts will
remain in effect through their expiration, the contracts are
subject to termination (with damages paid to the Company) at the
election of the government. Any loss of a significant government
contract would have an adverse impact on the results of operations
of the Company.
The Company has historically experienced slower collection
periods for its U.S. government accounts receivable than for its
commercial customers, which adversely affects liquidity. At
December 31, 1995, accounts receivable from the U.S. government
was $54 million.
Backlog
An order is entered into backlog only when the Company receives
a firm purchase commitment from a customer. The Company's backlog
of unfilled systems orders at December 31, 1995, was $197 million.
At December 31, 1994, backlog was $207 million. Substantially all
of the December 1995 backlog of orders is expected to be shipped
during 1996.
The Company does not consider its business to be seasonal,
though typically fourth quarter orders and revenues exceed those
of other quarters.
The Company does not ordinarily provide return of merchandise or
extended payment terms to its customers.
Competition
The industry in which the Company competes continues to be
characterized by price and performance competition. To compete
successfully, the Company and others in the industry must
accurately anticipate customer requirements and technological
trends and continuously develop products with enhanced performance
that can be offered at competitive prices. The Company, along
with other companies in the industry, engages in the practice of
price discounting to meet competitive industry conditions. Other
important competitive factors include quality, reliability, and
customer service, support, and training. Management of the
Company believes that competition will remain intense,
particularly in product pricing.
Competition in the interactive computer graphics industry varies
among the different product application areas. The Company
considers its principal competitors in the interactive computer
graphics market to be IBM, Computervision Corp., Hewlett-Packard
Corp., Digital Equipment Corporation (DEC), Sun MicroSystems,
Inc., Silicon Graphics, Inc., and Mentor Graphics, Inc. In the
hardware market, Intergraph also competes with personal computer
vendors, such as Compaq Computer Corporation, who sell high-end
systems. In the low-end graphics market, Intergraph competes with
the software products of Autodesk, Inc., Computervision, Softdesk,
Inc., and several smaller companies. Several companies with
greater financial resources than the Company, including IBM, DEC,
and Hewlett-Packard are active in the industry.
The Company provides point solutions and solutions which are
integrated -- workstations, servers, peripherals, and software
configured by the Company to work together and satisfy customers'
requirements. By delivering such integration, the Company
believes it has an advantage over other vendors who provide only
hardware or software, leaving system integration to the customer.
In addition, the Company believes that its experience and
extensive worldwide customer service and support infrastructure
represent a competitive advantage.
Environmental Affairs
The Company's manufacturing facilities are subject to numerous
laws and regulations designed to protect the environment,
particularly from plant wastes and emissions. In the opinion of
the Company, compliance with these laws and regulations has not
had, and should not have, a material effect on the capital
expenditures, earnings, or competitive position of the Company.
Licenses, Copyrights, Trademarks, and Patents
The Company develops graphics, data management, and applications
software as part of its continuing product development activities.
The Company has standard license agreements with Microsoft
Corporation for use and distribution of the Windows NT operating
system and with UNIX Systems Laboratories for use and distribution
of the UNIX operating system. The license agreements are
perpetual and allow the Company to sublicense the operating
systems software upon payment of required sublicensing fees. The
Company also has an extensive program for the licensing of third
party application and general utility software for use on systems
and workstations.
Through the end of 1994, the Company had an exclusive license
agreement with Bentley Systems, Inc. (BSI), a 50%-owned affiliate
of the Company, under which the Company distributed MicroStation,
a software product developed and maintained by BSI and utilized in
many of the Company's software applications. The exclusivity of
the Company's distribution license was the subject of arbitration
and litigation between the two companies and the other 50%
shareholders of BSI during 1993 and 1994. In May 1994, the
Company and BSI settled this dispute and terminated all related
arbitration and litigation then pending. As a result, effective
January 1, 1995, both BSI and the Company were permitted to
distribute MicroStation. The Company has a nonexclusive license
to sell MicroStation via its direct sales force, and to sell
MicroStation via its indirect sales channels if MicroStation is
sold with other Intergraph products. See Management's Discussion
and Analysis of Financial Condition and Results of Operations and
Note 11 of Notes to Consolidated Financial Statements contained in
the Company's 1995 Annual Report, portions of which are
incorporated by reference in this Form 10-K Annual Report, for
further discussion of the settlement and the Company's affiliation
with BSI.
The Company owns and maintains a number of registered patents
and registered and unregistered copyrights, trademarks, and
service marks. The patents and copyrights held by the Company are
the principal means by which the Company preserves and protects
the intellectual property rights embodied in the Company's
hardware and software products. Similarly, trademark rights held
by the Company are used to preserve and protect the goodwill
represented by the Company's registered and unregistered
trademarks, such as the federally registered trademark
"Intergraph".
As industry standards proliferate, there is a possibility that
the patents of others may become a significant factor in the
Company's business. Personal computer technology is widely
available, and many companies are attempting to develop patent
positions concerning technological improvements related to
personal computers and workstations. At present, it does not
appear that the Company will be prevented from using the
technology necessary to compete successfully, since patented
technology is typically available in the industry under royalty-
bearing licenses or patent cross-licenses, or the technology can
be purchased on the open market. Any increase in royalty payments
or purchase costs would increase the Company's costs of
manufacture, however, and it is possible that some key improvement
necessary to compete successfully in some markets served by the
Company may not be available.
An inability to retain significant third party license rights,
in particular the Microsoft license, to protect the Company's
copyrights, trademarks, and patents, or to obtain any required
patent rights of others through licensing or purchase could
significantly reduce the Company's revenues and adversely affect
its results of operations.
Employees
At December 31, 1995, the Company had approximately 8,400
employees. Of these, approximately 2,800 were employed outside
the United States. The Company's employees are not subject to
collective bargaining agreements, and there have been no work
stoppages due to labor difficulties. Management of the Company
believes its relations with employees to be good.
ITEM 2. PROPERTIES
The Company's corporate offices and primary manufacturing
facility are located in Huntsville, Alabama. Sales and support
facilities are maintained throughout the world.
The Company owns over 2,000,000 square feet of space in
Huntsville that is utilized for manufacturing, product
development, sales and administration. The Huntsville facilities
also include over 500 acres of unoccupied land that can be used
for future expansion. The Company maintains subsidiary company
facilities and sales and support locations in major U.S. cities
outside of Huntsville, primarily through operating leases.
Outside the U.S., the Company owns approximately 450,000 square
feet of space, primarily its Nijmegen distribution center and
European headquarters facility. Sales and support facilities are
leased in most major international locations.
The Company considers its facilities to be adequate for the
immediate future.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
None.
EXECUTIVE OFFICERS OF THE COMPANY
Certain information with respect to the executive officers of
the Company is set forth below. Officers serve at the discretion
of the Board of Directors.
Officer
Name Age Position Since
- ---- --- -------- -------
James W. Meadlock 62 Chairman of the Board and
Chief Executive Officer 1969
Larry J. Laster 44 Executive Vice President, Chief
Financial Officer, and Director 1986
Nancy B. Meadlock 57 Executive Vice President and Director 1969
James F. Taylor, Jr. 51 Executive Vice President and Director 1977
Robert E. Thurber 55 Executive Vice President and Director 1977
Lawrence F. Ayers, Jr. 63 Executive Vice President 1987
Richard S. Buchheim 50 Executive Vice President 1993
Penman R. Gilliam 58 Executive Vice President 1994
Neil E. Keith 50 Executive Vice President 1985
Wade C. Patterson 34 Executive Vice President 1994
Stephen J. Phillips 54 Executive Vice President 1987
William E. Salter 54 Executive Vice President 1984
Tommy D. Steele 55 Executive Vice President 1992
Kenneth C. Sullivan 48 Executive Vice President 1994
Edward A. Wilkinson 62 Executive Vice President 1987
Allan B. Wilson 47 Executive Vice President 1982
Manfred Wittler 55 Executive Vice President 1989
James W. Meadlock, a founder of the Company, has served as
Chairman of the Board of Directors since the Company's inception
in 1969 and is Chief Executive Officer. Mr. Meadlock and Nancy B.
Meadlock are husband and wife.
Larry J. Laster joined the Company in June 1981 and has held
several managerial positions in the Company's Finance Department
and Federal Systems Division. He was elected Vice President in
December 1986, named Chief Financial Officer in February 1987,
elected to the Board of Directors in April 1987, and is currently
Executive Vice President. Mr. Laster is a certified public
accountant.
Nancy B. Meadlock, a founder of the Company, has been a Director
since 1969, excluding the period from February 1970 to February
1972. Mrs. Meadlock served as Secretary for 10 years, was elected
Vice President in 1979, and is currently Executive Vice President
and Director. She holds a master's degree in business
administration. Mrs. Meadlock and James W. Meadlock are wife and
husband. Mrs. Meadlock will not stand for reelection to the Board
of Directors. Her term of office as a Director will expire
effective May 16, 1996, the date of the next annual meeting of
shareholders of the Company.
James F. Taylor, Jr., joined the Company in July 1969, shortly
after its formation, and is considered a founder. He has served
as a Director since 1973. Mr. Taylor was responsible for the
design and development of the Company's first commercial computer-
aided design products and for many application-specific products.
Mr. Taylor was elected Vice President in 1977 and was an Executive
Vice President at his retirement in 1992. Mr. Taylor returned to
full-time employment with the Company in January 1995 and is
currently an Executive Vice President of the Company and President
of the Intergraph Public Safety business unit. Mr. Taylor holds a
bachelor's degree in mathematics.
Robert E. Thurber, a founder of the Company, has been a Director
since 1972. In June 1977, Mr. Thurber was elected Vice President
and is currently Executive Vice President and Chief Engineer. He
is responsible for developing requirements and strategic
directions for application solutions. Mr. Thurber holds a
master's degree in engineering.
Lawrence F. Ayers, Jr., joined the Company in September 1987
after 32 years in federal government mapping where he became the
Civilian Director of the Defense Mapping Agency. He served as
Vice President for International Federal Marketing until February
1993. From 1993 to October 1995, he served as Executive Vice
President for the Utility and Mapping Sciences application group.
At present, he is serving on the Intergraph Software Solutions
business unit staff as Executive Vice President-at-large. Mr.
Ayers holds a bachelor's degree in civil engineering and a
master's degree in public administration.
Richard S. Buchheim joined the Company in July 1992. He was
elected Vice President in September 1993, Executive Vice President
in November 1994, and currently has responsibility for the
Company's Information Management and Solutions Engineering
Division. Mr. Buchheim came to Intergraph from the Camex
subsidiary of DuPont Electronic Imaging Systems where he was
Senior Vice President of Engineering. In his 18 year tenure at
DuPont and Camex, Mr. Buchheim led teams of over 100 software
engineers in the development of document management and publishing
systems for major metropolitan newspapers, including the New York
Times, New York Daily News, Toronto Star, and Orlando Sentinel,
and for retail advertisers such as May Company, Osco Drug, Service
Merchandise and Home Depot.
Penman R. Gilliam joined the Company in April 1994 as Executive
Vice President responsible for Federal Programs. Mr. Gilliam came
to Intergraph from Hughes Aircraft Company where he was Vice
President of Hughes Communications and Data Systems Division.
From late 1987 through early 1993, Mr. Gilliam served as Deputy
Director of the Defense Mapping Agency (DMA), the senior civilian
responsible for overall production, operations, and research. Mr.
Gilliam also held a number of other positions with DMA, including
production management positions in St. Louis and Washington D.C.
and a program director's position for DMA's digital production
system.
Neil E. Keith joined the Company in December 1981. He was
elected Vice President in September 1985 and is currently
Executive Vice President. He has extensive experience in
manufacturing management and is responsible for the Company's
manufacturing operations.
Wade C. Patterson joined the Company in 1984 as a design
engineer developing UNIX and central processing unit (CPU)
subsystems for Intergraph workstation products. In 1992, Mr.
Patterson managed Windows NT workstation projects as the Company
made the transition from reduced instruction set computing CPUs to
Intel processor-based CPUs. Mr. Patterson has been responsible
for hardware development and marketing for Intergraph Computer
Systems, the Company's hardware business unit, since August 1994.
He was elected Vice President in August 1994 and is currently an
Executive Vice President of the Company and President of
Intergraph Computer Systems. He holds a bachelor's degree in
electrical engineering.
Stephen J. Phillips joined the Company as Vice President and
General Counsel in November 1987 when Intergraph purchased the
Advanced Processor Division of Fairchild Semiconductor, where Mr.
Phillips was General Patent Counsel. He was elected Executive
Vice President in August 1992. Mr. Phillips holds a master's
degree in electrical engineering and a juris doctor in law.
William E. Salter joined the Company in April 1973. Since that
time, he has served in several managerial positions in the
Company's Federal Systems Division and as Director of Marketing
Communications. Dr. Salter was elected Vice President in August
1984 and is currently an Executive Vice President of the Company
and President of the Intergraph Federal Systems business unit. He
holds a doctorate in electrical engineering.
Tommy D. Steele joined the Company in June 1992 and is
responsible for systems software, most applications software, and
professional services. He is currently an Executive Vice
President of the Company and President of the Intergraph Software
Solutions business unit. Mr. Steele came to Intergraph from IBM
Corporation, where he was employed for more than 28 years. During
his tenure at IBM, he worked on the Saturn, Apollo, Skylab and
space shuttle programs as well as a number of Department of
Defense programs. Mr. Steele's last ten years at IBM were spent
in the personal computer software business managing products for
communications, databases, office automation, and operating
systems. The last four of those years were spent managing
personal computer operating systems (OS/2, DOS, and AIX).
Kenneth C. Sullivan joined the Company in 1988 and was
responsible for several areas of major business development in
Intergraph Federal Systems, including the Navy CAD-2 procurement
and programs. He was elected Vice President in March 1994 with
responsibility for the Company's Customer Services Division. He
was elected Executive Vice President in December 1995 and assumed
responsibility for sales and support for the Huntsville
operations. He holds a bachelor's degree in industrial
management.
Edward A. Wilkinson joined the Company in 1985 as Director of
Government Relations. He was elected Vice President of Federal
Systems in 1987 and Executive Vice President in 1994. Prior to
joining Intergraph, Mr. Wilkinson served for 34 years in the U.S.
Navy, retiring with the rank of Rear Admiral. He holds a master's
degree in mechanical engineering.
Allan B. Wilson joined the Company in 1980 and was responsible
for the development of international operations outside of Europe
and North America. He was elected Vice President in May 1982 and
Executive Vice President in November 1982. Mr. Wilson is
currently responsible for sales and support for the Company's Asia
Pacific region. He holds bachelor's and master's degrees in
electrical engineering.
Manfred Wittler joined the Company in 1989 as Vice President.
In 1991, he was elected Executive Vice President and is currently
responsible for sales and support for Europe and the Americas.
From 1983 through 1989, Mr. Wittler held several positions with
Data General Corporation in Europe, including Division Vice
President. He holds a doctorate in engineering.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED
SHAREHOLDER MATTERS
The information appearing under "Dividend Policy" and "Price
Range of Common Stock" on page 53 of the Intergraph Corporation
1995 Annual Report to Shareholders is incorporated by reference in
this Form 10-K Annual Report.
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data for the five years ended December 31,
1995, appearing under "Five-Year Financial Summary" on page 2 of
the Intergraph Corporation 1995 Annual Report to Shareholders are
incorporated by reference in this Form 10-K Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and
Results of Operations appearing on pages 16 to 28 of the
Intergraph Corporation 1995 Annual Report to Shareholders
is incorporated by reference in this Form 10-K Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and report of independent
auditors appearing on pages 29 to 52 of the Intergraph Corporation
1995 Annual Report to Shareholders are incorporated by reference
in this Form 10-K Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The information appearing under "Election of Directors", "Board
Committees and Attendance", and "Compliance with Section 16(a) of
the Securities Exchange Act of 1934" on pages 4 to 5 of the
Intergraph Corporation Proxy Statement relative to the Annual
Meeting of Shareholders to be held May 16, 1996, is incorporated
by reference in this Form 10-K Annual Report. Directors are
elected for terms of one year at the Annual Meeting of the
Company's shareholders.
Information relating to the executive officers of the Company
appearing under "Executive Officers of the Company" on pages 9
to 11 in this Form 10-K Annual Report is incorporated herein
by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information appearing under "Executive Compensation" on
pages 6 to 12 of the Intergraph Corporation Proxy Statement
relative to the Annual Meeting of Shareholders to be held May 16,
1996, is incorporated by reference in this Form 10-K Annual
Report.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information appearing under "Common Stock Outstanding and
Principal Shareholders" on pages 1 to 3 of the Intergraph
Corporation Proxy Statement relative to the Annual Meeting of
Shareholders to be held May 16, 1996, is incorporated by reference
in this Form 10-K Annual Report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information appearing under "Certain Relationships and
Related Transactions" on page 5 of the Intergraph Corporation
Proxy Statement relative to the Annual Meeting of Shareholders to
be held May 16, 1996, is incorporated by reference in this Form 10-
K Annual Report.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON
FORM 8-K
Page in
Annual
Report *
--------
(a) 1) The following consolidated financial statements of Intergraph
Corporation and subsidiaries and the report of independent
auditors thereon are incorporated by reference from the
Intergraph Corporation 1995 Annual Report to Shareholders:
Consolidated Balance Sheets at December 31, 1995 and 1994 29
Consolidated Statements of Operations for the three years
ended December 31, 1995 30
Consolidated Statements of Cash Flows for the three years
ended December 31, 1995 31
Consolidated Statements of Shareholders' Equity for the
three years ended December 31, 1995 32
Notes to Consolidated Financial Statements 33 - 51
Report of Independent Auditors 52
Page in
Form 10-K
---------
2) Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts
and Reserves for the three years
ended December 31, 1995 18
All other schedules are omitted because they are not applicable
or the required information is shown in the financial statements
or notes thereto.
Financial statements of 20%- to 50%-owned companies have been
omitted because the registrant's proportionate share of income
before income taxes of the companies is less than 20% of
consolidated income before income taxes, and the investments in
and advances to the companies are less than 20% of consolidated
total assets.
* Incorporated by reference from the indicated pages of the 1995
Annual Report to Shareholders.
3) Exhibits
Page in
Number Description Form 10-K
------ ----------- ---------
3(a) Certificate of Incorporation, Bylaws, and Certificate
of Merger. (1)
3(b) Amendment to Certificate of Incorporation. (2)
3(c) Restatement of Bylaws. (3)
4 Shareholder Rights Plan, dated August 25, 1993. (4)
10(a)* Intergraph Corporation 1992 Stock Option Plan. (5)
10(b)* Employment contracts of Manfred Wittler, dated
November 1, 1989 (6), April 18, 1991 (7), and
October 1, 1994 (13) and amendment to the November 1,
1989 contract, dated May 27, 1994. (13)
10(c)* Consulting contract of Keith H. Schonrock, Jr., dated
January 17, 1990 and amendments. (7)
10(d)* Agreement between Intergraph Corporation and Green
Mountain, Inc., dated February 23, 1994 (7), and amendment.
10(e) System OEM Upgrade Processor Trademark License
Agreement, dated April 30, 1993, between the Company
and Intel Corporation. (8)
10(f) Trademark License Agreement, dated May 1, 1993, between
the Company and Intel Corporation. (8)
10(g) OEM Market Development Program and Trademark License
Agreement, dated May 15, 1993, between the Company and
Intel Corporation. (8)
10(h) Software License Agreement as amended, dated April 17,
1987, between the Company and Bentley Systems, Inc. (9)
10(i) Settlement Agreement and Mutual General Release, dated
May 2, 1994, between the Company and Bentley Systems, Inc.(10)
10(j) Procurement Agreement, dated July 13, 1994, between the
Company and the U.S. Navy. (11)
10(k)* InterCAP Graphics Systems, Inc. 1989 Stock Option
Plan. (12)
10(l)* InterCAP Graphics Systems, Inc. 1994 Nonqualified
Stock Option Program. (12)
Page in
Number Description Form 10-K
------ ----------- ---------
10(m) Agreement between the Company and Bentley Systems,
Inc., dated December 16, 1994. (13)
10(n)* Loan program for executive officers of the Company as
amended, dated December 19, 1995.
10(o)* Employment contracts of Allan B. Wilson dated May 3,
1995.
10(p) $100,000,000 Credit Agreement, dated as of October 6, 1995,
among Intergraph Corporation, as Borrower, the Lenders
Party thereto, the Issuers Party thereto, and CitiCorp USA, Inc.
11 Computations of Loss Per Share 19
13 Portions of the Intergraph Corporation 1995 Annual
Report to Shareholders incorporated by reference in this
Form 10-K Annual Report
21 Subsidiaries of the Company 20
23 Consent of Independent Auditors 21
27 Financial Data Schedule
99 Consent of Director Nominee 22
*Denotes management contract or compensatory plan, contract, or
arrangement required to be filed as an Exhibit to this Form 10-K
- ------------
(1) Incorporated by reference to exhibits filed with the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1984, under the Securities Exchange Act of 1934, File
No. 0-9722.
(2) Incorporated by reference to exhibits filed with the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31,
1987, under the Securities Exchange Act of 1934, File
No. 0-9722.
(3) Incorporated by reference to exhibits filed with the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1993, under the Securities Exchange Act of 1934, File
No. 0-9722.
(4) Incorporated by reference to exhibits filed with the Company's
Current Report on Form 8-K dated August 25, 1993, under the
Securities Exchange Act of 1934, File No. 0-9722.
(5) Incorporated by reference to exhibits filed with the Company's
Annual Report on Form 10-K for the year ended December 31,
1991, under the Securities Exchange Act of 1934, File
No. 0-9722.
(6) Incorporated by reference to exhibits filed with the Company's
Annual Report on Form 10-K for the year ended December 31,
1992, under the Securities Exchange Act of 1934, File
No. 0-9722.
(7) Incorporated by reference to exhibits filed with the Company's
Annual Report on Form 10-K for the year ended December 31,
1993, under the Securities Exchange Act of 1934, File
No. 0-9722.
(8) Incorporated by reference to exhibits filed with the Company's
Form 10-K/A, Amendment No. 1, for the year ended December 31,
1993, under the Securities Exchange Act of 1934, File
No. 0-9722.
(9) Incorporated by reference to exhibits filed with the Company's
Form 10-K/A, Amendment No. 2, for the year ended December 31,
1993, under the Securities Exchange Act of 1934, File
No. 0-9722.
(10) Incorporated by reference to exhibits filed with the Company's
Form 10-Q/A, Amendment No. 2, for the quarter ended March 31,
1994, under the Securities Exchange Act of 1934, File No. 0-9722.
(11) Incorporated by reference to exhibits filed with the Company's
Form 10-Q/A, Amendment No. 1, for the quarter ended June 30,
1994, under the Securities Exchange Act of 1934, File No. 0-9722.
(12) Incorporated by reference to exhibits filed with the Company's
Registration Statement on Form S-8, Registration No. 33-57211,
filed January 10, 1995, under the Securities Act of 1933.
(13) Incorporated by reference to exhibits filed with the Company's
Annual Report on Form 10-K for the year ended December 31,
1994, under the Securities Exchange Act of 1934, File No. 0-9722.
- ------------
(b) No reports on Form 8-K were filed during the fourth quarter of
the fiscal year ended December 31, 1995.
(c) Exhibits - the response to this portion of Item 14 is
submitted as a separate section of this report.
(d) Financial statement schedules - the response to this portion
of Item 14 is submitted as a separate section of this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
INTERGRAPH CORPORATION
By /s/ James W. Meadlock Date: March 21, 1996
---------------------------
James W. Meadlock
Chief Executive Officer and
Chairman of the Board
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates
indicated.
Date
----
/s/ James W. Meadlock Chief Executive Officer and March 21, 1996
- ----------------------- Chairman of the Board
James W. Meadlock (Principal Executive Officer)
/s/ Larry J. Laster Executive Vice President, Chief March 21, 1996
- ----------------------- Financial Officer and Director
Larry J. Laster (Principal Financial Officer)
/s/ Nancy B. Meadlock Executive Vice President and Director March 21, 1996
- -----------------------
Nancy B. Meadlock
/s/ James F. Taylor, Jr. Executive Vice President and Director March 21, 1996
- -----------------------
James F. Taylor, Jr.
/s/ Robert E. Thurber Executive Vice President and Director March 21, 1996
- -----------------------
Robert E. Thurber
_______________________ Director March 21, 1996
Roland E. Brown
_______________________ Director March 21, 1996
Keith H. Schonrock, Jr.
/s/ John W. Wilhoite Vice President and Controller March 21, 1996
- ----------------------- (Principal Accounting Officer)
John W. Wilhoite
INTERGRAPH CORPORATION AND SUBSIDIARIES
SCHEDULE II ---- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Column A Column B Column C Column D Column E
- ----------------------- ---------- ---------- ---------- -------------
Additions
Balance at charged to
beginning costs and Balance at
Description of period expenses Deductions end of period
- ----------------------- ---------- ---------- ---------- -------------
Allowance for doubtful
accounts deducted from
accounts receivable in
the balance sheet
1995 $20,309,000 4,945,000 4,855,000(1) $20,399,000
1994 $20,791,000 10,536,000 11,018,000(1) $20,309,000
1993 $18,969,000 6,201,000 4,379,000(1) $20,791,000
Allowance for obsolete
inventory deducted
from inventories in
the balance sheet
1995 $31,033,000 17,455,000 14,047,000(2) $34,441,000
1994 $24,560,000 20,137,000 13,664,000(2) $31,033,000
1993 $24,607,000 41,630,000 41,677,000(2) $24,560,000
(1) Uncollectible accounts written off, net of recoveries.
(2) Obsolete inventory reduced to net realizable value.
INTERGRAPH CORPORATION AND SUBSIDIARIES
EXHIBIT 11 ---- COMPUTATIONS OF LOSS PER SHARE
Year ended December 31, 1995 1994 1993
- ----------------------- ------------- ------------- --------------
Primary:
Weighted average common shares
outstanding 46,077,000 44,860,000 46,199,000
Net common shares issuable on exercise
of certain stock options (1) --- --- ---
------------- ------------- --------------
Average common and equivalent
common shares outstanding 46,077,000 44,860,000 46,199,000
============= ============= ==============
Loss before cumulative effect of
change in accounting for
income taxes $(45,348,000) $(70,220,000) $(118,542,000)
Cumulative effect of change in
accounting for income taxes --- --- 2,500,000
------------- ------------ --------------
Net loss $(45,348,000) $(70,220,000) $(116,042,000)
============= ============= ==============
Loss per share:
Loss before cumulative effect of
change in accounting for income taxes $( .98) $(1.56) $(2.56)
Cumulative effect of change in accounting
for income taxes --- --- .05
------------- ------------- --------------
Net loss per share $( .98) $(1.56) $(2.51)
============= ============= ==============
Fully diluted:
Weighted average common
shares outstanding 46,077,000 44,860,000 46,199,000
Net common shares issuable on exercise
of certain stock options (1) --- --- ---
------------- ------------- --------------
Average common and equivalent
common shares outstanding 46,077,000 44,860,000 46,199,000
============= ============= ==============
Loss before cumulative effect of
change in accounting for
income taxes $(45,348,000) $(70,220,000) $(118,542,000)
Cumulative effect of change in
accounting for income taxes --- --- 2,500,000
------------- ------------- --------------
Net loss $(45,348,000) $(70,220,000) $(116,042,000)
============= ============= ==============
Loss per share:
Loss before cumulative effect of
change in accounting for income taxes $( .98) $(1.56) $(2.56)
Cumulative effect of change in accounting
for income taxes --- --- .05
------------- ------------- --------------
Net loss per share $( .98) $(1.56) $(2.51)
============= ============= ==============
(1) Net common shares issuable on exercise of certain stock
options is calculated based on the treasury stock method using
the average market price for the primary calculation and the
ending market price, if higher than the average, for the fully
diluted calculation.
INTERGRAPH CORPORATION AND SUBSIDIARIES
EXHIBIT 21 ---- SUBSIDIARIES OF REGISTRANT
State or Other Percentage of Voting
Jurisdiction of Securities Owned by
Name Incorporaton Parent
- ---------------------------------- --------------- --------------------
Bentley Systems, Inc. Delaware 50
Bestinfo, Inc. Delaware 100
Intergraph Asia Pacific, Inc. Delaware 100
Intergraph China, Inc. Delaware 100
Intergraph European Delaware 100
Manufacturing, L.L.C.
InterCAP Graphics Systems,Inc Delaware 100
Intergraph (Italia) L.L.C. Delaware 100
Intergraph (Middle East),L.L.C. Delaware 100
Intergraph Benelux B.V. The Netherlands 100
Intergraph CAD/CAM (Danmark) A/S Denmark 100
Intergraph CR s.r.o. Czech Republic 100
Intergraph (Deutschland) GmbH Germany 100
Intergraph Espana, S.A. Spain 100
Intergraph Europe (POLSKA) s.p.z.o.o Poland 100
Intergraph Finland Oy Finland 100
Intergraph (France) SA France 100
Intergraph GmbH (Osterreich) Austria 100
Intergraph (Hellas) S.A. Greece 100
Intergraph Hungary, Ltd. Hungary 100
Intergraph Ireland, Ltd. Ireland 100
Intergraph Norge A/S Norway 100
Intergraph (Portugal) Sistemas Portugal 100
de Computacao Grafica, S.A.
Intergraph SR s.r.o. Slovac Republic 100
Intergraph (Sverige) AB Sweden 100
Intergraph (Switzerland) A.G. Switzerland 100
Intergraph (UK), Ltd. United Kingdom 100
Intergraph Computer (Shenzhen) China 100
Co. Ltd.
Intergraph Corporation (N.Z.) Limited New Zealand 100
Intergraph Corporation Pty.,Ltd. Australia 100
Intergraph Corporation Taiwan Taiwan, R.O.C. 100
Intergraph Hong Kong Limited Hong Kong 100
Intergraph Japan K.K. Japan 100
Intergraph Korea, Ltd. Korea 100
Intergraph Public Safety Pty., Ltd. Australia 100
Intergraph Systems (Malaysia) Sdn Bhd Malaysia 100
Intergraph Systems Singapore Pte Ltd. Singapore 100
Intergraph Computer Services Turkey 97
Industry & Trade, A.S.
Intergraph Saudi Arabia Ltd. Saudi Arabia 75
Intergraph Canada, Ltd. Canada 100
Intergraph de Mexico, S.A. de C.V. Mexico 100
Intergraph Servicios de Venezuela 100
Venezuela C.A.
Intergraph (India) Pvt. Ltd. India 100
Intergraph Electronics Ltd. Israel 100
VeriBest, Inc. Delaware 100
EXHIBIT 23 ---- CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual
Report (Form 10-K) of Intergraph Corporation and subsidiaries of
our report dated January 31, 1996, included in the 1995 Annual
Report to Shareholders of Intergraph Corporation.
Our audits also included the financial statement schedule of
Intergraph Corporation listed in Item 14(a)(2). This schedule
is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In
our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements
taken as a whole, presents fairly in all material respects the
information set forth herein.
We also consent to the incorporation by reference in the
Registration Statement (Form S-3 No. 33-25880) pertaining to the
Stock Bonus Plan dated December 22, 1988; in the Registration
Statement (Form S-8 No. 33-10614) pertaining to the Intergraph
Corporation Amended and Restated 1987 Employee Stock Purchase
Plan dated December 31, 1992; in the Registration Statement
(Form S-8 No. 33-53849) pertaining to the Intergraph Corporation
1992 Stock Option Plan dated May 27, 1994; in the Registration
Statement (Form S-8 No. 33-57211) pertaining to the Assumption
of Options under the InterCAP Graphics Systems, Inc. 1989 Stock
Option Plan and 1994 Nonqualified Stock Option Program, dated
January 10, 1995; and in the related Prospectuses, of our report
dated January 31, 1996, with respect to the consolidated
financial statements and schedule of Intergraph Corporation and
subsidiaries included or incorporated by reference in the Annual
Report (Form 10-K) for the year ended December 31, 1995.
/s/ Ernst & Young LLP
Birmingham, Alabama
March 20, 1996
EXHIBIT 99 --CONSENT OF DIRECTOR NOMINEE
I hereby consent to being named as a nominee for director of
Intergraph Corporation in the proxy statement prepared for the
May 16, 1996 annual shareholders' meeting, and to serve as a
director of Intergraph Corporation if elected.
Date: March 21, 1996 /s/ Richard K. Snelling
-----------------------
Richard K. Snelling
[INTERGRAPH LETTERHEAD]
GREEN MOUNTAIN INC.
CONSULTING CONTRACT
AMENDMENT NUMBER SIX
The consulting contract between Intergraph Corporation and
Green Mountain, Inc. dated January 17th 1990 is hereby
extended through December 31, 1996.
Green Mountain, Inc. Intergraph Corporation
By: /s/ Gerald F. Donovan By: /s/ Larry Laster
----------------------- ----------------------------
Title: President Title: Executive Vice President
EXECUTIVE OFFICER LOAN AGREEMENT
This Agreement is between _________________________ ("the
Borrower") and Intergraph Corporation ("Intergraph"). The Borrower
hereby agrees to all of the terms and conditions contained in this
Agreement.
Establishment of the Program. On January 7, 1993, the Board of
Directors established a loan program for corporate officers who
are required to report Intergraph stock transactions to the SEC.
The purpose of the loan program is to assist such officers at
such times that stock transactions would be prohibited,
restricted, or otherwise impractical.
Program Amendments. In March 1994, the Board amended the program
by extending the original termination date from May 1, 1994 to
May 1, 1995. In April 1995, the Board again amended the program
by extending it to May 1, 1996. On December 19, 1995, the Board
amended the program by modifying the stock price used in the
definition of the Program End Date from $20 per share to $25 per
share, and by changing the repayment requirement from the date
that "the Borrower sells any Intergraph stock " to the date that
"the Borrower sells a cumulative amount of more than 100,000
shares of Intergraph stock". These amendments are reflected in
the provisions of this Agreement contained below.
Program Beginning/End The program will commence on January 7,
1993. The program will cease on the Program End Date, which is
the earlier of May 1, 1996, or the date that the Intergraph
common stock price reaches or exceeds $25 per share; provided,
however, that such determination shall not be made during a
restricted trading period (as announced from time-to-time by the
corporate legal department). The Intergraph common stock price
shall be based on the reported closing price as listed in the
Wall Street Journal (or similar publication).
Repayment. All principal and interest outstanding under the
program must be repaid in full within fifteen (15) business days
following the earlier of (i) the date of employment termination
with Intergraph and (ii) the date the Borrower sells a cumulative
amount of more than 100,000 shares of Intergraph stock, or (iii)
the Program End Date. Full or partial pre-payments of principal
are permitted at any time. All interest shall be paid with the
final principal payment.
Interest Rate. Interest on the amounts outstanding hereunder
shall accrue for each calendar month or portion thereof at a rate
equal to the Prime Rate as published in the "Money Rates" section
of the Wall Street Journal (or similar publication) on the last
business day of each calendar month (calculated on the basis of a
year of 365 (or 366 as the case may be) days and actual days
elapsed; provided, however, that if any amount shall not be paid
when due (at maturity, by acceleration or otherwise), such amount
shall bear interest at the rate stated above plus two percent
(2%) from the date such amount was due and payable until the date
such amount is paid in full.
Promissory Note. Loans made under this Agreement shall be
evidenced by a promissory note (below). The Borrower's signature
on the promissory note shall indicate agreement with all terms
and conditions of this Agreement.
I hereby certify that I am an officer of Intergraph Corporation and
that I am required to report Intergraph stock transactions to the
SEC. I further certify that (i) I am the owner or beneficial owner
of Intergraph common stock with a current market value of at least
the amount of any loans made under this Agreement, and/or (ii) I
have currently exercisable options to purchase Intergraph common
stock with a net value (current market price less exercise price)
of at least the amount of any loans made under this Agreement. I
agree to provide suitable evidence of the foregoing upon request.
I request a loan in the amount set forth in the promissory note
shown below.
PROMISSORY NOTE
$___________________ Date:__________
FOR VALUE RECEIVED, the Borrower promises to pay to the order of
Intergraph Corporation at any such place as Intergraph may
designate, the sum of $____________ together with interest thereon,
in accordance with the Agreement set forth above.
In the event that any payment due hereunder is not received when
due, this Note shall be deemed in default and the entire principal
and interest due hereunder shall be immediately due and payable.
In the event of default hereunder, the Borrower shall pay all costs
of collection, including, without limitation, reasonable attorney's
fees and legal expenses incurred by Intergraph in endeavoring to
collect any amounts payable hereunder. The Borrower hereby
expressly waives presentment, demand for payment, dishonor, notice
of dishonor, protest and notice of protest.
IN WITNESS WHEREOF, the Borrower has caused this Note to be made,
executed and delivered as of the date and year written above.
_________________________
Signature of the Borrower
Witness:
____________________________________________
OFFSHORE EMPLOYMENT CONTRACT
----------------------------
THIS AGREEMENT is made the 3rd day of May, 1995, BETWEEN
INTERGRAPH CORPORATION, whose registered office is One Madison
Industrial Park, Huntsville, Alabama, USA 35807 (hereinafter
called "the Company") of the one part and ALLAN B. WILSON of
Room 901-910 Tai Yau Building, 181 Johnston Road, Wanchai,
Hong Kong (hereinafter called "the Employee") of the other
part.
WITNESSETH:
WHEREAS the Company is desirous of employing the Employee as
an Executive Vice President in the Asia Pacific Region and the
Employee is desirous of being so employed.
NOW, THEREFORE, in consideration of the mutual premises and
convenants herein contained, the parties hereto agree as
follows:-
(1) The Company shall employ the Employee and the Employee
shall serve the Company as an Executive Vice President in
the Asia Pacific Region and elsewhere as required by the
Company upon the terms and conditions hereinafter
contained.
(2) Subject as hereinafter provided the employment hereunder
shall commence on the 22nd day of May, 1995 will continue
until terminated accordance with clause 8 hereunder.
Throughout the course of this Agreement the Employee shall
be based in and render his service in the Asia Pacific
Region.
(3) Remuneration: The Employee shall be
entitled by way of remuneration for his
services hereunder to a salary of
US$79,040.00 per annum (or such higher
rate as may from time to time be agreed
between the parties or determined upon and
notified to the Employee by the Company).
Such salary shall accrue from day to
day and shall be payable by equal monthly
instalments not later than the
penultimate working day of each month in
United States dollars or mutually agreed
equivalent.
(4) Reporting to: James Meadlock, Chairman
and CEO, Intergraph Corporation.
- --------------------------------------------------------------------------
Offshore Employment Contract Page 1 of 3
- -Allan B. Wilson
(5) Performance &
Salary Review: Your performance will be
reviewed on a regular basis and salary
will be reviewed on an annual basis after
the initial year of service.
(6) Relocation: The Company will pay for
the airfares for Employee and his family
to locate from U.S.A. to Hong Kong
(airfares at first class).
The Company will reimburse Employee for the
cost of relocating Employee's household goods
and chattels from the U.S.A. (by sea freight)
to Hong Kong.
Upon termination of this agreement
the Company will reimburse for relocating
Employee's household goods and chattels to
U.S.A. (by sea freight). Additionally,
the Company will pay for airfares (first
class) repatriation for Employee and his
family from Hong Kong to U.S.A.
(7) Home Leave: Two business class tickets,
or equivalent, from Hong Kong to USA and
return will be provided by the Company for
Employee and his family every calendar
year of service in Hong Kong under this
agreement.
(8) Termination
of Service: Notice of termination of
this Agreement may be given by either
party for any reason whatsoever subject to
the Company giving the Employee two (2)
months' notice of termination in writing
or the Employee giving the Company two (2)
months' notice of termination in writing.
(9) Personal
Taxation: It is agreed and understood that
you will be required to file your own tax
return in Hong Kong and will be
responsible for payment of any resultant
Hong Kong tax.
It is also agreed that you will be
responsible for the payment of any taxes
required by the United States Government.
The Company will reimburse Employee for
reasonable costs associated with professional tax
- -----------------------------------------------------------------------
Offshore Employment Contract Page 2 of 3
- -Allan B. Wilson
advice provided by Westpro in respect of
preparation of Employee's U.S. income tax return.
(10) Annual Leave: 20 working days vacation
will accrue to the Employee upon
completion of each year's service from the
commencement date of this Agreement. The
annual leave under this Agreement shall
run concurrently with annual leave
provided to the Employee under the
separate Employment Agreement for the
Employee's services to be rendered in Hong
Kong. The aggregate of remuneration under
the two aforesaid Employment Agreements
shall be applicable in respect of annual
leave.
(11) This Agreement shall be governed by and construed in
all respects in accordance with the laws of United States.
IN WITNESS whereof this Agreement has been entered into the
day and year first above written.
SIGNED by SIGNED BY the said
on behalf of ALLAN B. WILSON
INTERGRAPH CORPORATION
/s/ Graeme Farrell /s/ Allan B. Wilson
- ------------------------ ----------------------
Graeme Farrell
Vice-President
Witness:
Signature:
- ------------------------------------------------------------------------
Offshore Employment Contract Page 3 of 3
- -Allan B. Wilson
EMPLOYMENT AGREEMENT
OF
ALLAN B. WILSON
---------------
THIS EMPLOYMENT AGREEMENT ("Agreement") is hereby entered
into between INTERGRAPH ASIA PACIFIC LIMITED ("Employer") and
ALLAN B. WILSON ("Employee").
WHEREAS, the Employer is currently engaged in a business
that requires the assistance of individuals with Employee's
executive qualifications, skills and experience, and
WHEREAS, the Employer desires to procure the services of
Employee and Employee is willing to enter into the employ of
the Employer upon the terms and subject to the conditions set
forth herein, and
WHEREAS, the parties believe it is in their mutual
interest to address in this Agreement certain of their rights
and responsibilities arising out of such employment
relationship and other important considerations addressed
herein.
NOW THEREFORE, for adequate consideration and intending
to be legally bound, the Employer hereby employs Employee, and
the Employee hereby accepts such employment with the Employer,
upon the following terms and conditions:
Position: Executive Vice President
Commencement
Date: The commencement date of this agreement shall
be May 22, 1995
Reporting to: James Meadlock, Chairman and CEO, Intergraph
Corporation
Salary: Equivalent Annual Salary to be ONE HUNDRED
AND EIGHTEEN THOUSAND FIVE HUNDRED AND SIXTY
US Dollars (US$118,560), payable monthly in
arrears.
Living and
Accommodation: A suitable furnished apartment will be
provided Employee and his family for living
and accommodation in Hong Kong during the
currency of this agreement.
Page 1 of 3
The Company shall assist Employee to find
accommodation and will provide directly to a
landlord any deposits (refundable to The
Company) that are required under Lease for an
apartment and also pay any associated agency
and legal costs.
The Company will pay for utilities including
gas, electricity, water and phone the Company
will provide all refundable deposits related
to connection of said utilities provided that
deposits are held in the Company's name.
Annual Leave: 20 days vacation will accrue to Employee upon
completion of each year's service from the
commencement date of this agreement.
Insurance: Coverage for Employee and his family
(resident in Hong Kong) for medical, dental
and hospital expenses.
Performance and
Salary Review: Employee's performance will be reviewed on a
regular basis and Employee's salary will be
reviewed on an annual basis after the initial
year of service.
Business
Expenses: Employee's business expenses such as
travel, meals, hotel accommodation and
business telephone calls will be reimbursed
to Employee by the Company upon submission of
the appropriate expense reports with required
receipts in accordance with Company Policy.
Employee will be subject to all Asia-Pacific
regional policies and procedures.
Termination: Notice of termination of this employment
agreement may be given by either party by the
giving of two (2) months' notice to the other
party and grounds for termination may be for
any reason whatsoever.
Personal
Taxation: It is agreed and understood that
Employee will be required to file own tax
return in Hong Kong and will be responsible
for payment of any resultant Hong Kong tax.
It is also agreed that Employee will be
responsible for the payment of any personal
taxes required by the United States
Government.
Page 2 of 3
Governing Law: This agreement shall be governed by and
construed in all respects in accordance with
the Laws of Hong Kong.
EMPLOYEE ACKNOWLEDGES THAT HE HAS READ THIS AGREEMENT IN ITS
ENTIRETY AND HEREBY AGREES TO BE BOUND BY ITS TERMS.
IN WITNESS WHEREOF, for consideration the adequacy of which is
hereby acknowledged and intending to be legally bound, the parties
hereto have caused this Agreement to be executed on the date
below written.
Signed for and on behalf of Accepted by the said
INTERGRAPH ASIA PACIFIC LTD Allan B. Wilson on 3 day
of May, 1995.
/s/ Graeme Farrell /s/ Allan B. Wilson
- --------------------------- ------------------------
Graeme Farrell
Vice President
Witness:
Signature:
Page 3 of 3
U.S. $100,000,000
CREDIT AGREEMENT
Dated as of October 6, 1995
Among
INTERGRAPH CORPORATION
as Borrower,
-----------
THE LENDERS PARTY HERETO,
THE ISSUERS PARTY HERETO,
and
CITICORP USA, INC.,
as Agent
--------
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.1. Defined Terms 1
1.2. Computation of Time Periods 34
1.3. Accounting Terms 35
1.4. Certain Terms 35
ARTICLE II
AMOUNTS AND TERMS OF THE REVOLVING CREDIT LOANS
2.1. The Revolving Credit Loans 35
2.2. Making the Revolving Credit Loans 36
2.3. Fees 38
2.4. Reduction and Termination of the Revolving
Credit Commitments 38
2.5. Repayment 39
2.6. Prepayments 39
2.7. Conversion/Continuation Option 40
2.8. Interest 41
2.9. Interest Rate Determination 42
2.10. Increased Costs, Etc. 42
2.11. Payments and Computations 43
2.12. Taxes 45
2.13. Sharing of Payments, Etc. 47
2.14. Letter of Credit Facility 48
2.15. Cash Collateral Account 54
2.16. Segmentation of the Revolving Credit Commitment 57
ARTICLE III
CONDITIONS OF LENDING
3.1. Conditions Precedent to Initial
Revolving Credit Loans and Letters of Credit 57
3.2. Additional Conditions Precedent to Initial
Revolving Credit Loans and Letters of Credit 63
3.3. Conditions Precedent to Each Revolving Credit
Loan and Letter of Credit 64
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1. Corporate Existence; Compliance with Law 65
4.2. Corporate Power; Authorization;
Enforceable Obligations 66
4.3. Taxes 67
4.4. Full Disclosure 68
4.5. Financial Matters 68
4.6. Litigation 69
4.7. Margin Regulations 69
4.8. Subsidiaries 69
4.9. ERISA 70
4.10. Liens 70
4.11. No Burdensome Restrictions; No Defaults 70
4.12. No Other Ventures 71
4.13. Investment Company Act; Public Utility
Holding Company Act 71
4.14. Insurance 72
4.15. Labor Matters 72
4.16. Force Majeure 72
4.17. Use of Proceeds 72
4.18. Environmental Matters 73
4.19. Intellectual Property 74
4.20. Title 75
4.21. Restricted Payments 75
4.22. SEC Documents 76
ARTICLE V
FINANCIAL COVENANTS
5.1. Fixed Charge Coverage Ratio 76
5.2. Interest Coverage Ratio 77
5.3. Maintenance of Net Worth 78
5.4. Capital Expenditures, Etc. 78
ARTICLE VI
AFFIRMATIVE COVENANTS
6.1. Compliance with Laws, Etc. 79
6.2. Conduct of Business 79
6.3. Payment of Taxes, Etc. 80
6.4. Maintenance of Insurance 80
6.5. Preservation of Corporate Existence, Etc. 80
6.6. Access 80
6.7. Keeping of Books 81
6.8. Maintenance of Properties, Etc. 81
6.9. Performance and Compliance with Other Covenants 81
6.10. Application of Proceeds 82
6.11. Financial Statements 82
6.12. Reporting Requirements 84
6.13. Employee Plans 88
6.14. Fiscal Year 88
6.15. Borrowing Base Determination 88
6.16. Environmental 89
6.17. Cash Management System 89
6.18. Management Consulting Firm. 89
6.19. Foreign Accounts Receivable 89
6.20. Landlord Waivers and Consents 90
6.21. Government Contracts 90
6.22. Lockbox Agreements 90
6.23. Pledged Shares 91
6.24. Alabama Real Property Documents 91
ARTICLE VII
NEGATIVE COVENANTS
7.1. Liens, Etc. 92
7.2. Indebtedness 94
7.3. Lease Obligations; Sale/Leasebacks 96
7.4. Restricted Payments 97
7.5. Mergers, Stock Issuances, Sale of Assets, Etc. 97
7.6. Investments in Other Persons 99
7.7. Maintenance of Ownership of Subsidiaries 101
7.8. Change in Nature of Business 101
7.9. Modification of Material Agreements 102
7.10. Accounting Changes 102
7.11. Transactions with Affiliates 102
7.12. Interest Rate Contracts; Currency Agreements 103
7.13. Cancellation of Indebtedness Owed to It 103
7.14. New Subsidiaries 103
7.15. Capital Structure of the Borrower and
its Subsidiaries 104
7.16. No Speculative Transactions 104
7.17. Environmental 104
7.18. Bank Accounts 104
7.19. Prohibition on Negative Pledges 104
7.20. Compensation 105
ARTICLE VIII
EVENTS OF DEFAULT
8.1. Events of Default 105
8.2. Remedies 108
8.3. Actions in Respect of Letters of
Credit and Other Obligations 108
ARTICLE IX
THE AGENT
9.1. Authorization and Action 109
9.2. Agent's Reliance, Etc. 110
9.3. Citicorp USA and Affiliates 110
9.4. Lender Credit Decision 111
9.5. Indemnification 111
9.6. Successor Agent 112
ARTICLE X
MISCELLANEOUS
10.1. Amendments, Etc. 113
10.2. Notices, Etc. 114
10.3. No Waiver; Remedies 114
10.4. Costs; Expenses; Indemnities 115
10.5. Right of Set-off 118
10.6. Binding Effect 118
10.7. Assignments and Participations 118
10.8. Governing Law 122
10.9. Submission to Jurisdiction; Service of
Process 123
10.10. Section Titles 123
10.11. Execution in Counterparts 123
10.12. Entire Agreement 123
10.13. Confidentiality 124
10.14. Waiver of Jury Trial 124
CREDIT AGREEMENT, dated as of October 6, 1995, among Intergraph
Corporation, a Delaware corporation (the "Borrower"), the financial
institutions listed on the signature pages hereof as lenders (each
individually a "Lender" and collectively the "Lenders"), the financial
institutions listed on the signature pages hereof as issuers of letters of
credit hereunder (each individually an "Issuer" and collectively the
"Issuers"), and Citicorp USA, Inc. ("Citicorp USA"), as agent for the
Lenders and the Issuers (in such capacity, the "Agent").
W I T N E S S E T H :
WHEREAS, the Borrower has requested that the Lenders make
revolving credit advances to the Borrower of up to $100,000,000 in aggregate
principal amount outstanding at any one time for the purposes hereinafter
specified; and
WHEREAS, the Lenders are willing to make funds available for such
purposes upon the terms and subject to the conditions set forth herein; and
WHEREAS, the Borrower has requested that the Issuers provide the
Borrower with letters of credit for the purposes hereinafter specified, and
the Issuers are willing to issue letters of credit for such purposes upon
the terms and subject to the conditions contained herein;
NOW, THEREFORE, in consideration of the premises and the covenants
and agreements contained herein, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.1. Defined Terms. As used in this Agreement, the following
terms have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"Accounts" has the meaning specified in the Borrower Security
Agreement in the case of the Borrower and in each Subsidiary Security
Agreement in the case of Intergraph Canada.
"Affiliate" means, as to any Person, any Subsidiary of such Person
and any other Person which, directly or indirectly, controls, is controlled
by or is under common control with such Person and includes each officer or
director or general partner of such Person, and each Person who is the
beneficial owner of 10% or more of any class of voting Stock of such Person.
For the purposes of this definition, "control" means the possession of the
power to direct or cause the direction of management and policies of such
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Agent" has the meaning specified in the first paragraph of this
Agreement.
"Agreement" means this Credit Agreement, together with all
Schedules and Exhibits, as the same may be amended, supplemented or
otherwise modified from time to time.
"Alabama Real Property" means all of the real property located in
Madison County, Alabama owned by the Borrower.
"Alberta Subsidiary Security Agreement" means an agreement, in
substantially the form of Exhibit G-2, executed by Intergraph Canada, as
such agreement may be amended, supplemented or otherwise modified from time
to time.
"Applicable Base Rate Margin" means, with respect to any Base Rate
Loan, 1.75% per annum.
"Applicable Eurodollar Rate Margin" means, with respect to any
Eurodollar Rate Loan, 2.75% per annum.
"Applicable Lending Office" means, with respect to each Lender,
its Domestic Lending Office in the case of a Base Rate Loan and its
Eurodollar Lending Office in the case of a Eurodollar Rate Loan.
"Asset Sale" means any sale or other disposition, or series of
sales or other dispositions (including, without limitation, by merger or
consolidation, and whether by operation of law or otherwise), made on or after
the Closing Date by the Borrower and/or any Guarantor to any Person of (i)
all or substantially all of the outstanding Stock of any Guarantor, (ii) all
or substantially all of the assets, or the assets of any division, of the
Borrower or any Guarantor, or (iii) any other asset or assets which
individually or in the aggregate yield proceeds in excess of $1,000,000 in
any Fiscal Year; provided, however, that any sale or other disposition
permitted pursuant to Sections 7.5(b), (c)(i), (ii), (iii) and (v), shall
not constitute an Asset Sale for purposes of this Agreement.
"Asset Sale Proceeds" means cash payments received by the Borrower
or any Guarantor (including, without limitation, any cash payments received
by way of deferred payment of principal (but not interest)) pursuant to a
note or receivable or otherwise and any cash realized from any disposition
of non-cash proceeds received by the seller, but only as and when received,
in each case net of the amount of (a) brokers' and advisors' fees and
commissions payable other than to an Affiliate of the Borrower to be payable
as a direct consequence of such Asset Sale, (b) all foreign, federal, state
and local taxes estimated in good faith by the Borrower and any Guarantor to
be attributable to such Asset Sale and payable within twelve months of
receipt of such cash proceeds including, without limitation, in connection
with the payment of a dividend or the making of a distribution by a
Guarantor of such payments to the Borrower or any other Guarantor
(including, without limitation, taxes withheld in connection with the
repatriation of such proceeds), net of any tax benefits derived in respect
of such dividend or distribution, (c) the fees and expenses attributable to
such Asset Sale, to the extent not included in clause (a) above, except to
the extent payable to any Affiliate of the Borrower, and (d) any amount
required to be paid to any Person (other than the Borrower or any Guarantor)
owning a beneficial interest in the property or assets subject to such Asset
Sale. For the purposes of this definition, an Asset Sale shall be deemed to
include, without limitation, (i) any award of compensation for any asset or
property or group thereof taken by condemnation or eminent domain and
insurance proceeds for the loss of or damage to any asset or property and
(ii) all insurance proceeds for damage to any asset or assets employed by
the Borrower or any Guarantor in the operation of its business (including,
without limitation, assets constituting property, plant or equipment).
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Lender and an Eligible Assignee, in substantially the
form of Exhibit J, and accepted by the Agent.
"Available Credit" means, at any time, an amount equal to (a) the
lower of (i) the aggregate of the then effective Revolving Credit
Commitments of the Lenders, and (ii) the Borrowing Base at such time minus
(b) the sum of (i) the outstanding principal amount of the Revolving Credit
Loans at such time, (ii) the Letter of Credit Undrawn Amounts at such time,
(iii) the Reimbursement Obligations at such time, and (iv) $5,000,000 in
respect of the Borrower's exposure under Interest Rate Contracts and
Currency Agreements or, at the option of the Agent, subject to Section 7.12,
such other amount as determined at such time by the Agent using its
customary practices and criteria.
"Base Rate" means a fluctuating interest rate per annum as shall
be in effect from time to time, which rate per annum shall be equal at
any time to the then highest of:
(a) the rate of interest announced publicly by Citibank in New
York, New York, from time to time, as Citibank's base rate;
(b) the sum (adjusted to the nearest 1/4 of one percent or, if
there is no nearest 1/4 of one percent, to the next higher 1/4 of one
percent) of (i) 1/2 of one percent per annum, plus (ii) the rate per annum
obtained by dividing (A) the latest three-week moving average of secondary
market morning offering rates in the United States for three-month
certificates of deposit of major United States money market banks, such
three-week moving average being determined weekly on each Monday (or, if
any such day is not a Business Day, on the next succeeding Business Day) for
the three-week period ending on the previous Friday by Citibank on the basis
of such rates reported by certificate of deposit dealers to and published by
the Federal Reserve Bank of New York or, if such publication shall be
suspended or terminated, on the basis of quotations for such rates received
by Citibank from three New York certificate of deposit dealers of recognized
standing selected by Citibank, by (B) a percentage equal to 100% minus the
average of the daily percentages specified during such three-week period by
the Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, without limitation,
any emergency, supplemental or other marginal reserve requirement) for
Citibank in respect of liabilities consisting of or including (among other
liabilities) three-month U.S. dollar nonpersonal time deposits in the United
States, plus (iii) the average during such three-week period of the maximum
annual assessment rates payable to the Federal Deposit Insurance Corporation
(or any successor) by banks which are members of the Bank Insurance Fund for
insuring U.S. dollar deposits in the United States; and
(c) the sum (adjusted to the nearest 1/4 of one percent or, if
there is no nearest 1/4 of one percent, to the next higher 1/4 of one
percent) of (i) 1/2 of one percent per annum plus (ii) the Federal Funds
Rate.
"Base Rate Loan" means any outstanding principal amount of the
Revolving Credit Loans of any Lender that bears interest with reference to
the Base Rate.
"Borrower" has the meaning specified in the first paragraph of
this Agreement.
"Borrower Intellectual Property Security Agreement" means an
agreement in substantially the form of Exhibit G-4, executed by the
Borrower, as such agreement may be amended, supplemented or otherwise
modified from time to time.
"Borrower Letter of Credit Reimbursement Agreement" has the
meaning specified in Section 2.14(d).
"Borrower Security Agreement" means an agreement, in substantially
the form of Exhibit G-1, executed by the Borrower, as such agreement may be
amended, supplemented or otherwise modified from time to time.
"Borrowing Base" means, at any time, an amount equal to the sum of
up to (as determined by the Agent, in its sole discretion, subject to
Section 10.1) (i) the advance rates applicable to the face amount of Eligible
Receivables as set forth in the Borrowing Base Certificate; provided,
however, that the portion of the Borrowing Base comprised of receivables not
evidenced by an invoice or other writing in form acceptable to the Agent, in
its sole discretion, shall not exceed $10,000,000 in the aggregate at any
time exclusive of those receivables where goods have already been shipped or
services have already been performed and for which no invoice or other
writing has yet been created but which will be created within 30 days after
the date such goods were shipped or such services were performed, (ii) the
advance rates applicable to Eligible Inventory as set forth in the Borrowing
Base Certificate, (iii) $13,000,000 with respect to Eligible Machinery and
Equipment; provided, however, that the aggregate amount of Eligible
Machinery and Equipment shall be reduced by the appraised value of any
Eligible Machinery and Equipment sold, or if no such appraised value is
available, such amount as determined by the Agent, (iv) $4,750,000 with
respect to Eligible Real Property; provided, however, that the aggregate
amount of Eligible Real Property shall be reduced by the appraised value of
any Eligible Real Property sold, or if no such appraised value is available,
such amount as determined by the Agent, and (v) 100% of the amount of Cash
and Cash Equivalents in the Cash Collateral Account, less, in each case,
such reserves as the Agent, in its sole discretion, may deem appropriate.
"Borrowing Base Certificate" means a certificate, in substantially
the form of Exhibit K.
"Business Day" means a day of the year on which banks are not
required or authorized to close in New York City and, if the applicable
Business Day relates to a Eurodollar Rate Loan, a day on which dealings are
also carried on in the London interbank market.
"Canadian Guaranty" means a guaranty, in substantially the form of
Exhibit H-2, executed by Intergraph Canada, as such Guaranty may be amended,
supplemented or otherwise modified from time to time.
"Capital Expenditures" means, for any Person for any period, the
aggregate of (a) all cash expenditures made by such Person and its
Subsidiaries, except interest capitalized during construction, during such
period for property, plant or equipment, including, without limitation,
renewals, improvements, replacements and capitalized repairs, that would be
reflected as additions to property, plant or equipment on a consolidated
balance sheet of such Person and its Subsidiaries prepared in conformity
with GAAP and (b) without duplication, the principal amount of all
Indebtedness incurred or assumed to finance any such additions to property,
plant and equipment; provided, however, that Capital Expenditures shall not
include any expenditures made by any Subsidiaries of the Borrower in
connection with the BEST Australia Project but only to the extent such
Project is funded on a project finance or other independent basis.
"Capitalized Lease" means, as to any Person, any lease of property
by such Person as lessee which would be capitalized on a balance sheet of
such Person prepared in conformity with GAAP.
"Capitalized Lease Obligations" means, as to any Person, the
capitalized amount of all obligations of such Person or any of its
Subsidiaries under Capitalized Leases, as determined on a consolidated basis
in conformity with GAAP.
"Capitalized Software Development Costs" means, with respect to
the Borrower for any period, the amount of all software development costs
which have been capitalized in accordance with past practice on a
consolidated balance sheet of the Borrower and its Subsidiaries prepared in
conformity with GAAP.
"Cash Collateral Account" has the meaning specified in Section
2.15(a).
"Cash Equivalents" means (a) securities with maturities of one
year or less from the date of acquisition issued or fully guaranteed or
insured by the United States government or any agency thereof, (b) overnight
bank deposits made with any Lender, (c) certificates of deposit, time
deposits of any nature and bankers' acceptances of either any Lender or any
commercial bank organized under the laws of the United States of America or
any state thereof that has a combined capital and surplus of at least
$500,000,000, having maturities of six months or less from the date of
acquisition, (d) commercial paper of an issuer rated at least "A-1" by
Standard & Poor's Rating Group or "P-1" by Moody's Investors Service, Inc.,
or carrying an equivalent rating by a nationally recognized rating agency if
both of the two named rating agencies cease publishing ratings of
investments, having maturities of six months or less from the date of
acquisition, and (e) repurchase obligations for underlying securities of the
type described in clause (a) above; provided, however, that such repurchase
obligations do not have a term of longer than seven days from the date of
acquisition thereof and such repurchase obligations are with a counterparty
that is a financial institution organized or licensed under the laws of the
United States of America or any state thereof that has a combined capital and
surplus of at least $500,000,000.
"Cash Interest Expense" means, for any Person for any period,
the Net Interest Expense of such Person for such period, plus (a) interest
expense capitalized during construction for such period to the extent
deducted in the determination of such Net Interest Expense, less (b)
Non-Cash Interest Expense of such Person for such period.
"CERCLA" has the meaning specified in the definition of
"Environmental Laws".
"Change of Control" means (i) the acquisition by any Person or
group determined in accordance with Section 13(d) of the Exchange Act as a
result of a tender or exchange offer, open market purchases, privately
negotiated purchases or otherwise, of beneficial ownership (within the
meaning of Rule 13d-3 under the Exchange Act), directly or indirectly, of
Stock or Stock Equivalents of the Borrower representing ownership of or the
right to acquire at least 25% of the Voting Stock of the Borrower or (ii)
individuals who were directors of the Borrower on the date hereof shall at
any time cease to constitute a majority of the board of directors of the
Borrower unless the election, or the nomination for election by the
Borrower's stockholders, of each new director was approved by a vote of at
least a majority of the board of directors then still in office who were
directors on the date hereof (including for these purposes (but, in the case
of a successor, without duplication) any new directors whose election or
nomination was so approved).
"Citibank" means Citibank, N.A., a national banking association.
"Citicorp USA" has the meaning specified in the first paragraph of
this Agreement.
"Closing Date" means the first date on which a Revolving Credit
Loan is made or a Letter of Credit is issued.
"Code" means the Internal Revenue Code of 1986 (or any successor
legislation thereto), as amended from time to time.
"Collateral" means all property and interests in property and
proceeds thereof now owned or hereafter acquired by any Loan Party in or
upon which a Lien is purported to be granted in favor of the Secured Parties
under any of the Collateral Documents, except to the extent such property or
interests have been released from such Lien in accordance with the terms of
the applicable Collateral Document.
"Collateral Documents" means the Borrower Security Agreement, the
Subsidiary Security Agreements, the Borrower Intellectual Property Security
Agreement, the Pledge Agreement, the Mortgages, the Lockbox Agreements and
any other document executed and delivered by a Loan Party or a Designated
Subsidiary granting a Lien in favor of the Secured Parties on any of its
property to secure payment of the Obligations.
"Commitment Fee" has the meaning specified in Section 2.3(a).
"Compensation" means, with respect to any Person, all payments and
accruals commonly considered to be compensation, including, without
limitation, all wages, salary, deferred payment arrangements, bonus payments
and accruals, profit sharing arrangements, payments in respect of stock
option or phantom stock option or similar arrangements, stock appreciation
rights or similar rights, incentive payments, pension or employment benefit
contributions or similar payments, made to or accrued for the account of
such Person or otherwise for the direct or indirect benefit of such Person.
"Contaminant" means any substance, material or waste regulated or
forming the basis of liability under any applicable Environmental Law,
including, without limitation, any waste, pollutant, hazardous substance,
toxic substance, hazardous waste, special waste, petroleum or petroleum-
derived substance or waste, asbestos or asbestos containing material,
polychlorinated biphenyls, urea, formaldehyde and any constituent of any
such substance or waste.
"Contingent Obligation" means, as applied to any Person, any
direct or indirect liability, contingent or otherwise, of such Person with
respect to any Indebtedness of another Person, if the purpose or intent of
such Person in incurring the Contingent Obligation is to provide assurance
to the obligee of such Indebtedness that such Indebtedness will be paid or
discharged, or that any agreement relating thereto will be complied with, or
that any holder of such Indebtedness will be protected (in whole or in part)
against loss in respect thereof. Contingent Obligations of a Person
include, without limitation, (a) the direct or indirect guarantee,
endorsement (other than for collection or deposit in the ordinary course of
business), co-making, discounting with recourse or sale with recourse by such
Person of Indebtedness of another Person, and (b) any liability of such
Person for Indebtedness of another Person through any agreement (contingent
or otherwise) (i) to purchase, repurchase or otherwise acquire such
Indebtedness or any security therefor or to provide funds for the payment or
discharge of such Indebtedness (whether in the form of a loan, advance,
stock purchase, capital contribution or otherwise), (ii) to maintain the
solvency or any balance sheet item, level of income or financial condition
of another Person, (iii) to make take-or-pay or similar payments, if
required, regardless of non-performance by any other party or parties to an
agreement relating to Indebtedness, (iv) to purchase, sell or lease (as
lessor or lessee) property, or to purchase or sell services, primarily for
the purpose of enabling the obligor to make payment of such Indebtedness or
to assure the holder of such Indebtedness against loss, or (v) to supply
funds to or in any other manner invest in such other Person (including,
without limitation, to pay for property or services irrespective of whether
such property is received or such services are rendered) in connection with
Indebtedness of such other Person, if in the case of any agreement described
under subclause (i), (ii), (iii), (iv) or (v) of this sentence the primary
purpose or intent thereof is as described in the preceding sentence. The
amount of any Contingent Obligation shall be equal to the outstanding amount
of the Indebtedness so guaranteed or otherwise supported.
"Contractual Obligation" of any Person means any obligation,
agreement, undertaking or similar provision of any security issued by such
Person or of any agreement, undertaking, contract, lease, indenture,
mortgage, deed of trust or other instrument (excluding, in each of the
foregoing cases, a Loan Document) to which such Person is a party or by
which it or any of its property is bound or to which any of its properties
is subject, including, without limitation, any Government Contract of such
Person.
"Cost Reduction Plan" means that certain cost reduction plan of
the Borrower, dated August 13, 1995, a copy of which was previously
delivered by the Borrower to the Agent.
"Cumulative EBITDA" means, with respect to the Borrower through
any date, the cumulative EBITDA of the Borrower since September 1, 1995
through such date with such period being considered a single accounting
period.
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement.
"Current Assets" means, with respect to any Person at any date,
the total consolidated current assets of such Person and its Subsidiaries
at such date, determined in conformity with GAAP.
"Current Liabilities" means, with respect to any Person at any
date, the total consolidated current liabilities of such Person and its
Subsidiaries at such date, determined in conformity with GAAP, other than,
in the case of the Borrower and its Subsidiaries, liabilities in respect of
the Obligations.
"Default" means any event which with the passing of time or the
giving of notice or both would become an Event of Default.
"Designated Subsidiary" means each of those foreign Subsidiaries
of the Borrower listed on Schedule 1.1(b).
"Designated Subsidiary Letter of Credit Reimbursement Agreement"
has the meaning specified in Section 2.14(d).
"DOL" means the United States Department of Labor, or any
successor thereto.
"Dollars" and the sign "$" each mean the lawful money of the
United States of America.
"Domestic Lending Office" means, with respect to any Lender, the
office of such Lender specified as its "Domestic Lending Office" opposite
its name on Schedule II or such other office of such Lender as such Lender
may from time to time specify to the Borrower and the Agent.
"EBITDA" means, for any Person for any period, the Net Income
(Loss) of such Person for such period taken as a single accounting period,
plus (a) the sum of the following amounts of such Person and its
Subsidiaries for such period determined on a consolidated basis in
conformity with GAAP to the extent included in the determination of such Net
Income (Loss): (i) depreciation expense, (ii) amortization expense, (iii)
interest expense, (iv) income tax expense to the extent actually paid during
such period, (v) extraordinary losses (and other losses on Asset Sales not
otherwise included in extraordinary losses determined on a consolidated
basis in conformity with GAAP) and (vi) non-cash charges (including the
cumulative effect of accounting changes), less (b) the sum of the following
amounts of such Person and its Subsidiaries determined on a consolidated
basis in conformity with GAAP to the extent included in the determination of
such Net Income (Loss): (i) extraordinary gains (and other gains on Asset
Sales not otherwise included in extraordinary gains determined on a
consolidated basis in conformity with GAAP), (ii) the Net Income (Loss) of
any other Person that is accounted for by the equity method of accounting
except to the extent of the amount of dividends or distributions paid to
such Person, (iii) the Net Income (Loss) of any other Person acquired by
such Person or a Subsidiary of such Person in a transaction accounted for as
a pooling of interests for any period prior to the date of such acquisition
and (iv) non-cash credits (including the cumulative effect of accounting
changes).
"Eligible Assignee" means (a) a commercial bank organized under
the laws of the United States, or any State thereof, and having a combined
capital and surplus of at least $250,000,000, (b) a commercial bank
organized under the laws of any other country which is a member of the
Organization for Economic Cooperation and Development (the "OECD"), or a
political subdivision of any such country, and having a combined capital and
surplus of at least $250,000,000, as long as that such bank is acting through
a branch or agency located in the country in which it is organized or
another country which is also a member of the OECD or the Cayman Islands,
(c) the central bank of any country which is a member of the OECD, (d) a
finance company, insurance company or other financial institution or fund
(whether a corporation, partnership, trust or other entity) that is engaged
in making, purchasing or otherwise investing in commercial loans in the
ordinary course of its business and having a combined capital and surplus of
at least $250,000,000, (e) any Lender and (f) any Affiliate of any Lender.
"Eligible Inventory" means, Inventory of the Borrower and
Intergraph Canada (i) in which the Agent has a fully perfected first
priority Lien, (ii) with respect to which no warranty contained in any of
the Loan Documents has been breached, (iii) which is not, in the reasonable
opinion of the Agent, obsolete or unmerchantable, (iv) for which the Agent
has received a Landlord Waiver and Consent, if appropriate, and (v) which
the Majority Lenders, acting in their reasonable credit judgment, deem to
be Eligible Inventory, based on such credit and collateral considerations as
such Majority Lenders may deem appropriate. Eligible Inventory shall be
valued at the lower of the weighted average cost basis or market value.
"Eligible Machinery and Equipment" means the machinery and
equipment of the Borrower (to the extent owned by the Borrower) described in
the appraisal from AccuVal Associates, Incorporated, dated July 10, 1995, a
copy of which has previously been delivered by the Borrower to the Agent (or
in any appraisal conducted after the date hereof pursuant to Section 6.12(o),
which appraisal shall be in form and substance satisfactory to the Agent),
in which the Agent has a fully perfected first priority Lien.
"Eligible Real Property" means the real property of the Borrower
(to the extent owned by the Borrower) described in the appraisals from
Jackson-Cross Company, dated July 10, 1995 and July 12, 1995, copies of
which have previously been delivered by the Borrower to the Agent (or in any
appraisal conducted after the date hereof pursuant to Section 6.12(o), which
appraisal shall be in form and substance satisfactory to the Agent), in
which the Agent has a fully perfected first priority Lien.
"Eligible Receivables" means the gross outstanding balance, less
all finance charges, late fees and other fees which are unearned, and
credits and allowances granted, of those Accounts of the Borrower or
Intergraph Canada arising out of sales, leases or licenses of Inventory,
merchandise, goods or services in the ordinary course of business, made by
the Borrower and Intergraph Canada to a Person which is not an Affiliate of
the Borrower or Intergraph Canada, which are not in dispute, and which
constitute Collateral in which the Agent has a fully perfected first
priority security interest and, if the account debtor is a Governmental
Authority and the transaction represented thereby is in excess of $1,000,000,
the Borrower or Intergraph Canada has assigned its rights to payment of such
account to the Agent pursuant to the Assignment of Claims Act of 1940, as
amended, in the case of a United States federal Governmental Authority, or
to applicable state law, if any, in the case of any other domestic
Governmental Authority, or to applicable Canadian federal or provincial law,
if any, in the case of a Canadian Governmental Authority, and, if requested
by the Majority Lenders, such assignment has been accepted and acknowledged
by the appropriate government officers, except that (i) no such assignment
shall be required for those Accounts which, pursuant to the terms of the
Government Contract relating thereto, are classified and are prohibited from
being disclosed and (ii) those Accounts where the account debtor is a state
Governmental Authority shall not be excluded from being an Eligible
Receivable for a period of 60 days from the Closing Date merely because no
such assignment of the account relating thereto shall have been made;
provided, however, that, unless consented to by the Majority Lenders, an
Account shall in no event be an Eligible Receivable if:
(a) (i) with respect to any account debtor other than a
Governmental Authority, such Account is more than (x) 60 days past due
according to the original terms of sale or (y) 90 days past the original
invoice date thereof and (ii) with respect to any account debtor that is a
Governmental Authority, such Account is more than (x) 90 days past due
according to the original terms of sale or (y) 120 days past the original
invoice date thereof; or
(b) any representation or warranty contained in this Agreement
or any other Loan Document is not true and correct with respect to such
Account; or
(c) the account debtor on such Account has disputed liability
or made any material claim with respect to any other Account due from such
account debtor to the Borrower or any of the Guarantors and such account
debtor has refused to pay any or all other Accounts owing to the Borrower or
any of its Subsidiaries until such disputed liability is resolved; or
(d) the account debtor on such Account has filed a petition for
bankruptcy or any other relief under the Bankruptcy Code or any other U.S.
or Canadian federal or provincial law relating to bankruptcy, insolvency,
reorganization or relief of debtors; made an assignment for the benefit of
creditors; had filed against it any petition or other application for relief
under the Bankruptcy Code or any such other law; has failed, suspended
business operations, become insolvent, called a meeting of its creditors
for the purpose of obtaining any financial concession or accommodation, or
had or suffered a receiver or a trustee to be appointed for all or a
significant portion of its assets or affairs; or
(e) the account debtor on such Account is also a supplier to or
creditor of the Borrower or any of the Guarantors; provided, however, that
only that portion of the Accounts of such account debtor that would
otherwise constitute Eligible Receivables as is equal to the estimated
amount of payables owing by the Borrower or its Subsidiaries to such account
debtor, as determined by the Agent, in its sole discretion, shall be deemed
ineligible solely by reason of this clause (e); and provided further that,
if such account debtor has agreed, in writing to the satisfaction of the
Agent, not to offset any of its accounts with the Borrower or any of the
Guarantors, no amount shall be deemed ineligible solely by reason of this
clause (e); or
(f) the sale represented by such Account is to an account
debtor outside the United States or Canada, unless the sale is on letter of
credit or acceptance terms acceptable to the Agent, in its sole judgment; or
(g) the sale to such account debtor on such Account is on a
bill-and-hold, guaranteed sale, sale-and-return, sale-on-approval or
consignment basis; or
(h) such Account is subject to a Lien in favor of any Person
other than the Secured Parties; or
(i) such Account is subject to any material deduction, offset,
counterclaim, return privilege or other conditions; or
(j) the account debtor on such Account is located in New Jersey
or Minnesota, unless the Borrower is the obligee on such Account and (i) has
received a certificate of authority to do business and is in good standing
in such state or (ii) has filed a Notice of Business Activities Report with
the appropriate office or agency of such state for the current year; or
(k) the Agent, in accordance with its customary criteria, deems
such Account ineligible; or
(l) 50% or more of the outstanding Accounts of the account
debtor or such Account that constituted Eligible Receivables at the time
they arose have become, or have been determined by the Agent to be,
ineligible; or
(m) the sale represented by such Account is denominated in
other than Dollars or, with respect to sales made by Intergraph Canada, in
other than Canadian Dollars, except for sales made by the Borrower that are
not denominated in Dollars to the extent, at the date of determination, not
in excess of $5,000,000 determined on a spot equivalent basis; or
(n) the Agent believes, in its sole discretion, that the
collection of such Account is insecure or that such Account may not be paid;
or
(o) the Borrower or any Guarantor, in order to be entitled to
collect such Account, is required to perform any additional service for, or
perform or incur any additional obligation to, the Person to whom or to
which it was made; or
(p) Accounts of such account debtor (other than those account
debtors which are (i) Governmental Authorities or (ii) approved by the
Majority Lenders) represent more than 10% of the Eligible Receivables at
such time or such account debtor is approved by the Agent and Accounts of
such account debtor represent more than 15% of the Eligible Receivables at
such time, except that, in either case, only the amount in excess of the
specified percentage shall be deemed ineligible solely by reason of this
clause (p) and then only to the extent that the payment of such excess is
not covered by a letter of credit or such other assurance of payment as is
acceptable to the Agent, in its sole judgment.
"Environmental Laws" means all federal, state and local laws,
statutes, ordinances and regulations, now or hereafter in effect, and in
each case as amended or supplemented from time to time, and any judicial or
administrative interpretation thereof, including, without limitation, any
judicial or administrative order, consent decree or judgment relating to the
regulation and protection of human or employee health, safety, the
environment or natural resources (including, without limitation, ambient
air, surface water, groundwater, wetlands, land surface or subsurface
strata, wildlife, aquatic species and vegetation). Environmental Laws
include, but are not limited to, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended (42 U.S.C. Section 9601 et
seq.) ("CERCLA"); the Hazardous Material Transportation Act, as amended (49
U.S.C. Section 1801 et seq.); the Federal Insecticide, Fungicide, and
Rodenticide Act, as amended (7 U.S.C. Section 136 et seq.); the Resource
Conservation and Recovery Act, as amended (42 U.S.C. Section 6901 et seq.)
("RCRA"); the Toxic Substance Control Act, as amended (15 U.S.C. Section 2601
et seq.); the Clean Air Act, as amended (42 U.S.C. Section 7401 et seq.); the
Federal Water Pollution Control Act, as amended (33 U.S.C. Section 1251 et
seq.); the Occupational Safety and Health Act, as amended (29 U.S.C. Section
651 et seq.); and the Safe Drinking Water Act, as amended (42 U.S.C. Section
300f et seq.), and their state, local and foreign counterparts or equivalents
and any transfer of ownership notification or approval statutes, including,
without limitation, the New Jersey Industrial Site Recovery Act (N.J. Stat.
Ann. Section 13:1K-6 et seq.).
"Environmental Liabilities and Costs" means, as to any Person, all
liabilities, obligations, responsibilities, Remedial Actions, losses,
damages, punitive damages, consequential damages, treble damages, costs and
expenses (including, without limitation, all fees, disbursements and expenses
of counsel, experts and consultants and costs of investigation and
feasibility studies and Remedial Actions), fines, penalties, sanctions and
interest incurred as a result of any claim or demand by any other Person,
whether based in contract, tort, implied or express warranty, strict
liability, criminal or civil statute, including, without limitation, any
thereof arising under any Environmental Law, Permit, order or agreement
with any Governmental Authority or other Person, and which relate to any
environmental, health or safety condition, or a Release or threatened
Release, and result from the past, present or future operations of, or
ownership of property by, such Person or any of its Subsidiaries.
"Environmental Lien" means any Lien in favor of any Governmental
Authority for Environmental Liabilities and Costs.
"Environmental Reports" has the meaning specified in Section 3.2(c).
"ERISA" means the Employee Retirement Income Security Act of 1974
(or any successor legislation thereto), as amended from time to time.
"ERISA Affiliate" means any Person, or trade or business (whether
or not incorporated) under common control with the Borrower or any of its
Subsidiaries within the meaning of Section 414 (b), (c), (m) or (o) of the
Code.
"ERISA Event" means (a) a reportable event described in Section
4043(b)(1), (2), (3), (5), (6), (8) or (9) of ERISA with respect to a Title
IV Plan or a Multiemployer Plan, (b) the withdrawal of the Borrower, any of
its Subsidiaries or any ERISA Affiliate from a Title IV Plan subject to
Section 4063 of ERISA during a plan year in which it was a substantial
employer, as defined in Section 4001(a)(2) of ERISA, (c) the complete or
partial withdrawal of the Borrower, any of its Subsidiaries or any ERISA
Affiliate from any Multiemployer Plan, (d) the filing of a notice of intent
to terminate a Title IV Plan or the treatment of a plan amendment as a
termination under Section 4041 of ERISA, (e) the institution by the PBGC of
proceedings to terminate a Title IV Plan or Multiemployer Plan or to appoint
a trustee to administer any Title IV Plan, (f) the failure to make any
contribution required by applicable law to a Qualified Plan, (g) the
insolvency or notice of reorganization of a Multiemployer Plan, (h) any
other event or condition which might reasonably be expected to constitute
grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Title IV Plan or Multiemployer
Plan or the imposition of any liability under Title IV of ERISA, other than
for PBGC premiums due but not delinquent under Section 4007 of ERISA or (i) a
non-exempt prohibited transaction with respect to a Qualified Plan for which
the Borrower or any of its Subsidiaries has liability.
"Eurocurrency Liabilities" has the meaning assigned to that term
in Regulation D of the Board of Governors of the Federal Reserve System, as
in effect from time to time.
"Eurodollar Lending Office" means, with respect to any Lender, the
office of such Lender specified as its "Eurodollar Lending Office" below its
name on Schedule II (or, if no such office is specified, its Domestic Lending
Office) or such other office of such Lender as such Lender may from time to
time specify to the Borrower and the Agent.
"Eurodollar Rate" means, for any Interest Period, an interest rate
per annum equal to the rate per annum obtained by dividing (a) the rate of
interest determined by the Agent to be the rate per annum at which deposits
in U.S. dollars are offered by the principal office of Citibank in London,
England to prime banks in the London interbank market at 11:00 A.M. (London
time) two Business Days before the first day of such Interest Period in an
amount substantially equal to the Eurodollar Rate Loan of Citibank during
such Interest Period and for a period equal to such Interest Period by (b) a
percentage equal to 100% minus the Eurodollar Rate Reserve Percentage for
such Interest Period.
"Eurodollar Rate Loan" means any outstanding principal amount of
the Revolving Credit Loans of any Lender that, for an Interest Period, bears
interest at a rate determined with reference to the Eurodollar Rate.
"Eurodollar Rate Reserve Percentage" for any Interest Period means
the reserve percentage applicable two Business Days before the first day of
such Interest Period under regulations issued from time to time by the Board
of Governors of the Federal Reserve System for determining the maximum
reserve requirement (including, without limitation, any emergency,
supplemental or other marginal reserve requirement) for a member bank of the
Federal Reserve System in New York City with respect to liabilities or
assets consisting of or including Eurocurrency Liabilities (or with respect
to any other category of liabilities which includes deposits by reference
to which the Eurodollar Rate is determined) having a term equal to such
Interest Period.
"Event of Default" has the meaning specified in Section 8.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Executive Loan Program" means that certain loan program for
executive officers of the Borrower, as amended, dated March 17, 1994.
"Fair Market Value" means (a) with respect to any asset (other
than a marketable security) at any date, the value of the consideration
obtainable in a sale of such asset at such date assuming a sale by a willing
seller to a willing purchaser dealing at arm's length and arranged in an
orderly manner over a reasonable period of time having regard to the nature
and characteristics of such asset, as reasonably determined by the seller,
or, if such asset shall have been the subject of a relatively contemporaneous
appraisal by an independent third party appraiser, the basic assumptions
underlying which have not materially changed since its date and are still
valid, as set forth in such appraisal, and (b) with respect to any
marketable security at any date, the closing sale price of such security on
the business day (on which any national securities exchange is open for the
normal transaction of business) next preceding such date, as appearing in
any published list of any national securities exchange or in the National
Market List of the National Association of Securities Dealers, Inc. or, if
there is no such closing sale price of such security, the final price for
the purchase of such security quoted on such business day by a financial
institution of recognized standing which regularly deals in securities of
such type.
"Federal Funds Rate" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted average
of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published for
such day (or, if such day is not a Business Day, for the next preceding
Business Day) by the Federal Reserve Bank of New York, or, if such rate is
not so published for any day which is a Business Day, the average of the
quotations for such day on such transactions received by the Agent from
three Federal funds brokers of recognized standing selected by it.
"Fiscal Quarter" means each of the three month periods ending on
March 31, June 30, September 30 and December 31.
"Fiscal Year" means the twelve-month period ending on December 31.
"Fixed Charge Coverage Ratio" means, with respect to any Person
for any period, the ratio of (a) the EBITDA of such Person for such period
less the sum of (i) Capital Expenditures of such Person for such period,
(ii) Capitalized Software Development Costs of such Person for such period
and (iii) the increase, if any, in the Working Capital of such Person at the
end of such period from the Working Capital of such Person at the beginning
of such period plus the sum of (i) all rentals of such Person for such
period included within the calculation of the Fixed Charges of such Person
for such period and (ii) the decrease, if any, in the Working Capital of
such Person at the end of such period from the Working Capital of such
Person at the beginning of such period to (b) the Fixed Charges of such
Person for such period.
"Fixed Charges" means, for any Person for any period, the sum,
without duplication, of (a) the Cash Interest Expense of such Person for
such period, (b) all rentals under leases of real, personal or mixed
property in respect of such period which are reflected as expenses on the
statements of income for such period by such Person and each of its
Subsidiaries determined on a consolidated basis in conformity with GAAP,
(c) the principal amount of Indebtedness for borrowed money of such Person
and each of its Subsidiaries determined on a consolidated basis in conformity
with GAAP having a scheduled due date during such period, (d) all amounts
having a scheduled due date during such period payable on Capitalized Lease
Obligations by such Person and each of its Subsidiaries determined on a
consolidated basis in conformity with GAAP and (e) all dividends payable in
cash during such period by such Person and its Subsidiaries on preferred
stock in respect of such period other than to the Borrower and its
Subsidiaries.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect from time to time set forth in the
opinions and pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and the statements and
pronouncements of the Financial Accounting Standards Board, or in such other
statements by such other entity as may be in general use by significant
segments of the accounting profession, which are applicable to the
circumstances as of the date of determination except that, for purposes of
Article V, GAAP shall be determined on the basis of such principles in
effect on the date hereof and consistent with those used in the preparation
of the audited financial statements referred to in Section 4.5.
"Governmental Authority" means any nation or government,
legislature or any state, provincial, municipal or other political
subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory, taxation or administrative functions of or pertaining
to government.
"Government Contract" means any bid, quotation, proposal,
contract, agreement, work authorization, lease, commitment or sale or
purchase order of the Borrower that is with the United States Government or
a United States Governmental Authority, or any state or local government, or
of Intergraph Canada that is with the federal government of Canada or any
province or local Canadian Governmental Authority.
"Guarantor" means each Subsidiary of the Borrower incorporated
under the laws of Canada, any province of Canada, any state of the United
States of America or the District of Columbia having Total Assets of $100,000
or more.
"Guaranty" means a guaranty, in substantially the form of Exhibit
H-1, executed by each Guarantor with Total Assets of $100,000 or more (other
than Intergraph Canada), as such guaranty may be amended, supplemented or
otherwise modified from time to time.
"Indebtedness" of any Person means, without duplication, (a) all
indebtedness of such Person for borrowed money (including, without
limitation, reimbursement and all similar obligations with respect to
surety bonds, letters of credit and bankers' acceptances, whether or not
matured), (b) all indebtedness of such Person for the deferred purchase
price of property or services but not including obligations to trade
creditors incurred in the ordinary course of business consistent with past
practice and which are not past due, (c) all indebtedness of such Person
evidenced by notes, bonds, debentures or similar instruments, (d) all
indebtedness of such Person created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such
Person (even though the rights and remedies of the seller or lender under
such agreement in the event of default are limited to repossession or sale
of such property), (e) all Capitalized Lease Obligations of such Person, (f)
all Contingent Obligations of such Person, (g) all obligations of such
Person to purchase, redeem, retire, defease or otherwise acquire for value
any Stock or Stock Equivalents of such Person (other than with Stock or
Stock Equivalents of such Person in respect of which such Person has no
purchase, redemption, retirement, defeasance or other acquisition obligation),
(h) all obligations of such Person under Interest Rate Contracts and
Currency Agreements, (i) all Indebtedness referred to in clause (a), (b),
(c), (d), (e), (f), (g) or (h) above secured by (or for which the holder of
such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien upon or in property (including, without limitation,
Accounts and general intangibles) owned by such Person, even though such
Person has not assumed or become liable for the payment of such
Indebtedness, and (j) in the case of the Borrower, the Obligations.
"Indemnitees" has the meaning specified in Section 10.4(b).
"Interest Coverage Ratio" means, with respect to any Person for
any period, the ratio of (i) the EBITDA of such Person for such period to
(ii) the Cash Interest Expense of such Person for such period.
"Interest Period" means, in the case of any Eurodollar Rate Loan,
(a) initially, the period commencing on the date such Eurodollar Rate Loan
is made or on the date of conversion of a Base Rate Loan to such Eurodollar
Rate Loan and ending one, two, three or six months thereafter, as selected
by the Borrower in its Notice of Borrowing or Notice of Conversion or
Continuation given to the Agent pursuant to Section 2.2 or 2.7, and (b)
thereafter, if such Eurodollar Rate Loan is continued, in whole or in part,
as a Eurodollar Rate Loan pursuant to Section 2.7, a period commencing on
the last day of the immediately preceding Interest Period therefor and
ending one, two, three or six months thereafter, as selected by the Borrower
in its Notice of Conversion or Continuation given to the Agent pursuant to
Section 2.7; provided, however, that all of the foregoing provisions
relating to Interest Periods with respect to Eurodollar Rate Loans are
subject to the following:
(i) if any Interest Period would otherwise end on a
day which is not a Business Day, such Interest Period shall be extended
to the next succeeding Business Day, unless the result of such
extension would be to extend such Interest Period into another calendar
month, in which event such Interest Period shall end on the immediately
preceding Business Day;
(ii) any Interest Period that begins on the last
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of a calendar month;
(iii) the Borrower may not select any Interest Period
which ends after the date of a scheduled principal payment on the
Eurodollar Rate Loans as set forth in Article II unless, after giving
effect to such selection, the aggregate unpaid principal amount of the
Eurodollar Rate Loans for which Interest Periods end after such
scheduled principal payment shall be equal to or less than the principal
amount to which the Eurodollar Rate Loans are required to be reduced
after such scheduled principal payment is made;
(iv) the Borrower may not select any Interest Period
in respect of Eurodollar Rate Loans having an aggregate principal amount
of less than $2,000,000; and
(v) there shall be outstanding at any one time no more
than five Interest Periods in the aggregate.
"Interest Rate Contracts" means interest rate swap agreements,
interest rate cap agreements, interest rate collar agreements, interest rate
insurance and other agreements or arrangements designed to provide
protection against fluctuations in interest rates.
"Intergraph Canada" means Intergraph Canada Ltd., an Alberta
corporation.
"Inventory" has the meaning specified in the Borrower Security
Agreement in the case of the Borrower and in each Subsidiary Security
Agreement in the case of Intergraph Canada.
"Investments" has the meaning specified in Section 7.6.
"IRS" means the Internal Revenue Service, or any successor thereto.
"Issuer" and "Issuers" have the meanings specified in the first
paragraph of this Agreement.
"Landlord Waiver and Consent" has the meaning specified in Section
6.20.
"Lender" and "Lenders" have the meanings specified in the first
paragraph of this Agreement.
"Letter of Credit" means any letter of credit issued for the
account of the Borrower by any Issuer pursuant to Section 2.14.
"Letter of Credit Obligations" means, at any time, all liabilities
at such time of the Borrower to any Issuer with respect to Letters of Credit,
whether or not any such liability is contingent, and includes, without
limitation, the sum of (a) the Reimbursement Obligations at such time and
(b) the Letter of Credit Undrawn Amounts at such time.
"Letter of Credit Reimbursement Agreements" means, collectively,
the Borrower Letter of Credit Reimbursement Agreements and the Designated
Subsidiary Letter of Credit Reimbursement Agreements.
"Letter of Credit Request" has the meaning specified in Section
2.14(c).
"Letter of Credit Sublimit" means (a) $30,000,000 of Letter of
Credit Obligations with respect to Letters of Credit issued to provide
credit support for indebtedness of a Designated Subsidiary to the extent
such indebtedness is permitted pursuant to Section 7.2 and (b) $25,000,000 of
Letter of Credit Obligations with respect to Letters of Credit issued for
the purposes other than as set forth in clause (a) above.
"Letter of Credit Undrawn Amounts" means, at any time, the
aggregate undrawn face amount of all Letters of Credit outstanding at such
time.
"Lien" means any mortgage, claim, deed of trust, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory
or other), security interest or preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever in
respect of property intended to assure payment of any Indebtedness or other
obligation, including, without limitation, any conditional sale or other
title retention agreement, the interest of a lessor under a Capitalized
Lease Obligation, any financing lease having substantially the same economic
effect as any of the foregoing, and the filing, under the Uniform Commercial
Code or comparable law of any jurisdiction, of any financing statement
naming the owner of the asset to which such Lien relates as debtor.
"Loan Documents" means, collectively, this Agreement, the
Revolving Credit Notes, the Canadian Guaranty, the Guaranty, each Letter of
Credit Reimbursement Agreement, the Collateral Documents, and each agreement,
contract or facility evidencing, creating or otherwise giving rise to one or
more Other Obligations.
"Loan Party" means each of the Borrower and each Guarantor.
"Lockbox" has the meaning specified in the Lockbox Agreement.
"Lockbox Agreement" means each agreement executed by the Borrower,
the bank referred to therein and the Agent, substantially in the form of
Exhibit L with such changes as may be consented to by the Agent, provided
that each such agreement shall provide for (i) an assignment of and a first
priority security interest in the account referred to therein, (ii) the
transfer of exclusive dominion and control of such account to the Agent and
(iii) a daily sweep of all cash collected from such account, as each such
agreement may be amended, supplemented or otherwise modified from time to
time.
"Majority Lenders" means, at any time, Lenders holding at least
51% of the Revolving Credit Commitments; provided, however, that if the
Revolving Credit Commitments have been terminated, it means Lenders holding
at least 51% of the outstanding Revolving Credit Loans and Letter of Credit
Obligations.
"Material Adverse Change" means a material adverse change in any
of (a) the condition (financial or otherwise), business, performance,
prospects, operations or properties of the Borrower and its Subsidiaries
taken as one enterprise, (b) the legality, validity or enforceability of any
Loan Document, (c) the perfection or priority of the Liens granted pursuant
to the Collateral Documents, (d) the ability of the Borrower to repay the
Obligations or of any Loan Party to perform its obligations under any Loan
Document or (e) the rights and remedies under the Loan Documents, taken as a
whole, of the Lenders, the Issuers or the Agent.
"Material Adverse Effect" means an effect that results in or
causes, or has a reasonable likelihood of resulting in or causing, a
Material Adverse Change.
"Mortgages" means the mortgages or deeds of trust, as appropriate,
made or required herein to be made by the Borrower or any of the Guarantors
in substantially the forms of Exhibits M and N, respectively, as such
Mortgages may be amended, supplemented or otherwise modified from time to
time.
"Multiemployer Plan" means a multiemployer plan, as defined in
Section 4001(a)(3) of ERISA to which the Borrower, any of its Subsidiaries
or any ERISA Affiliate makes, is obligated to make, or has made or been
obligated to make within the preceding six years, contributions on behalf of
participants who are or were employed by any of them.
"Net Income (Loss)" means, for any Person for any period, the
aggregate of net income (or loss) of such Person and its Subsidiaries for
such period, determined on a consolidated basis in conformity with GAAP.
"Net Interest Expense" means, for any Person for any period, gross
interest expense of such Person and its Subsidiaries for such period
determined on a consolidated basis in conformity with GAAP, less (a) the
following for such Person and its Subsidiaries determined on a consolidated
basis in conformity with GAAP: the sum of (i) interest capitalized during
construction for such period, (ii) interest income for such period, and
(iii) gains for such period on Interest Rate Contracts (to the extent not
included in interest income above and to the extent not deducted in the
calculation of such gross interest expense), plus (b) the following for
such Person and its Subsidiaries determined on a consolidated basis in
conformity with GAAP: the sum of (i) losses for such period on Interest Rate
Contracts (to the extent not included in such gross interest expense), and
(ii) the amortization of upfront costs or fees for such period associated
with Interest Rate Contracts (to the extent not included in gross interest
expense).
"Net Worth" of any Person means, at any date, the excess of the
Total Assets of such Person at such date over the Total Liabilities of such
Person at such date; provided, however, that in the case of the Borrower
(i) there shall be excluded from Total Assets all amounts outstanding under
the Executive Loan Program and (ii) there shall be deducted from Net Worth
the amount of any cumulative translation adjustment determined in conformity
with GAAP.
"Non-Cash Interest Expense" means, for any Person for any period,
the sum of the following amounts to the extent included in Net Interest
Expense of such Person for such period: (a) the amount of amortized debt
discount and debt issuance costs, (b) charges relating to write-ups or
write-downs in the book or carrying value of existing Indebtedness, and
(c) interest payable in evidences of Indebtedness or otherwise not payable
in cash.
"Notice of Borrowing" has the meaning specified in Section 2.2(a).
"Notice of Continuation or Conversion" has the meaning specified
in Section 2.7.
"Obligations" means the Revolving Credit Loans, the Letter of
Credit Obligations, the Other Obligations and all other advances, debts,
liabilities, obligations, covenants and duties owing by the Borrower to the
Agent, any Lender, any Issuer, any Affiliate of any of them or any
Indemnitee, of every type and description, present or future, whether or not
evidenced by any note, guaranty or other instrument, arising under this
Agreement or under any other Loan Document, whether or not for the payment of
money, whether arising by reason of an extension of credit, opening or
amendment of a Letter of Credit or payment of any draft drawn thereunder,
loan, guaranty, indemnification, Interest Rate Contract or Currency
Agreement entered into and permitted in accordance with Section 7.12 or in
any other manner, whether direct or indirect (including, without limitation,
those acquired by assignment), absolute or contingent, due or to become due,
now existing or hereafter arising and however acquired. The term
"Obligations" includes, without limitation, all interest, charges, expenses,
fees, attorneys' fees and disbursements and any other sum chargeable to the
Borrower under this Agreement or any other Loan Document, all obligations of
the Borrower to cash collateralize Letter of Credit Obligations or Other
Obligations, and all Letter of Credit Obligations of each Designated
Subsidiary with respect to the Credit (as defined in the Designated
Subsidiary Reimbursement Agreement) issued for the benefit of each such
Designated Subsidiary.
"Other Obligations" means the total exposure of the Borrower to a
Lender or any Affiliate of a Lender, as determined by such Lender or such
Affiliate in accordance with its customary criteria, arising from any and
all Interest Rate Contracts and Currency Agreements entered into by the
Borrower in accordance with Section 7.12 with such Lender or Affiliate.
"Other Taxes" has the meaning specified in Section 2.12(b).
"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Permit" means any consent, permit, approval, authorization,
license, order, directive, variance or permission required from a
Governmental Authority under an applicable Requirement of Law.
"Person" means an individual, partnership, corporation (including,
without limitation, a business trust), limited liability company, joint
stock company, trust, incorporated or unincorporated association, joint
venture or other entity, or a Governmental Authority.
"Pledge Agreement" means an agreement, in substantially the form
of Exhibit F, executed by the Borrower, M&S Computing Investments, Inc. and
Intergraph Delaware, Inc., as such agreement may be amended, supplemented or
otherwise modified from time to time.
"Qualified Plan" means a retirement plan intended to qualify under
Section 401(a) of the Code which the Borrower, any of its Subsidiaries or
any ERISA Affiliate maintains or makes, is obligated to make, or has made or
been obligated to make within the preceding six years, contributions on
behalf of participants who are or were employed by any of them, other than a
Multiemployer Plan.
"Quebec Subsidiary Hypothecation Agreement" means an agreement, in
substantially the form of Exhibit G-3, executed by Intergraph Canada, as such
agreement may be amended, supplemented or otherwise modified from time to
time.
"Ratable Portion" or "ratably" means, with respect to any Lender,
the quotient obtained by dividing the Revolving Credit Commitment of such
Lender by the Revolving Credit Commitments of all Lenders; provided,
however, that if the Revolving Credit Commitments have been terminated, it
means the quotient obtained by dividing the outstanding principal amount of
Revolving Credit Loans and the outstanding Letter of Credit Obligations held
by such Lender by the outstanding principal amount of all Revolving Credit
Loans and outstanding Letter of Credit Obligations held by all Lenders.
Except as otherwise specifically provided herein, payments of principal of
the Revolving Credit Loans shall be made pro rata in accordance with the
respective unpaid principal amounts of the Revolving Credit Loans held by the
Lenders and payments of interest on the Revolving Credit Loans shall be made
pro rata in accordance with the respective amounts of unpaid interest on the
Revolving Credit Loans owed to all the Lenders.
"RCRA" has the meaning specified in the definition of
"Environmental Laws."
"Register" has the meaning specified in Section 10.7(c).
"Reimbursement Obligations" means all matured reimbursement or
repayment obligations of the Borrower and the Designated Subsidiaries to an
Issuer for payment by such Issuer of any draft drawn under a Letter of Credit.
"Release" means any release, spill, emission, leaking, pumping,
injection, exhaustion, deposit, disposal, discharge, dispersal, leaching or
migration, in each case of any Contaminant, into the indoor or outdoor
environment or into or out of any property owned or operated by such Person,
including, without limitation, the movement of Contaminants through or in
the air, soil, surface water, ground water or property.
"Remedial Action" means all actions required or voluntarily
undertaken to (a) clean up, remove, treat or in any other way address
Contaminants in the indoor or outdoor environment, (b) prevent the Release
or threat of Release or minimize the further Release of Contaminants so they
do not migrate or endanger or threaten to endanger public health or welfare
or the indoor or outdoor environment, (c) perform pre-remedial studies and
investigations and post-remedial monitoring and care or (d) bring facilities
on any property owned, operated or leased by the Borrower or any of its
Subsidiaries into compliance with applicable Environmental Laws.
"Requirement of Law" means, as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents of
such Person, and all federal, state, provincial, local and foreign laws,
rules and regulations and all orders, judgments, decrees or other
determinations of any Governmental Authority or arbitrator, applicable to
or binding upon such Person or any of its property or to which such Person
or any of its property is subject.
"Responsible Officer" means, with respect to any Person, any of
the executive officers of such Person.
"Revolving Credit Borrowing" means a borrowing consisting of
Revolving Credit Loans made on the same day by the Lenders ratably according
to their respective Revolving Credit Commitments.
"Revolving Credit Commitment" means, as to any Lender, the
commitment of such Lender to make Revolving Credit Loans to the Borrower
pursuant to Section 2.1 in the aggregate principal amount outstanding not to
exceed the amount set forth opposite such Lender's name on Schedule I, as
such amount may be reduced or modified pursuant to this Agreement and
"Revolving Credit Commitments" means the aggregate Revolving Credit
Commitments of all Lenders.
"Revolving Credit Loan" means a loan made by a Lender to the
Borrower pursuant to Section 2.1.
"Revolving Credit Note" means a promissory note of the Borrower
payable to the order of any Lender in a principal amount equal to the amount
of such Lender's Revolving Credit Commitment as originally in effect, in
substantially the form of Exhibit A, evidencing the aggregate Indebtedness
of the Borrower to such Lender resulting from the Revolving Credit Loans
made by such Lender.
"SEC" means the Securities and Exchange Commission.
"Secured Parties" means the Lenders, the Issuers, the Agent and
any other holders of any Other Obligation.
"Solvency Letter" means a letter, in form and substance
satisfactory to each Lender, attesting to the solvency of the Borrower and
its Subsidiaries delivered by Valuation Research Corporation.
"Solvent" means, with respect to any Person, that the value of the
assets of such Person (both at fair value and present fair saleable value)
is, on the date of determination, greater than the total amount of
liabilities (including, without limitation, contingent and unliquidated
liabilities) of such Person as of such date and that, as of such date, such
Person is able to pay all liabilities of such Person as such liabilities
mature and does not have unreasonably small capital. In computing the
amount of contingent or unliquidated liabilities of any Person at any time,
such liabilities will be computed at the amount which, in light of all the
facts and circumstances existing at such time, represents the amount that
can reasonably be expected to become an actual or matured liability.
"Stock" means shares of capital stock, beneficial or partnership
interests, participations or other equivalents (regardless of how
designated) of or in a corporation, company, partnership or equivalent
entity, whether voting or non-voting, and includes, without limitation,
common stock and preferred stock.
"Stock Equivalents" means all securities convertible into or
exchangeable for Stock and all warrants, options or other rights to purchase
or subscribe for any Stock, whether or not presently convertible,
exchangeable or exercisable.
"Strategic Alliance" means any joint venture, cooperative
development arrangement, joint research, development or marketing
arrangement, strategic alliance or similar joint undertaking.
"Subsidiary" means, with respect to any Person, any corporation,
partnership or other business entity, other than, in the case of the
Borrower and any of its Subsidiaries, any Strategic Alliance entered into in
the ordinary course of business consistent with past practice, of which an
aggregate of more than 50% of the outstanding Voting Stock is, at the time,
directly or indirectly, owned or controlled by such Person and/or one or
more Subsidiaries of such Person.
"Subsidiary Security Agreements" means, collectively, the Alberta
Subsidiary Security Agreement and the Quebec Subsidiary Hypothecation
Agreement.
"Tax Affiliate" means, as to any Person, any past or present
Subsidiary of such Person, and any past or present Affiliate of such Person,
with which such Person filed or files or was or is eligible to file
consolidated, combined or unitary tax returns.
"Taxes" has the meaning specified in Section 2.12(a).
"Tax Returns" has the meaning specified in Section 4.3(a).
"Termination Date" means the earliest of (a) five Business Days
after the date hereof unless the Closing Date occurs prior thereto,
(b) October 6, 1998 and (c) the date of termination in whole of the Revolving
Credit Commitments pursuant to Section 2.4 or 8.2.
"Title IV Plan" means a Qualified Plan which is covered by Title IV
of ERISA.
"Title Insurance Policy" has the meaning specified in Section
3.1(j)(i).
"Total Assets" of any Person means, at any date, the total assets
of such Person and its Subsidiaries at such date determined on a
consolidated basis in conformity with GAAP.
"Total Liabilities" of any Person means, at any date, all
obligations which in conformity with GAAP would be included in determining
total liabilities as shown on the liabilities side of a consolidated balance
sheet of such Person and its Subsidiaries at such date, and in any event
includes, without limitation, all Indebtedness of such Person or any of its
Subsidiaries at such date whether or not the same would be so shown.
"Trigger Event" means the Borrower's failure to attain at the end
of each month set forth below at least the Cumulative EBITDA set forth below
for such period:
Through Month Ending Cumulative Amount
-------------------- -----------------
September 1995 $ 4,000,000
October 1995 $ 10,000,000
November 1995 $ 15,000,000
December 1995 $ 30,000,000
January 1996 $ 32,000,000
February 1996 $ 35,000,000
March 1996 $ 44,000,000
April 1996 $ 47,000,000
May 1996 $ 53,000,000
June 1996 $ 61,000,000
July 1996 $ 70,000,000
August 1996 $ 79,000,000
September 1996 $ 96,000,000
October 1996 $103,000,000
November 1996 $110,000,000
December 1996 $120,000,000
January 1997 $135,000,000
February 1997 $146,000,000
March 1997 $160,000,000
April 1997 and $200,000,000
thereafter
"Unfunded Pension Liability" means, as to the Borrower at any time,
the aggregate amount, if any, of the sum of (a) the amount by which the
present value of all accrued benefits under each Title IV Plan of the Borrower,
any of its Subsidiaries or any ERISA Affiliate exceeds the fair market value
of all assets of such Title IV Plan allocable to such benefits in accordance
with Title IV of ERISA, all determined as of the most recent valuation date
for each such Title IV Plan using the actuarial assumptions in effect under
such Title IV Plan, and (b) for a period of five years following a
transaction reasonably likely to be covered by Section 4069 of ERISA, the
liabilities (whether or not accrued) that could be avoided by the Borrower,
any of its Subsidiaries or any ERISA Affiliate as a result of such
transaction.
"Virginia Real Property" means all of the real property located
at 2051 Mercator Drive, Reston, Virginia owned by the Borrower.
"Voting Stock" means, with respect to any Person, Stock of such
Person having ordinary voting power to elect a majority of the board of
directors, managers, trustees or other controlling persons (irrespective of
whether, at the time, Stock of any other class or classes of such entity
shall have or might have voting power by reason of the happening of any
contingency).
"Withdrawal Liability" means, as to the Borrower at any time, the
aggregate amount of the liabilities of the Borrower, any of its Subsidiaries
or any ERISA Affiliate pursuant to Section 4201 of ERISA, and any increase in
contributions required to be made pursuant to Section 4243 of ERISA, with
respect to all Multiemployer Plans.
"Working Capital" means, for any Person at any time, the Current
Assets of such Person at such time less the Current Liabilities of such
Person at such time.
1.2. Computation of Time Periods. In this Agreement, in the
computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including" and the words "to" and
"until" each mean "to but excluding" and the word "through" means "to and
including."
1.3. Accounting Terms. All accounting terms not specifically
defined herein shall be construed in conformity with GAAP and all accounting
determinations required to be made pursuant hereto shall, unless expressly
otherwise provided herein, be made in conformity with GAAP.
1.4. Certain Terms. (a) The words "herein," "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a
whole, and not to any particular Article, Section, subsection or clause in
this Agreement. References herein to an Exhibit, Schedule, Article, Section,
subsection or clause refer to the appropriate Exhibit or Schedule to, or
Article, Section, subsection or clause in this Agreement.
(b) The terms "Lender," "Issuer," and "Agent" include their
respective successors and the terms "Lender" and "Issuer" include each
assignee of such Lender or such Issuer who becomes a party hereto pursuant
to Section 10.7.
(c) Upon the appointment of any successor Agent pursuant to
Section 9.6, references to Citicorp USA in Section 9.3 and in the
definitions of Eurodollar Rate shall be deemed to refer to the successor
then acting as the Agent.
ARTICLE II
AMOUNTS AND TERMS OF THE REVOLVING CREDIT LOANS
2.1. The Revolving Credit Loans. On the terms and subject
to the conditions contained in this Agreement, each Lender severally agrees
to make loans (each a "Revolving Credit Loan") to the Borrower from time to
time on any Business Day during the period from the date hereof until the
Business Day preceding the Termination Date in an aggregate amount not to
exceed at any time outstanding such Lender's Revolving Credit Commitment;
provided, however, that at no time shall any Lender be obligated to make a
Revolving Credit Loan in excess of such Lender's Ratable Portion of the
Available Credit. Within the limits of each Lender's Revolving Credit
Commitment, amounts prepaid pursuant to Section 2.6 may be reborrowed under
this Section 2.1. The Revolving Credit Loans of each Lender shall be
evidenced by the Revolving Credit Note payable to the order of such Lender.
2.2. Making the Revolving Credit Loans. (a) Each
borrowing of Revolving Credit Loans shall be made by telephonic notice,
given by the Borrower to the Agent not later than 11:00 A.M. (New York City
time), followed by written notice, given by the Borrower to the Agent not
later than 3:00 P.M. (New York City time), on the Business Day prior to the
proposed Revolving Credit Borrowing, in the case of Revolving Credit Loans
that are to be made as Base Rate Loans, and on the second Business Day prior
to the date of the proposed Revolving Credit Borrowing, in the case of
Revolving Credit Loans that are to be made as Eurodollar Rate Loans. Each
such written notice (a "Notice of Borrowing") shall be in substantially the
form of Exhibit B, specifying therein (i) the date of such proposed
Revolving Credit Borrowing, (ii) the aggregate amount of such proposed
Revolving Credit Borrowing, (iii) the amount thereof, if any, requested to
be Eurodollar Rate Loans, and (iv) the initial Interest Period or Periods
for any such Eurodollar Rate Loans. The Revolving Credit Loans shall be
made as Base Rate Loans unless (subject to Section 2.10) the Notice of
Borrowing specifies that all or a pro rata portion thereof shall be
Eurodollar Rate Loans; provided, however, that the aggregate of the
Eurodollar Rate Loans for each Interest Period must be in an amount of not
less than $2,000,000 or an integral multiple of $1,000,000 in excess thereof.
(b) The Agent shall give to each Lender prompt notice of the
Agent's receipt of a Notice of Borrowing but in no event later than the
Business Day on which the Agent receives such Notice of Borrowing from the
Borrower and, if Eurodollar Rate Loans are properly requested in such Notice
of Borrowing, the applicable interest rate thereon. Each Lender shall,
before 12:00 Noon (New York City time) on the date of the proposed Revolving
Credit Borrowing, make available for the account of its Applicable Lending
Office to the Agent at its address referred to in Section 10.2, in
immediately available funds, such Lender's Ratable Portion of such proposed
Revolving Credit Borrowing. After the Agent's receipt of such funds and
upon fulfillment of the applicable conditions set forth in Article III, the
Agent will make such funds available to the Borrower at the Agent's aforesaid
address.
(c) Each Revolving Credit Borrowing shall be in an aggregate
amount of not less than $2,000,000 or an integral multiple of $1,000,000 in
excess thereof.
(d) Each Notice of Borrowing shall be irrevocable and binding
on the Borrower. In the case of any proposed Revolving Credit Borrowing
which the related Notice of Borrowing specifies is to be comprised of
Eurodollar Rate Loans, the Borrower shall indemnify each Lender against any
loss, cost or expense incurred by such Lender as a result of any failure to
fulfill on or before the date specified in such Notice of Borrowing for such
proposed Revolving Credit Borrowing the applicable conditions set forth in
Article III, including, without limitation, any loss (including, without
limitation, loss of anticipated profits), cost or expense incurred by reason
of the liquidation or reemployment of deposits or other funds acquired by
such Lender to fund any Eurodollar Rate Loan to be made by such Lender as
part of such proposed Revolving Credit Borrowing when such Eurodollar Rate
Loan, as a result of such failure, is not made on such date, assuming for
such purpose that such Lender will fund such Eurodollar Rate Loan in the
London interbank eurodollar market with a loan of the same amount and
Interest Period as such Eurodollar Rate Loan.
(e) Unless the Agent shall have received notice from a Lender
prior to the date of any proposed Revolving Credit Borrowing that such Lender
will not make available to the Agent such Lender's Ratable Portion of such
Revolving Credit Borrowing, the Agent may assume that such Lender has made
such Ratable Portion available to the Agent on the date of such Revolving
Credit Borrowing in accordance with this Section 2.2 and the Agent may, in
reliance upon such assumption, make available to the Borrower on such date
a corresponding amount. If and to the extent that such Lender shall not
have so made such Ratable Portion available to the Agent, such Lender and
the Borrower severally agree to repay to the Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the
date such amount is made available to the Borrower until the date such
amount is repaid to the Agent, at (i) in the case of the Borrower, the
interest rate applicable at the time to the Revolving Credit Loans
comprising such Revolving Credit Borrowing and (ii) in the case of such
Lender, the Federal Funds Rate, and such Lender authorizes the Agent to
withhold from any payment to such Lender under any Loan Document the amount
so owed by such Lender and to pay the same to the Agent. If such Lender
shall repay to the Agent such corresponding amount, such amount so repaid
shall constitute such Lender's Revolving Credit Loan as part of such
Revolving Credit Borrowing for purposes of this Agreement. If the Borrower
shall repay to the Agent such corresponding amount, such payment shall not
relieve such Lender of any obligation it may have to the Borrower hereunder.
(f) The failure of any Lender to make the Revolving Credit Loan
to be made by it as part of any Revolving Credit Borrowing shall not relieve
any other Lender of its obligation, if any, hereunder to make its Revolving
Credit Loan on the date of such Revolving Credit Borrowing, but no Lender
shall be responsible for the failure of any other Lender to make the
Revolving Credit Loan to be made by such other Lender on the date of any
Borrowing.
2.3. Fees. (a) The Borrower shall pay to the Agent, for
the account of the Lenders ratably, a commitment fee (the "Commitment Fee")
on the average daily unused portion of such Lender's Revolving Credit
Commitment from the date of acceptance by the Borrower of each Lender's
commitment to provide Revolving Credit Loans until the Termination Date at
the rate of 1/2 of 1% per annum, payable on (i) the Closing Date, (ii) on
the last Business Day of each month during the term of such Lender's
Revolving Credit Commitment, commencing on the last day of the month
following the Closing Date, except that in the event the Revolving Credit
Commitments are reduced pursuant to Section 2.4, then such payment shall,
without duplication, also be made on the date of any such reduction and
(iii) the Termination Date.
(b) The Borrower shall pay to the Agent an annual agency fee
and collateral monitoring fee in the amount and on terms specified in a
separate letter agreement between the Borrower and the Agent (the "Fee
Letter").
(c) The Borrower shall pay to the Agent, for the account of the
Lenders ratably in accordance with their respective Revolving Credit
Commitments, a closing fee, in an amount equal to a percentage of the
Revolving Credit Commitments as set forth opposite such Lender's name on
Schedule I less $25,000, payable on the Closing Date.
2.4. Reduction and Termination of the Revolving Credit
Commitments. (a) The Borrower may, upon at least five Business Days' prior
notice to the Agent, terminate in whole or reduce ratably in part the unused
portions of the Revolving Credit Commitments; provided, however, that each
partial reduction shall be in the aggregate amount of not less than
$5,000,000 or an integral multiple of $1,000,000 in excess thereof.
(b) Upon the occurrence of a Trigger Event, the Revolving
Credit Commitments shall be reduced by $25,000,000 (and the Revolving Credit
Commitment of each Lender shall be reduced by its Ratable Portion of such
amount).
2.5. Repayment. The Borrower shall repay the entire unpaid
principal amount of the Revolving Credit Loans, together with all accrued
and unpaid interest thereon, on the Termination Date.
2.6. Prepayments. (a) The Borrower shall have no right
to prepay the principal amount of any Revolving Credit Loan other than as
provided in this Section 2.6.
(b) The Borrower may upon at least three Business Days' prior
notice to the Agent, stating in such notice the proposed date and aggregate
principal amount of the prepayment, prepay the outstanding principal amount
of the Revolving Credit Loans in whole or ratably in part, together with
accrued interest to the date of such prepayment on the principal amount
prepaid; provided, however, that each partial prepayment shall be in an
aggregate principal amount not less than $2,000,000 or integral multiples of
$1,000,000 in excess thereof; provided, further, however, that all payments
shall be made as set forth in Section 10.4(c), as applicable. Upon the
giving of such notice of prepayment, the principal amount of the Revolving
Credit Loans specified to be prepaid shall become due and payable on the date
specified for such prepayment.
(c) The Borrower shall prepay the Revolving Credit Loans upon
receipt by the Borrower or any Guarantor of Asset Sale Proceeds (including,
without limitation, Asset Sale Proceeds received by the Borrower upon the
sale of the Stock of Bentley Systems, Inc. owned by the Borrower, it being
understood that such Stock may not be sold except as set forth in Section
7.5(c)(vi) or unless such sale is consented to in writing by the Majority
Lenders) in an amount equal to such Asset Sale Proceeds, together with
accrued interest to the date of such prepayment on the principal amount
prepaid.
(d) If at any time the sum of the aggregate principal amount of
Revolving Credit Loans at such time, Reimbursement Obligations at such time,
and Letter of Credit Undrawn Amounts at such time, exceeds the lesser of
(A) the Revolving Credit Commitments at any such time or (B) the Borrowing
Base at such time, the Borrower shall forthwith (i) prepay the Revolving
Credit Loans and/or the Reimbursement Obligations then outstanding in an
amount equal to such excess, together with accrued interest and (ii) if there
are no Revolving Credit Loans or Reimbursement Obligations then outstanding
or if such prepayment of Revolving Credit Loans or Reimbursement Obligations
does not eliminate such excess, pay an amount equal to such excess (or
remaining portion thereof) into the Cash Collateral Account to cash collater
alize outstanding Letter of Credit Obligations and Other Obligations.
2.7. Conversion/Continuation Option. Subject to Section
2.10, the Borrower may elect (a) at any time to convert Base Rate Loans or
any portion thereof to Eurodollar Rate Loans, or (b) at the end of any
Interest Period with respect thereto, to convert Eurodollar Rate Loans or
any portion thereof into Base Rate Loans or to continue such Eurodollar Rate
Loans or any portion thereof for an additional Interest Period; provided,
however, that the aggregate of the Eurodollar Rate Loans for each Interest
Period must be in the amount of $2,000,000 or an integral multiple of
$1,000,000 in excess thereof. Each conversion or continuation shall be
allocated among the Lenders in accordance with their respective Ratable
Portions. Each such election shall be in substantially the form of Exhibit
C (a "Notice of Conversion or Continuation") and shall be made by giving the
Agent at least (x) three Business Days' prior written notice thereof, in the
case of the conversion of Base Rate Loans into Eurodollar Rate Loans or the
continuation of Eurodollar Rate Loans, and (y) one Business Day's prior
written notice thereof, in the case of the conversion of Eurodollar Rate
Loans into Base Rate Loans, in each case specifying (i) the amount and type
of Revolving Credit Loan being converted or continued, (ii) in the case of a
conversion to or a continuation of Eurodollar Rate Loans, the Interest
Period therefor and (iii) in the case of a conversion, the date of
conversion (which date shall be a Business Day and, if a conversion from
Eurodollar Rate Loans, shall also be the last day of the Interest Period
therefor). The Agent shall promptly notify each Lender of its receipt of a
Notice of Conversion or Continuation and of the contents thereof.
Notwithstanding the foregoing, no conversion in whole or in part of Base
Rate Loans to Eurodollar Rate Loans, and no continuation in whole or in part
of Eurodollar Rate Loans upon the expiration of any Interest Period therefor,
shall be permitted at any time at which a Default or an Event of Default
shall have occurred and be continuing. If, within the time period required
under the terms of this Section 2.7, the Agent does not receive a Notice of
Conversion or Continuation from the Borrower containing a permitted election
to continue any Eurodollar Rate Loans for an additional Interest Period,
then, upon the expiration of the Interest Period therefor, such Eurodollar
Rate Loans will be automatically converted to Base Rate Loans. Each Notice
of Conversion or Continuation shall be irrevocable.
2.8. Interest. The Borrower shall pay interest on the
unpaid principal amount of each Revolving Credit Loan from the date thereof
until the principal amount thereof shall be paid in full, as follows:
(a) For Base Rate Loans, at a rate per annum equal at all times
to the Base Rate in effect from time to time plus the Applicable Base Rate
Margin, payable monthly in arrears on the first day of each month, on the
Termination Date and on the date any Base Rate Loan is converted or paid in
full (but only on the Base Rate Loan so converted or paid in full); provided,
however, that during the continuance of an Event of Default, all Base Rate
Loans shall bear interest, payable on demand, at a rate per annum equal at
all times to 2% per annum above the Base Rate in effect from time to time
plus the Applicable Base Rate Margin.
(b) For Eurodollar Rate Loans, at a rate per annum equal at all
times during the applicable Interest Period for each Eurodollar Rate Loan to
the sum of the Eurodollar Rate for such Interest Period plus the Applicable
Eurodollar Rate Margin in effect on the first day of such Interest Period,
payable in arrears on the last day of such Interest Period, on the
Termination Date and, if such Interest Period has a duration of more than
three months, on each day during such Interest Period which occurs every
three months from the first day of such Interest Period; provided, however,
that during the continuance of an Event of Default, all Eurodollar Rate
Loans shall bear interest, payable on demand, at a rate per annum equal at
all times to 2% per annum above the Eurodollar Rate in effect from time to
time plus the Applicable Eurodollar Rate Margin.
2.9. Interest Rate Determination. The Eurodollar Rate for
each Interest Period for Eurodollar Rate Loans shall be determined by the
Agent two Business Days before the first day of such Interest Period.
2.10. Increased Costs, Etc. (a) If, due to either (i) the
introduction of or any change in or in the interpretation of any law or
regulation (other than any change by way of imposition or increase of reserve
requirements included in determining the Eurodollar Rate Reserve Percentage)
or (ii) compliance with any guideline or request from any central bank or
other Governmental Authority (whether or not having the force of law), there
shall be any increase in the cost to any Lender of agreeing to make or
making, funding or maintaining any Eurodollar Rate Loans or any Issuer of
agreeing to issue or of issuing or maintaining the Letters of Credit (other
than an increase in cost attributable to (x) Taxes or Other Taxes, which
shall be governed by Section 2.12 and (y) all taxes expressly excluded in
the definition of Taxes, then the Borrower shall from time to time, upon
demand by such Lender or such Issuer (with a copy of such demand to the
Agent), pay to the Agent for the account of such Lender or such Issuer
additional amounts sufficient to compensate such Lender or such Issuer for
such increased cost. A certificate as to the amount of such increased cost
showing the basis therefor in reasonable detail, submitted to the Borrower
and the Agent by such Lender or such Issuer, shall be conclusive and binding
for all purposes, absent manifest error.
(b) If, with respect to any Eurodollar Rate Loan, the Majority
Lenders notify the Agent that the Eurodollar Rate for any Interest Period
for Eurodollar Rate Loans will not adequately reflect the cost to such
Lenders of making, funding or maintaining their Eurodollar Rate Loans for
such Interest Period, the Agent shall forthwith so notify the Borrower and
the Lenders, whereupon (i) each such Eurodollar Rate Loan will automatically,
on the last day of the then existing Interest Period therefor, convert into
a Base Rate Loan, and (ii) the obligation of the Lenders to make Eurodollar
Rate Loans or to convert Base Rate Loans into Euro dollar Rate Loans shall
be suspended until the Agent shall notify the Borrower that such Lenders
have determined that the circumstances causing such suspension no longer
exist.
(c) If, due to either (i) the introduction of or any change in
or in the interpretation of any law or regulation, or (ii) compliance with
any guideline or request from any central bank or other Governmental
Authority (whether or not having the force of law), there shall be an
increase in the amount of capital required or expected to be maintained by
any Lender or any Issuer or any Person controlling any Lender or any Issuer
as a result of or based upon the existence of such Lender's or such Issuer's
Revolving Credit Commitment, Revolving Credit Loans, commitment to issue
Letters of Credit and its other obligations hereunder and other commitments,
loans and obligations of such type or the issuance or maintenance of the
Letters of Credit (or similar Contingent Obligations), then, upon demand by
such Lender or such Issuer (with a copy of such demand to the Agent), the
Borrower shall pay to the Agent for the account of such Lender or such
Issuer, from time to time as specified by such Lender or such Issuer,
additional amounts sufficient to compensate such Lender or such Issuer in
the light of such circumstances, to the extent that such Lender or such
Issuer reasonably determines such increase in capital to be allocable to the
existence of such Lender's or such Issuer's Revolving Credit Commitment,
Revolving Credit Loans, commitment to issue Letters of Credit, or the
issuance or maintenance of any Letter of Credit. A certificate as to such
amounts submitted to the Borrower and the Agent by such Lender or such
Issuer shall be conclusive and binding for all purposes absent manifest error.
(d) Notwithstanding any other provision of this Agreement, if
the introduction of or any change in or in the interpretation of any law or
regulation shall make it unlawful, or any central bank or other Governmental
Authority shall assert that it is unlawful, for any Lender or its Eurodollar
Lending Office to perform its obligations hereunder to make Eurodollar Rate
Loans or to continue to fund or maintain Eurodollar Rate Loans hereunder,
then, on notice thereof and demand therefor by such Lender to the Borrower
through the Agent, (i) each Eurodollar Rate Loan will automatically, upon
such demand, convert into a Base Rate Loan and (ii) the obligation of the
Lenders to make, or to convert Base Rate Loans into, Eurodollar Rate Loans
shall be suspended until the Agent shall notify the Borrower that such Lender
has determined that the circumstances causing such suspension no longer exist.
2.11. Payments and Computations. (a) The Borrower shall
make each payment hereunder and under the Revolving Credit Notes not later
than 1:00 P.M. (New York City time) on the day when due, in Dollars, to the
Agent at its address referred to in Section 10.2 in immediately available
funds without set-off or counterclaim. The Agent will promptly thereafter
cause to be distributed immediately available funds relating to the payment
of principal or interest or fees (other than amounts payable pursuant to
Sections 2.10 and 2.12) to the Lenders, in accordance with their respective
Ratable Portions, for the account of their respective Applicable Lending
Offices, and like funds relating to the payment of any other amount payable
to any Lender to such Lender for the account of its Applicable Lending
Office, in each case to be applied in accordance with the terms of this
Agreement. Payment received by the Agent after 1:00 P.M. (New York City
time) shall be deemed to be received on the next Business Day.
(b) The Borrower hereby authorizes the Agent, if and to the
extent payment is owed to any Lender and is not made when due hereunder or
under any Revolving Credit Loan held by such Lender, to charge from time to
time against any and all of the Borrower's accounts with the Agent any
amount so due. The Agent is authorized to, and at its option may, make
advances on behalf of the Borrower for the payment of all fees, expenses,
charges, costs, principal and interest incurred by the Borrower hereunder
and under the other Loan Documents (including those expenses, disbursements
and advances incurred by the Agent pursuant to the Loan Documents after the
occurrence and during the continuance of an Event of Default which the Agent,
in its sole discretion, deems necessary or desirable to preserve or protect
the Collateral or any portion thereof or to enhance the likelihood or
maximize the amount of repayment of the Obligations) when and as the Borrower
fails to promptly pay any such amounts. At the Agent's option and to the
extent permitted by law, any advances so made shall constitute part of the
Revolving Credit Loans hereunder.
(c) All computations of interest based on the Base Rate, the
Eurodollar Rate and the Federal Funds Rate and of fees hereunder shall be
made by the Agent on the basis of a year of 360 days, in each case for the
actual number of days (including the first day but excluding the last day)
occurring in the period for which such interest and fees are payable. Each
determination by the Agent of an interest rate hereunder shall be conclusive
and binding for all purposes, absent manifest error.
(d) Whenever any payment hereunder or under the Revolving
Credit Notes shall be stated to be due on a day other than a Business Day,
such payment shall be made on the next succeeding Business Day, and such
extension of time shall in such case be included in the computation of
payment of interest or fee, as the case may be; provided, however, that if
such extension would cause payment of interest on or principal of any
Eurodollar Rate Loan to be made in the next calendar month, such payment
shall be made on the next preceding Business Day.
(e) Unless the Agent shall have received notice from the
Borrower prior to the date on which any payment is due hereunder to the
Lenders that the Borrower will not make such payment in full, the Agent may
assume that the Borrower has made such payment in full to the Agent on such
date and the Agent may, in reliance upon such assumption, cause to be
distributed to each Lender on such due date an amount equal to the amount
then due such Lender. If and to the extent the Borrower shall not have so
made such payment in full to the Agent, each Lender shall repay to the Agent
forthwith on demand such amount distributed to such Lender together with
interest thereon, for each day from the date such amount is distributed to
such Lender until the date such Lender repays such amount to the Agent, at
the Federal Funds Rate.
2.12. Taxes. (a) Any and all payments by the Borrower
under each Loan Document shall be made free and clear of and without
deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect
thereto, excluding, (i) in the case of each Lender, each Issuer and the
Agent, taxes measured by its net income, and franchise taxes imposed on it,
by the jurisdiction (or any political subdivision thereof) under the laws of
which such Person is organized, (ii) in the case of each Lender, taxes
measured by its net income, and franchise taxes imposed on it, by the
jurisdiction (or any political subdivision thereof) in which is located such
Lender's Applicable Lending Office, and (iii) in the case of each Lender
organized under the laws of a jurisdiction outside the United States, United
States federal withholding tax payable with respect to payments by the
Borrower which would not have been imposed had such Lender, to the extent
required under Section 2.12(f), delivered to the Borrower and the Agent the
forms prescribed thereunder (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities being hereinafter referred
to as "Taxes"). If the Borrower shall be required by law to deduct any
Taxes from or in respect of any sum payable under any Loan Document to any
Lender, any Issuer or the Agent (i) the sum payable shall be increased as
may be necessary so that after making all required deductions (including,
without limitation, deductions applicable to additional sums payable under
this Section 2.12) such Lender, such Issuer or the Agent (as the case may be)
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower shall make such deductions, (iii)
the Borrower shall pay the full amount deducted to the relevant taxing
authority or other authority in accordance with applicable law, and (iv) the
Borrower shall deliver to the Agent evidence of such payment to the relevant
taxing or other authority.
(b) In addition, the Borrower agrees to pay any present or
future stamp or documentary taxes or any other excise or property taxes,
charges or similar levies of the United States or any political subdivision
thereof or any applicable foreign jurisdiction, and all liabilities with
respect thereto, which arise from any payment made under any Loan Document
or from the execution, delivery or registration of, or otherwise with
respect to, any Loan Document (collectively, "Other Taxes").
(c) The Borrower will indemnify each Lender, each Issuer and
the Agent for the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section 2.12) paid by such Lender, such Issuer or the
Agent (as the case may be) and any liability (including, without limitation,
for penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or legally
asserted; provided, however, that the Borrower shall not be liable for any
portion of such penalties, interest or expenses resulting from any Lender's,
any Issuer's or the Agent's gross negligence or willful misconduct as
determined by a final judgement of a court of competent jurisdiction. This
indemnification shall be made within 30 days from the date such Lender or
the Agent (as the case may be) makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes or
Other Taxes, the Borrower will furnish to the Agent, at its address referred
to in Section 10.2, the original or a certified copy of a receipt evidencing
payment thereof.
(e) Without prejudice to the survival of any other agreement of
the Borrower hereunder, the agreements and obligations of the Borrower
contained in this Section 2.12 shall survive the payment in full of the
Obligations.
(f) Prior to the Closing Date in the case of each initial
Lender, and prior to the date of the Assignment and Acceptance pursuant to
which it becomes a Lender in the case of each other Lender, and from time to
time thereafter if reasonably requested by the Borrower or the Agent (unless
such Lender is unable to do so by reason of a change in law (including,
without limitation, any statute, treaty, ruling, determination or regulation)
occurring subsequent to the Closing Date or date of Assignment and
Acceptance, as the case may be), each Lender organized under the laws of a
jurisdiction outside the United States shall provide the Agent and the
Borrower with two valid, accurate and complete original signed copies of IRS
Form 4224 or Form 1001 or other applicable form, certificate or document
prescribed by the IRS certifying as to such Lender's entitlement to full
exemption from United States withholding tax with respect to all payments to
be made to such Lender under this Agreement. Unless the Borrower and the
Agent have received forms or other documents indicating that payments
hereunder or under any Revolving Credit Note are not subject to United
States withholding tax, the Borrower or the Agent shall, in the case of
payments to or for any Lender organized under the laws of a jurisdiction
outside the United States, withhold taxes from such payments at the
applicable statutory rate, or at a rate reduced by an applicable tax treaty
(provided that the Borrower or the Agent, as the case may be, has received
forms or other documents indicating that such reduced rate applies).
2.13. Sharing of Payments, Etc. (a) If any Lender shall
obtain any payment (whether voluntary, involuntary, through the exercise of
any right of set-off or otherwise on account of the Revolving Credit Loans
made by it other than pursuant to Sections 2.10 and 2.12) in excess of its
Ratable Portion of payments obtained by all the Lenders on account of the
Revolving Credit Loans made by the Lenders, such Lender shall forthwith
purchase from the other Lenders such participations in their Revolving
Credit Loans as shall be necessary to cause such Purchasing Lender to share
the excess payment ratably with each of them.
(b) If all or any portion of any payment received by a
Purchasing Lender is thereafter recovered from such Purchasing Lender, such
purchase from each selling Lender described in Section 2.13(a) (a "Selling
Lender") shall be rescinded and such Selling Lender shall repay to the
Purchasing Lender the purchase price to the extent of such recovery together
with an amount equal to such Selling Lender's ratable share (according to
the proportion of (i) the amount of such Selling Lender's required repayment
to (ii) the total amount so recovered from the Purchasing Lender) of any
interest or other amount paid or payable by the Purchasing Lender in respect
of the total amount so recovered.
(c) The Borrower agrees that any Purchasing Lender purchasing a
participation from a Selling Lender (as defined in Section 2.13(b)) pursuant
to this Section 2.13 may, to the fullest extent permitted by law, exercise
all its rights of payment (including, without limitation, the right of
setoff) with respect to such participation as fully as if such Lender were
the direct creditor of the Borrower in the amount of such participation.
(d) Notwithstanding the foregoing, if any Lender shall be
precluded from enforcing its rights and remedies under this Agreement and
the other Loan Documents as a result of such Lender's failure to be
qualified as a foreign corporation in the state of Alabama, such Lender
shall not be entitled to the benefits of this Section 2.13.
2.14. Letter of Credit Facility. (a) On the terms and
subject to the conditions contained in this Agreement, each Issuer agrees
to issue one or more Letters of Credit at the request of the Borrower for
the account of the Borrower, up to an aggregate face amount at any one time
outstanding equal to the applicable Letter of Credit Sublimit, from time to
time during the period commencing on the date hereof and ending the Business
day prior to the Termination Date; provided, however, that no Issuer shall
be under any obligation to issue any Letter of Credit if:
(i) any order, judgment or decree of any
Governmental Authority or arbitrator shall purport by its terms to
enjoin or restrain such Issuer from issuing such Letter of Credit or
any Requirement of Law applicable to such Issuer or any request or
directive (whether or not having the force of law) from any
Governmental Authority with jurisdiction over such Issuer shall
prohibit, or request that such Issuer refrain from, the issuance of
letters of credit generally or such Letter of Credit in particular or
shall impose upon such Issuer with respect to such Letter of Credit any
restriction or reserve or capital requirement (for which such Issuer is
not otherwise compensated) not in effect on the date hereof or result
in any unreimbursed loss, cost or expense which was not applicable, in
effect or known to such Issuer as of the date hereof and which such
Issuer in good faith deems material to it;
(ii) such Issuer shall have received written notice
from the Agent, any Lender or the Borrower, on or prior to the
requested date of issuance of such Letter of Credit, that one or more
of the applicable conditions contained in Article III is not then
satisfied;
(iii) after giving effect to the issuance of such
Letter of Credit, the Available Credit would be a negative number; or
(iv) fees due in connection with a requested
issuance have not been paid.
None of the Lenders (other than the Issuers) shall have any obligation to
issue any Letter of Credit.
(b) The expiration date of any Letter of Credit shall be no
later than the earlier to occur of (i) two years after the date of issuance
thereof (other than as a result of an extension thereof approved by the
Issuer thereof) and (ii) the Business day preceding the Termination Date.
(c) In connection with the issuance of each Letter of Credit,
the Borrower shall give the Issuer selected by it and the Agent at least two
Business Days' prior written notice (a "Letter of Credit Request"), in
substantially the form of Exhibit D (or in such other written or electronic
form as is acceptable to such Issuer), of the requested issuance of such
Letter of Credit. Such notice shall be irrevocable and shall specify the
stated amount of the Letter of Credit requested, the date of issuance of
such requested Letter of Credit (which day shall be a Business Day), the
date on which such Letter of Credit is to expire (which date shall be a
Business Day), and the Person for whose benefit the requested Letter of
Credit is to be issued. Such notice, to be effective, must be received by
such Issuer and the Agent not later than 11:00 A.M. (New York City time) on
the last Business Day on which notice can be given under the immediately
preceding sentence.
(d) Prior to the issuance of each Letter of Credit, and as a
condition of such issuance, the Borrower shall have delivered to the Issuer
thereof a letter of credit reimbursement agreement, in substantially the form
of Exhibit E-1 (a "Borrower Letter of Credit Reimbursement Agreement"),
signed by the Borrower, and, with respect to a Letter of Credit issued to
provide credit support for indebtedness of a Designated Subsidiary to the
extent such indebtedness is permitted by Section 7.2, a letter of credit
reimbursement agreement, in substantially the form of Exhibit E-2 (a
"Designated Subsidiary Letter of Credit Reimbursement Agreement"), signed
by such Designated Subsidiary, and such other documents or items as may be
required pursuant to the terms thereof. Each drawing under a Letter of
Credit shall be repayable on demand with interest at the Base Rate plus the
Applicable Base Rate Margin plus 2% per annum for the period from the date
such draw is paid by the Issuer of such Letter of Credit until the
Reimbursement Obligation is satisfied and each Letter of Credit
Reimbursement Agreement shall so provide. In the event of any conflict
between the terms of any Letter of Credit Reimbursement Agreement and this
Agreement, the terms of this Agreement shall govern.
(e) Subject to the terms and conditions of this Section 2.14
and provided that the applicable conditions set forth in Article III are
satisfied, an Issuer shall, on the requested date, issue a Letter of Credit
on behalf of the Borrower in accordance with such Issuer's usual and custom-
ary business practices. On the date of the proposed issuance of the Letter
of Credit, the Agent shall confirm to such Issuer that the applicable
conditions in Article III are satisfied (or have been waived in accordance
with the terms of this Agreement).
(f) Immediately upon the issuance by an Issuer of a Letter of
Credit in accordance with the terms and conditions of this Agreement, such
Issuer shall be deemed to have sold and transferred to each Lender, and each
Lender shall be deemed irrevocably and unconditionally to have purchased and
received from such Issuer, without recourse or warranty, an undivided
interest and participation, to the extent of such Lender's Ratable Portion,
in such Letter of Credit and the obligations of the Borrower and any
Designated Subsidiary with respect thereto (including, without limitation,
all Letter of Credit Obligations with respect thereto) and any security
therefor and guaranty pertaining thereto.
(g) In determining whether to pay under any Letter of Credit,
no Issuer shall have any obligation relative to the Lenders other than to
confirm that any documents required to be delivered under such Letter of
Credit appear to have been delivered and that they appear to comply on their
face with the requirements of such Letter of Credit. Any action taken or
omitted to be taken by any Issuer under or in connection with any Letter of
Credit, if taken or omitted in the absence of gross negligence or willful
misconduct, shall not put such Issuer under any resulting liability to any
Lender.
(h) In the event that any Issuer makes any payment under any
Letter of Credit and such amount shall not have been repaid to such Issuer
pursuant to the Letter of Credit Reimbursement Agreement, such Issuer shall
promptly notify the Agent, which shall promptly notify each Lender of such
failure, and each Lender shall promptly and unconditionally pay to the Agent
for the account of such Issuer the amount of such Lender's Ratable Portion of
such payment in Dollars and in immediately available funds. The Agent shall
forthwith pay to such Issuer all such amounts so received by the Agent. If
the Agent so notifies such Lender prior to 11:00 A.M. (New York City time)
on any Business Day, such Lender shall make available to the Agent for the
account of such Issuer its Ratable Portion of the amount of such payment
on such Business Day in immediately available funds. If and to the extent
such Lender shall not have so made such Lender's Ratable Portion of the
amount of such payment available to the Agent for the account of such
Issuer, such Lender agrees to pay to the Agent for the account of such
Issuer forthwith on demand such amount together with interest thereon, for
each day from such date until the date such amount is repaid to the Agent
for the account of such Issuer, at the Federal Funds Rate, and such Lender
authorizes the Agent to withhold from any payment to such Lender under any
Loan Document the amount so owed by such Lender and to pay the same to such
Issuer. The failure of any Lender to make available to the Agent for the
account of such Issuer its Ratable Portion of any such payment shall not
relieve any other Lender of its obligation hereunder to make available to
the Agent for the account of any Issuer its Ratable Portion of any payment
on the date such payment is to be made, but no Lender shall be responsible
for the failure of any other Lender to make available to the Agent for the
account of any Issuer such other Lender's Ratable Portion of any such
payment.
(i) Whenever any Issuer receives a payment from the Borrower or
a Designated Subsidiary of a Reimbursement Obligation as to which such
Issuer has received payment from a Lender pursuant to Section 2.14(h), such
Issuer shall pay to the Agent and the Agent shall promptly pay to each
Lender, in immediately available funds, an amount equal to such Lender's pro
rata share of such payment based on the respective amounts the Lenders have
paid in respect of such Reimbursement Obligation.
(j) Upon the request of any Lender, each Issuer shall furnish
to such Lender copies of any Letter of Credit Reimbursement Agreement to
which such Issuer is a party and such other documentation as may reasonably
be requested by such Lender.
(k) The obligations of the Lenders to make payments to the Agent
for the account of each Issuer with respect to Letters of Credit shall be
irrevocable and not subject to any qualification or exception whatsoever and
shall be made in accordance with the terms and conditions of this Agreement
under all circumstances (except as expressly provided in Section 2.14(g)),
including, without limitation, any of the following circumstances:
(i) any lack of validity or enforceability of this
Agreement or any of the Collateral Documents;
(ii) the existence of any claim, set-off, defense or other
right which the Borrower may have at any time against a beneficiary
named in a Letter of Credit, any transferee of any Letter of Credit (or
any Person for whom any such transferee may be acting), the Agent, any
Issuer, any Lender or any other Person, whether in connection with this
Agreement, any Letter of Credit or any unrelated transaction (including,
without limitation, any underlying transaction between the Borrower and
the beneficiary named in any Letter of Credit);
(iii) any draft, certificate or any other document
presented under the Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect;
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Collateral
Documents;
(v) the occurrence of any Default or Event of Default; or
(vi) the fact that the beneficiary of any Letter of
Credit is a foreign branch of any Issuer.
(l) If any payment made by or on behalf of the Borrower or a
Designated Subsidiary and received by any Issuer with respect to any Letter
of Credit is rescinded or must otherwise be returned by such Issuer for any
reason and if such Issuer has made payment to the Agent on account thereof
pursuant to Subsection 2.14(i), each Lender shall, upon notice by such
Issuer, forthwith pay over to such Issuer an amount equal to such Lender's
pro rata share of the amount which must be so returned by such Issuer based
on the respective amounts paid in respect thereof to the Lenders pursuant to
Section 2.14(i).
(m) The Borrower agrees to pay the following amounts with
respect to each Letter of Credit:
(i) to the Agent for the account of the Issuer of such
Letter of Credit, an issuance fee equal to 1/4% per annum of the maximum
amount available from time to time to be drawn under such Letter of
Credit, payable monthly in arrears on the first day of each month and
on the termination of such Letter of Credit, and calculated on the
basis of a 360-day year and the actual number of days elapsed;
(ii) to the Agent for the ratable benefit of the
Lenders, a fee equal to the Applicable Eurodollar Rate Margin less 1/4%
per annum of the maximum amount available from time to time to be drawn
under such Letter of Credit, payable monthly in arrears on the first
day of each month and on the termination of such Letter of Credit, and
calculated on the basis of a 360-day year and the actual number of days
elapsed; provided, however, that during the continuance of an Event of
Default, such fee shall be increased by 2.00% per annum and shall be
payable on demand; and
(iii) to the Issuer of such Letter of Credit, with
respect to the issuance, amendment or transfer of such Letter of Credit
and each drawing made thereunder, documentary and processing charges in
accordance with such Issuer's standard schedule for such charges in
effect at the time of issuance, amendment, transfer or drawing, as the
case may be.
(n) For purposes of this Agreement, including, without
limitation, Section 2.6(d), the amount of the Letter of Credit Undrawn
Amounts and the Reimbursement Obligations in respect of any Letter of Credit
denominated in a currency other than Dollars shall be equal to the Dollar
equivalent thereof on any date of determination, based on the then current
spot exchange rate, as determined by the Agent.
2.15. Cash Collateral Account. (a) The Borrower has
established the following account at the offices of Citibank in New York,
New York (the "Cash Collateral Account"): "Citicorp USA, Inc. f/a/o
Intergraph Corporation Cash Collateral", 399 Park Avenue, New York, New York
10043.
(b) The Borrower shall continue to instruct its account debtors
to mail their remittances to the applicable Lockbox and the Borrower agrees
to take all steps necessary or desirable, as the Agent shall determine, to
cause the Borrower's account debtors to mail their remittances to the
applicable Lockbox for processing for deposit in the Cash Collateral Account.
The Borrower shall deliver to the applicable Lockbox any remittances sent
directly to the Borrower as soon as possible, and in any event within two
days after receipt thereof. In addition, except for amounts permitted to be
maintained in bank accounts as set forth in Section 7.18, the Borrower shall
pay, or cause to be paid, into the Cash Collateral Account (i) all amounts
received by the Borrower, (ii) all amounts received by the Borrower from its
Subsidiaries, (iii) to the extent that any Asset Sale Proceeds remain after
being applied in accordance with Section 2.6(c), the amount of such excess
Asset Sale Proceeds, and (iv) to the extent that any bank account permitted
hereunder has funds in excess of what is reasonably necessary for the
purpose of such account, the amount of such excess funds.
(c) As collateral security for the Obligations, the Borrower
hereby transfers, assigns and pledges to the Agent and grants to the Agent
a Lien on and security interest in, for the benefit of the Secured Parties
on a first priority basis, all of the right, title and interest of the
Borrower in the Cash Collateral Account and all cash, deposits, Cash
Equivalents and other instruments held in the Cash Collateral Account and
its proceeds. The Cash Collateral Account shall be under the sole dominion
and control of the Agent and no Person or entity shall have any right, title
or interest in, any control over the use of, or any right to withdraw from,
the Cash Collateral Account, except as provided in this Agreement.
(d) The Borrower agrees that it will not (i) sell or otherwise
dispose of any interest in the Cash Collateral Account or any funds held
therein or (ii) create or permit to exist any Lien upon or with respect to
such Cash Collateral Account or any funds held therein, except in favor of
the Secured Parties as provided in or contemplated by this Agreement.
(e) On each Business Day that there are immediately available
funds in the Cash Collateral Account, the Agent shall apply such funds as
follows:
(i) as long as (x) the representations and warranties
of the Borrower contained in Article IV and of each Loan Party in the
other Loan Documents are correct on and as of such date as though made
on and as of such date, (y) no Default shall have occurred and is
continuing and (z) no Event of Default shall have occurred and is
continuing, the excess of (A) the Borrowing Base at such time over (B)
the sum of the then outstanding Revolving Credit Loans, Letter of Credit
Undrawn Amounts, Reimbursement Obligations and the amount set forth in
clause (iv) of the definition of "Available Credit" as then in effect
as determined by the Agent may be applied as requested and directed by
the Borrower to the extent of such funds, which request shall
constitute a representation and warranty by the Borrower that the
conditions to such release have been satisfied, and, if the conditions
set forth in clauses (x) and (y) of this subsection (e)(i) shall not be
satisfied on such date, then such funds shall remain in the Cash
Collateral Account but shall be released to the Borrower only to the
extent that such funds exceed the then outstanding Obligations whether
or not then due and payable; and
(ii) as long as there is an Event of Default continuing,
the Agent may, and upon the Revolving Credit Loans becoming due and
payable as a result and in the manner set forth in Section 8.2 shall,
apply such funds in the following order of priorities:
First, to the payment of the costs and expenses of
any sale, disposition or other realization upon all or any part of
the Collateral, including, without limitation, all expenses of the
Agent and its agents including the fees and expenses of its
counsel, and any other expenses, liabilities and advances made or
incurred by the Agent and the Lenders pursuant to the Loan
Documents;
Next, to the Agent and the Issuers, pro rata, for
the payment in full of any amounts owed to them pursuant to Sections
2.2(e) and 2.14(h);
Next, to the Secured Parties, pro rata, for
the payment in full of the Obligations, other than Letter of Credit
Obligations and Other Obligations not then due and payable, and,
to the extent deemed practical by the Agent, all Proceeds (as
defined in the Borrower Security Agreement) of any sale,
disposition or other realization upon all or any part of the
Collateral applied to repay the Revolving Credit Loans shall be
applied to Revolving Credit Loans outstanding under the Tranche B
Commitment before Revolving Credit Loans outstanding under the
Tranche A Commitment; provided, however, that all Proceeds of any
sale, disposition or other realization upon the Alabama Real
Property shall be applied only to the Revolving Credit Loans
outstanding under the Tranche A Commitment;
Next, to fund the Cash
Collateral Account in the amount, if any, by which the Letter of
Credit Obligations and Other Obligations then outstanding exceed
the amount of funds then held in the Cash Collateral Account
pursuant to Section 8.3; and
Finally, after payment in full of all
the Obligations, other than Letter of Credit Obligations and Other
Obligations not then due and payable, and the deposit to fund the
Cash Collateral Account in the amount referred to in the preceding
paragraph, to the Borrower or its successors or assigns.
(f) The Agent may exercise, in its sole discretion, in respect
of the Cash Collateral Account, in addition to the other rights and remedies
provided for herein or otherwise available to it, all the rights and remedies
of a secured party upon default under the Uniform Commercial Code in effect
in the State of New York at that time.
(g) At such time as there are no Obligations or Letters of
Credit outstanding, the Agent may pay any remaining balance in the Cash
Collateral Account to the Borrower, or its successors and assigns, or to
whomsoever may be lawfully entitled to receive the same as a court of
competent jurisdiction may direct.
2.16. Segmentation of the Revolving Credit Commitment. The
Revolving Credit Commitment shall be segmented as follows: (i) the first
$25 million (the "Tranche A Commitment") and (ii) the balance (the "Tranche
B Commitment"). All Obligations (other than Obligations in respect of
extensions of credit under the Tranche B Commitment) shall be secured by all
the Collateral. All Obligations in respect of extensions of credit under
the Tranche B Commitment shall be secured by all the Collateral except the
Alabama Real Property. Obligations in respect of extensions of credit under
the Tranche A Commitment and Obligations in respect of extensions of credit
under the Tranche B Commitment shall be pari passu. No portion of the
Tranche B Commitment may be utilized unless the Tranche A Commitment is
fully utilized. All prepayments of any Revolving Credit Loan shall be
deemed applied first to the Tranche B Commitment and then to the Tranche A
Commitment.
ARTICLE III
CONDITIONS OF LENDING
3.1. Conditions Precedent to Initial Revolving Credit
Loans and Letters of Credit. The obligation of each Lender to make its
initial Revolving Credit Loan and of each Issuer to issue a Letter of Credit
is subject to satisfaction of the conditions precedent that the Agent shall
have received, on the Closing Date, the following, each dated the Closing
Date unless otherwise indicated, in form and substance satisfactory to the
Agent and (except for the Revolving Credit Notes) in sufficient copies for
each Lender:
(a) The Revolving Credit Notes to the order of the Lenders,
respectively.
(b) Certified copies of (i) the resolutions of the Board of
Directors of each Loan Party approving each Loan Document to which it is a
party, and (ii) all documents evidencing other necessary corporate action
and required governmental and third party approvals, licenses and consents
required to be obtained by any Loan Party with respect to each Loan Document
and the financing contemplated thereby.
(c) A copy of the articles or certificate of incorporation of
each Loan Party, certified as of a recent date by the Secretary of State of
the state of incorporation of such Loan Party, together with certificates of
such official attesting to the good standing of each such Loan Party, and a
copy of the certificate of incorporation and the By-Laws of each Loan Party,
certified as of the Closing Date by the Secretary or an Assistant Secretary
of each such Loan Party.
(d) A certificate of the Secretary or an Assistant Secretary of
each Loan Party certifying the names and true signatures of each officer of
such Loan Party who has been authorized to execute and deliver any Loan
Document or other document required hereunder to be executed and delivered
by or on behalf of such Loan Party.
(e) Each of (i) the Guaranty, duly executed by each Guarantor
(other than Intergraph Canada), and (ii) the Canadian Guaranty, duly
executed by Intergraph Canada.
(f) The Pledge Agreement, duly executed by the Borrower,
together with:
(i) certificates representing the Pledged Shares (as
defined in the Pledge Agreement) and undated stock powers for such
certificates executed in blank; and
(ii) evidence that all action reasonably requested by
the Agent to perfect and protect the Lien created by the Pledge
Agreement has been taken.
(g) The Borrower Security Agreement, duly executed by the
Borrower, together with:
(i) acknowledgment copies of proper Financing
Statements (Form UCC-1) duly filed under the Uniform Commercial Code of
all other jurisdictions as may be necessary or, in the opinion of the
Agent, desirable to perfect the Lien created by the Borrower Security
Agreement;
(ii) certified copies of Requests for Information or
Copies (Form UCC-11), or equivalent reports, listing all effective
financing statements as of the date of such Requests for Information
or Copies which name the Borrower (under its present name or any
previous name of the Borrower during the past five years) as debtor and
which are filed in the jurisdictions referred to in said paragraph (i)
above, together with copies of such other financing statements (none of
which shall cover the Collateral purported to be covered by the Borrower
Security Agreement except to the extent any such financing statement
relates to a Lien permitted under Section 7.1);
(iii) all Instruments (as defined in, and to the extent
required to be pledged under, the Borrower Security Agreement),
including notes evidencing loans made by the Borrower to any of its
employees under the Executive Loan Program, together with assignments
thereof in blank; and
(iv) evidence that the insurance required by the terms
of the Collateral Documents and by Section 6.4 is in full force and
effect.
(h) Each Subsidiary Security Agreement, duly executed by
Intergraph Canada, together with:
(i) acknowledgment copies of proper Financing
Statements (Form UCC-1) or equivalent forms, duly filed under the
Uniform Commercial Code, personal property security legislation or
similar legislation of all other jurisdictions as may be necessary or,
in the opinion of the Agent, desirable to perfect the Lien created by
such Subsidiary Security Agreement; and
(ii) certified copies of Requests for Information or
Copies (Form UCC-11), or equivalent reports, listing all effective
financing statements which name any Guarantor (under its present name
or any previous name of such Guarantor during the past five years) as
of the date of such Requests for Information or Copies as debtor which
are filed in the jurisdictions referred to in said paragraph (i) above,
together with copies of such other financing statements (none of which
shall cover the Collateral purported to be covered by such Subsidiary
Security Agreement except to the extent any such financing statement
relates to a Lien permitted under Section 7.1); and
(iii) evidence that the insurance required by the terms
of the Collateral Documents and by Section 6.4 is in full
force and effect.
(i) The Borrower Intellectual Property Security Agreement,
duly executed by the Borrower, together with such documents for recording
and filing under the Uniform Commercial Code of all jurisdictions as may be
necessary or, in the opinion of the Agent, desirable to perfect the Lien
created by such Borrower Intellectual Property Security Agreement and all
relevant federal United States intellectual property statutes, including,
without limitation, recordings and filings with the United States Patent and
Trademark Office, by the Borrower and at its expense, as may be necessary or,
in the opinion of the Agent, desirable to perfect and protect the Lien
created by such Borrower Intellectual Property Security Agreement.
(j) Duly executed and acknowledged Mortgages for each parcel of
the Borrower's real property specified on Schedule 3.1(j), together with:
(i) title insurance policies (the "Title Insurance
Policies") issued by a title company acceptable to the Agent, in such
form and amounts as are acceptable to the Agent, insuring that each
such Mortgage is a valid first priority Lien on the real property
covered thereby, subject only to such exceptions to title as shall be
reasonably acceptable to the Agent and containing such endorsements and
affirmative insurance as the Agent may reasonably require and as are
obtainable in the applicable jurisdiction, and true copies of each
document, instrument or certificate required by the terms of each such
policy and/or Mortgage to be, or have been, filed, recorded, executed
or delivered in connection therewith;
(ii) duly executed Financing Statements (Form UCC-1) in
appropriate form for filing under the applicable Uniform Commercial Code
to be filed in connection with such Mortgages, in form and substance
satisfactory to the Agent, to perfect the Lien created by the applicable
Mortgages;
(iii) duly executed and acknowledged Landlord Waivers
and Consents from all landlords of property on which any Inventory is
located as set forth on Schedule 6.20 but only to the extent the
Borrower has obtained such Landlord Waivers and Consents using its best
efforts as provided in Section 6.20;
(iv) current ALTA surveys and surveyor's certification
as to all real property covered by a Mortgage, or as may be reasonably
required by the Agent, each in form and substance reasonably
satisfactory to the Agent;
(v) proof of payment of all title insurance premiums
and, if not included in such title insurance premiums, payment to the
title company of all documentary, stamp or intangible taxes, recording
fees and mortgage taxes
payable in connection with the recording of any of the
Loan Documents or the issuance of the Title Insurance
Policies; and
(vi) certificates of insurance evidencing the coverages
required under the Mortgages.
(k) Each Lockbox Agreement, duly executed by the Borrower and
the Lockbox Banks referred to therein, together with evidence that all action
necessary or, in the reasonable opinion of the Agent, desirable to perfect
the Lien created thereby has been taken.
(l) A favorable opinion of (i) Balch & Bingham, special Alabama
counsel to the Loan Parties, (ii) Sullivan & Worcester, special Massachusetts
counsel to the Loan Parties, (iii) Shaw, Pittman, Potts & Trowbridge, special
Virginia counsel to the Loan Parties, (iv) Blake, Cassels & Graydon, special
Alberta counsel to Intergraph Canada, (v) Lavery de Billy, special Quebec
counsel to Intergraph Canada, (vi) Maynard, Cooper & Gale, P.C., special
Alabama counsel to the Agent and (vii) B. Judson Hennington III, counsel to
the Covered Intergraph Entities (as defined in such opinion), in
substantially the form of Exhibits I-1, I-2, I-3, I-4, I-5, I-6 and I-7,
respectively, and as to such other matters as any Lender through the Agent
may reasonably request.
(m) Appraisals of the Borrower's real property from Jackson-
Cross Company and other assets of the Borrower from AccuVal Associates,
Incorporated, in each case, in form and substance satisfactory to the Agent.
(n) A Borrowing Base Certificate, executed by the Borrower,
dated as of August 15, 1995.
(o) The Solvency Letter.
(p) A certificate of the chief financial officer of the
Borrower, stating that the Borrower is, and on a consolidated basis, the
Borrower and its Subsidiaries are, Solvent after giving effect to the
initial Revolving Credit Loans, the application of the proceeds thereof in
accordance with Section 6.10 and the payment of all expenses related hereto
and thereto.
(q) A copy of a letter to the Borrower's independent public
accountants from the Borrower (i) expressly acknowledging that it is the
Borrower's primary intent that (x) the Lenders shall benefit from and be
influenced by such accountant's professional services and (y) the Lenders
shall rely on the reports and other financial information delivered by such
accountants in connection with the extension of credit from time to time
under this Agreement and in connection with the preparation, review,
execution, delivery, amendment, modification, administration, collection
and/or enforcement of this Agreement or any of the other Loan Documents and
(ii) containing such other assurances as shall be requested by the Lenders.
(r) Notices of assignment forms for all Government Contracts
(other than those Government Contracts with state Governmental Authorities
or which are classified) where the transaction represented thereby is in
excess of $1,000,000, together with a certificate signed by a Responsible
Officer of each of the Borrower and Intergraph Canada stating that all such
required assignment forms have been delivered to the Agent.
(s) A certificate, signed by a Responsible Officer of the
Borrower, stating that each of the conditions specified in Sections 3.2(a)
and (b) and 3.3(a) and (b) has been satisfied or will be satisfied
simultaneously with the making of the initial Revolving Credit Loans on the
Closing Date.
(t) The Fee Letter referred to in Section 2.3(b).
(u) A letter from the Borrower to the Agent as to the
matters set forth in Section 7.5(c)(vi), in form and substance satisfactory
to the Agent.
(v) Such additional documents, information and materials as any
Lender, through the Agent, may reasonably request.
3.2. Additional Conditions Precedent to Initial Revolving
Credit Loans and Letters of Credit. The obligation of each Lender to make
its initial Revolving Credit Loan and of each Issuer to issue its initial
Letter of Credit is subject to the further conditions precedent that:
(a) On the Closing Date, the following statements shall be
true, and the Lenders shall have received a certificate of a Responsible
Officer of the Borrower as evidence thereof:
(i) There has been no material change since December
31, 1994 in the corporate, capital or legal structure of the
Borrower or any of the Guarantors, without the consent of the
Lenders and the Agent, other than as disclosed in any publicly
available documents filed by the Borrower with the SEC;
(ii) All necessary governmental and third party
approvals required to be obtained by the Borrower or any other Loan
Party in connection with the Loan Documents and the financing
contemplated thereby have been obtained and remain in effect;
(iii) There exists no judgment, order, injunction or
other restraint prohibiting the Borrower from obtaining the
financing contemplated by the Loan Documents;
(iv) The sum of the principal amount of initial
Revolving Credit Loans and the face amount of initial Letters of
Credit issued hereunder do not exceed $50,000,000 in the aggregate;
(v) After giving effect to the initial Revolving
Credit Loans and the application of the proceeds therefrom,
the Borrower shall have no trade payables owing by it to any vendor
outstanding and due more than the number of days customarily
permitted by such vendor to remain outstanding other than those
being contested in good faith by appropriate actions and/or
proceedings; and
(vi) The Borrowing Base exceeds the sum of the
principal amount of the initial Revolving Credit Loans and the face
amount of the initial Letters of Credit issued hereunder by an
amount not less than $50,000,000.
(b) All costs and accrued and unpaid fees and expenses
(including, without limitation, legal fees and expenses) required to be paid
to the Lenders and the Agent and its Affiliates in connection with the
financing contemplated hereby on or before the Closing Date, including,
without limitation, those referred to in Sections 2.3, 2.14 and 10.4, to the
extent then due and payable and, as to Section 10.4, invoiced, shall have
been paid.
(c) The Borrower shall have retained an environmental
consultant, acceptable to the Agent in its reasonable judgment, who shall
have prepared a written report or reports of an investigation addressing any
significant environmental, health and safety violations, hazards or
liabilities to which the Borrower or any of its Subsidiaries may be subject,
which reports shall include, at a minimum, a Phase I report (the
"Environmental Reports"), which Environmental Reports shall demonstrate, to
the satisfaction of the Agent, in its reasonable judgment, that the
Borrower and its Subsidiaries and their operations are and have been in
compliance in all material respects with all applicable Environmental Laws
and are not subject to any material Environmental Liabilities and Costs.
3.3. Conditions Precedent to Each Revolving Credit Loan
and Letter of Credit. The obligation of each Lender to make any Revolving
Credit Loan (including the Revolving Credit Loan being made by such Lender
on the Closing Date) and of each Issuer to issue any Letter of Credit shall
be subject to the further conditions precedent that:
(a) The following statements shall be true on the date of such
Revolving Credit Loan or issuance, before and after giving effect thereto
and to the application of the proceeds therefrom and to such issuance (and
the acceptance by the Borrower of the proceeds of such Revolving Credit Loan
or such Letter of Credit shall constitute a representation and warranty by
the Borrower that on the date of such Revolving Credit Loan or issuance such
statements are true):
(i) The representations and warranties of the
Borrower contained in Article IV and of each Loan Party in the other
Loan Documents are correct on and as of such date as though made on and
as of such date; and
(ii) No Default or Event of Default will result from
any Revolving Credit Loan being made or Letter of Credit being issued
on such date.
(b) The making of the Revolving Credit Loans or the issuance of
such Letter of Credit on such date does not violate any Requirement of Law
and is not enjoined, temporarily, preliminarily or permanently.
(c) The Agent shall have received such additional documents,
information and materials as any Lender or any Issuer, through the Agent, may
reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
To induce the Lenders, the Issuers and the Agent to enter into
this Agreement, the Lenders to make the Revolving Credit Loans and the
Issuers to issue the Letters of Credit, the Borrower represents and warrants
to the Lenders, the Issuers and the Agent that:
4.1. Corporate Existence; Compliance with Law. The
Borrower and each of its Subsidiaries (a) is a corporation or other type of
Person duly incorporated or otherwise duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation or
organization, (b) is duly qualified as a foreign corporation or other Person
and in good standing under the laws of each jurisdiction where such
qualification is necessary, except for failures that, in the aggregate,
would have no Material Adverse Effect, (c) has all requisite corporate or
other comparable power and authority and the legal right to own, pledge,
mortgage and operate its properties, to lease the property it operates under
lease and to conduct its business as now or currently proposed to be
conducted, (d) is in compliance with its certificate of incorporation and
by-laws or other comparable governing documents, (e) is in compliance with
all other applicable Requirements of Law except for such non-compliances
that, in the aggregate, would have no Material Adverse Effect, and (f) has
all necessary licenses, permits, consents or approvals from or by, has made
all necessary filings with, and has given all necessary notices to, each
Governmental Authority having jurisdiction, to the extent required for such
ownership, operation and conduct, except for licenses, permits, consents,
approvals or filings which can be obtained or made by the taking of
ministerial action to secure the grant or transfer thereof and such failures
that, in the aggregate, would have no Material Adverse Effect.
4.2. Corporate Power; Authorization; Enforceable
Obligations. (a) The execution, delivery and performance by each Loan
Party of the Loan Documents to which it is a party and the consummation of
the financing contemplated thereby:
(i) are within such Loan Party's corporate or other
comparable powers;
(ii) have been duly authorized by all necessary
corporate or other comparable action, including, without
limitation, the consent of stockholders where required;
(iii) do not and will not (A) contravene any Loan
Party's certificate of incorporation or by-laws or other comparable
governing documents, (B) violate any other applicable Requirement of
Law applicable to any Loan Party (including, without limitation,
Regulations G, T, U and X of the Board of Governors of the Federal
Reserve System), or any order or decree of any Governmental Authority or
arbitrator applicable to any Loan Party, (C) conflict with or result
in the breach of, or constitute a default under, or result in or permit
the termination or acceleration of, any Contractual Obligation of any
Loan Party, or (D) result in the creation or imposition of any Lien
upon any of the property of any Loan Party, other than those in favor
of the Secured Parties pursuant to the Collateral Documents and other
Liens permitted hereby; and
(iv) do not require the consent of, authorization by,
approval of, notice to, or filing or registration with, any
Governmental Authority or any other Person, other than (A) periodic
disclosures and other required filings with the SEC, (B) those which
have been obtained or made and copies of which have been or will be
delivered to the Agent pursuant to Section 3.1, and each of which on the
Closing Date will be in full force and effect and (C) with respect to
the Collateral, filings required to perfect the Liens created by the
Collateral Documents which have been delivered to the Agent.
(b) This Agreement has been, and each of the other Loan
Documents will have been upon delivery thereof pursuant to Section 3.1, duly
executed and delivered by each Loan Party party thereto. This Agreement is,
and the other Loan Documents will be when delivered hereunder, the legal,
valid and binding obligation of each Loan Party party thereto, enforceable
against such Loan Party in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally and by general principles of equity, including principles
of commercial reasonableness, good faith and fair dealing (regardless of
whether enforcement is sought in equity or at law).
4.3. Taxes. (a) All federal, state, local and foreign
tax returns, reports and statements (collectively, the "Tax Returns")
required to be filed by the Borrower or any of its Tax Affiliates have been
filed with the appropriate governmental agencies in all jurisdictions in
which such Tax Returns are required to be filed, all such Tax Returns are
true and correct in all material respects, and all taxes, charges and other
impositions reflected therein or otherwise due and payable have been paid
prior to the date on which any fine, penalty, interest, late charge or loss
may be added thereto for non-payment thereof, except for any failures to
file or make payment that in the aggregate are adequately reserved for on
the books of the Borrower or such Tax Affiliate in conformity with GAAP.
Proper and accurate amounts have been withheld by the Borrower and each of
its Tax Affiliates from their respective employees for all periods in full
and complete compliance with the tax, social security and unemployment
withholding provisions of applicable federal, state, local and foreign law
and such withholdings have been timely paid to the respective Governmental
Authorities.
(b) None of the Borrower or any of its Subsidiaries has any
obligation under any tax sharing agreement with or to any entity other than,
in the case of the Borrower's Subsidiaries, the Borrower.
4.4. Full Disclosure. All written statements prepared or
furnished by or on behalf of the Borrower or any of its Affiliates in
connection with any of the Loan Documents or the consummation of the
financing contemplated thereby and all financial statements delivered pursuant
hereto or thereto were prepared by the Borrower or such Affiliate in good
faith with a reasonable basis therefor, and all such statements (other than
projections and forecasts), taken as a whole, do not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements contained herein or therein not misleading as of the
respective dates when furnished and in light of the circumstances existing
when made. As of the Closing Date, to the best knowledge of the Borrower,
all facts known to the Borrower which are material to an understanding of
the financial condition, business, properties or prospects of the Borrower
and its Subsidiaries taken as one enterprise have been disclosed to the
Lenders.
4.5. Financial Matters. (a) The consolidated balance
sheet of the Borrower and its Subsidiaries as at December 31, 1994, and the
related consolidated statements of income, retained earnings and cash flows
of the Borrower and its Subsidiaries for the fiscal year then ended,
certified by Ernst & Young LLP, and the consolidated balance sheet of the
Borrower and its Subsidiaries as at June 30, 1995, and the related
consolidated statements of income, retained earnings and cash flows of the
Borrower and its Subsidiaries for the three months then ended, certified by
the chief financial officer of the Borrower, copies of which have been
furnished to each Lender, fairly present the consolidated financial condition
of the Borrower and its Subsidiaries as at such dates and the consolidated
results of the operations of the Borrower and its Subsidiaries for the period
ended on such dates, all in conformity with GAAP.
(b) Except as previously disclosed to the Lenders in the
Borrower's quarterly reports on Form 10Q filed for the Fiscal Quarters ended
March 31, 1995 and June 30, 1995, since December 31, 1994, there has been no
Material Adverse Change and there have been no events or developments that,
in the aggregate, have had a Material Adverse Effect.
(c) Neither the Borrower nor any of its Subsidiaries had at
December 31, 1994 any material obligation, contingent liability or liability
for taxes, long-term leases or unusual forward or long-term commitment which
is not reflected in the balance sheet at such date referred to in Section
4.5(a) or in the notes thereto.
(d) The Borrower is, and on a consolidated basis the Borrower
and its Subsidiaries are, Solvent.
4.6. Litigation. Except as set forth on Schedule 4.6,
there are no pending or, to the knowledge of the Borrower, threatened
actions, investigations or proceedings affecting the Borrower or any of its
Subsidiaries before any court, Goverrmental Authority or arbitrator, other
than those that, in the aggregate, could reasonably be expected to have no
Material Adverse Effect. The performance of any action by any Loan Party
required or contemplated by any of the Loan Documents is not restrained or
enjoined (either temporarily, preliminarily or permanently), and no material
adverse condition has been imposed by any Governmental Authority or
arbitrator upon the financing contemplated hereby.
4.7. Margin Regulations. The Borrower is not engaged in
the business of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulation U issued by the Board of
Governors of the Federal Reserve System), and no proceeds of any Revolving
Credit Borrowing will be used to purchase or carry any margin stock or to
extend credit to others for the purpose of purchasing or carrying any margin
stock.
4.8. Subsidiaries. Set forth on Schedule 4.8 is a
complete and accurate list showing all Subsidiaries of the Borrower as of
the date hereof and, as to each such Subsidiary, the jurisdiction of its
incorporation and the percentage of the outstanding shares owned (directly or
indirectly) by the Borrower. No Stock of any Subsidiary of the Borrower is
subject to any outstanding option, warrant, right of conversion or purchase
or any similar right. All of the outstanding capital Stock of each
Subsidiary of the Borrower has been validly issued, is fully paid and
nonassessable and except as set forth on Schedule 4.8, is owned by the
Borrower or a Subsidiary of the Borrower, free and clear of all Liens (other
than the Liens in favor of the Secured Parties created pursuant to the
Collateral Documents). Except as set forth on Schedule 4.8, none of the
Borrower or any of its Subsidiaries is a party to, or has knowledge of, any
agreement restricting the transfer or hypothecation of any shares of Stock
of any such Subsidiary, other than the Loan Documents. The Borrower does
not own or hold, directly or indirectly, any capital Stock or equity security
of, or any equity interest in, any Person other than the Subsidiaries and
Investments permitted pursuant to Section 7.6.
4.9. ERISA. (a) Each Qualified Plan has been determined
by the IRS to qualify under Section 401 of the Code, and the trusts created
thereunder have been determined to be exempt from tax under the provisions of
Section 501 of the Code, except where all such failures to be qualified or
exempt, as the case may be, in the aggregate, have no Material Adverse
Effect.
(b) There has been no, nor is there reasonably expected to
occur, any ERISA Event which has Material Adverse Effect.
4.10. Liens. There are no Liens of any nature whatsoever on
any properties of the Borrower or any of its Subsidiaries other than those
permitted by Section 7.1. The Liens granted by the Loan Parties to the
Agent pursuant to the Collateral Documents are (subject only to the due
filing with the appropriate Governmental Authorities of the financing
statements and other documents delivered pursuant to Sections 3.1(g)(i),
(h)(i) and (i), the Mortgages and the financing statements delivered pursuant
to Section 3.1(j)(ii)) fully perfected first priority Liens in and to the
Collateral.
4.11. No Burdensome Restrictions; No Defaults. (a) None of
the Borrower or any of its Subsidiaries (i) is a party to any Contractual
Obligation the compliance with which would have a Material Adverse Effect or
the performance of which by any thereof, either unconditionally or upon the
happening of an event, will result in the creation of a Lien (other than a
Lien granted pursuant to a Loan Document or otherwise permitted hereby) on
the property or assets of any thereof or (ii) is subject to any charter or
corporate restriction which would have a Material Adverse Effect.
(b) Neither the Borrower nor any of its Subsidiaries is in
default under or with respect to any Contractual Obligation owed by it and,
to the knowledge of the Borrower, no other party is in default under or with
respect to any Contractual Obligation owed to the Borrower or to any of its
Subsidiaries, other than, in either such case, those defaults which, in the
aggregate, would have no Material Adverse Effect.
(c) No Default or Event of Default has occurred and is continuing.
(d) To the best knowledge of the Borrower, there is no
Requirement of Law applicable to the Borrower or any of its Subsidiaries,
the compliance with which by the Borrower or any of its Subsidiaries would
have a Material Adverse Effect.
(e) No Subsidiary of the Borrower is subject to any Contractual
Obligation restricting or limiting its ability to declare or make any
dividend payment or other distribution on account of any shares of any class
of its Stock or its ability to purchase, redeem, or otherwise acquire for
value or make any payment in respect of any such shares or any shareholder
rights except pursuant to any Loan Document.
4.12. No Other Ventures. Neither the Borrower nor any of
its Subsidiaries is engaged in any partnership or other joint venture with
any other Person other than those permitted by Section 7.6 and those
Strategic Alliances entered into in the ordinary course of business
consistent with past practice.
4.13. Investment Company Act; Public Utility Holding Company
Act. (a) Neither the Borrower nor any of its Subsidiaries is an "investment
company," or "promoter" or "principal underwriter" for, an "investment
company," as such terms are defined in the Investment Company Act of 1940,
as amended. The making of the Revolving Credit Loans by the Lenders, the
application of the proceeds and repayment thereof by the Borrower and the
consummation of the financing contemplated by the Loan Documents will not
result in a violation by the Borrower or any of its Subsidiaries of any
provision of such Act or any rule, regulation or order issued by the
Securities and Exchange Commission thereunder.
(b) Neither the Borrower nor any of its Subsidiaries is a
"holding company" or an "affiliate" of a "holding company" or a "subsidiary
company," of a "holding company," within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
4.14. Insurance. All policies of insurance of any kind or
nature of the Borrower or any of its Subsidiaries, including, without
limitation, policies of life, fire, theft, product liability, public
liability, property damage, other casualty, employee fidelity, workers'
compensation and employee health and welfare insurance but excluding
directors and officers liability insurance policies, are in full force and
effect and are of a nature and provide such coverage as is sufficient and
customarily carried by companies of the size and character of such Person.
None of the Borrower or any of its Subsidiaries has been refused insurance
for any material coverage for which it had applied or had any policy of
insurance for any material coverage terminated (other than at its request).
4.15. Labor Matters. (a) There are no strikes, work
stoppages, slowdowns or lockouts pending or threatened against or involving
the Borrower or any of its Subsidiaries, other than those which, in the
aggregate, would have no Material Adverse Effect.
(b) There are no unfair labor practices charges, grievances or
complaints pending or, to the knowledge of the Borrower, threatened against
or involving the Borrower or any of its Subsidiaries, other than those
which, in the aggregate, would have no Material Adverse Effect.
4.16. Force Majeure. Neither the business nor the properties
of the Borrower or any of its Subsidiaries are currently suffering from the
effects of any fire, explosion, accident, drought, storm, hail, earthquake,
embargo, act of God or of the public enemy or other casualty (whether or
not covered by insurance), other than those which in the aggregate would
have no Material Adverse Effect.
4.17. Use of Proceeds. The proceeds of the Revolving Credit
Loans and the Letters of Credit are being used by the Borrower for working
capital purposes or, in the case of any Letter of Credit for which a
Designated Subsidiary is required hereunder to be a co-applicant, solely for
the purpose of providing credit support for the indebtedness of such
Designated Subsidiary, or in the case of any Letter of Credit for which a
Subsidiary of the Borrower is required to be a co-applicant, for general
corporate purposes of such Subsidiary.
4.18. Environmental Matters. (a) There are no conditions
or circumstances associated with the currently or previously owned or leased
properties or currently or previously conducted operations of the Borrower or
any of its Subsidiaries other than those as, in the aggregate, would have no
Material Adverse Effect.
(b) The operations of the Borrower and its Subsidiaries and
tenants comply with all applicable Environmental Laws other than such
non-compliances that in the aggregate are not reasonably likely to result
in Environmental Liabilities and Costs in excess of $5,000,000.
(c) The Borrower and its Subsidiaries have obtained all Permits
required under Environmental Laws necessary for their respective operations,
and all such Permits are in good standing, and the Borrower and each of its
Subsidiaries are in compliance with the terms and conditions of such
Permits, other than for such failures and non-compliances as, in the
aggregate, have no Material Adverse Effect.
(d) Neither the Borrower nor any of its Subsidiaries is, and
none of their respective currently or, to the best knowledge of the Borrower,
previously owned or leased property or operations is, subject to any
threatened order from or agreement with any Governmental Authority or other
Person or any judicial or administrative proceeding respecting any
Environmental Law, Remedial Action, Release or threatened Release, other
than those that in the aggregate are not reasonably likely to result in
Environmental Costs and Liabilities in excess of $5,000,000.
(e) Neither the Borrower nor any of its Subsidiaries is a
treatment, storage or disposal facility requiring a permit under RCRA, the
regulations thereunder or any state analog.
(f) Except as set forth on Schedule 4.18, there is not now nor,
to the best knowledge of the Borrower, has there been in the past on or in
the property owned, leased or operated by the Borrower or any of its
Subsidiaries any underground storage tanks or surface impoundments,
asbestos containing materials or polychlorinated biphenyls used in electrical
or other equipment.
(g) Neither the Borrower nor any of its Subsidiaries has filed
or failed to file any notice required under any applicable Environmental Law
reporting a Release other than notices of Releases occurring in compliance
with a Permit issued pursuant to any Environmental Law.
(h) No Environmental Lien has attached to any property of the
Borrower or any of its Subsidiaries.
4.19. Intellectual Property. (a) To the best knowledge of
the Borrower, the operation of neither the Borrower's nor any Subsidiary's
business, as currently operated or contemplated to be operated, including
without limitation, the manufacture, use, copying, distribution, sale, or
import of any, device, product, service, process, method, substance, part or
component, or any of their respective advertising, packaging, marketing or
promotional activities, infringes or violates the intellectual property
rights (including, without limitation, patent, copyright, trademark or trade
secret rights) of any other Person.
(b) To the best knowledge of the Borrower, the Borrower and its
Subsidiaries have all necessary and material licenses, permits, and
authorizations, including without limitation, any patent, trademarks,
copyright, trade secret or other intellectual property licenses, permitting
or authorizing each of them to operate their respective businesses as
currently operated or contemplated to be operated, and neither the Borrower
nor any of its Subsidiaries is in default, or has breached such licenses,
permits or authorization.
(c) Except as set forth in Schedule 4.19, no Person has
threatened to commence, or has otherwise notified Borrower, and no action
is pending in which it is claimed, that Borrower or any of its Subsidiaries
infringes the intellectual property rights, including, without limitation,
patent, copyright, trademark or trade secret rights, of any other Person,
other than those, that in the aggregate, could reasonably be expected to have
no Material Adverse Effect.
(d) No Subsidiary of the Borrower owns any significant
intellectual property, including, without limitation, any patent, trademarks,
copyrights, trade secrets or other intellectual property licenses.
4.20. Title. (a) The Borrower and its Subsidiaries own good,
indefeasible and marketable title to, or valid leasehold interests in, all
real properties and good and indefeasible title to, all personal properties
and assets purported to be owned by the Borrower or any of its Subsidiaries
including, without limitation, those reflected on the Borrower's most recent
financial statements delivered pursuant to this Agreement and not disposed of
as permitted hereunder, and none of such properties and assets is subject to
any Lien, except Liens granted to the Secured Parties pursuant to the Loan
Documents or otherwise permitted hereunder. The Borrower and its
Subsidiaries have received all deeds, assignments, waivers, consents,
non-disturbance and recognition or similar agreements, bills of sale and
other documents, and have duly effected all recordings, filings and other
actions necessary to establish, protect and perfect the Borrower's and its
Subsidiaries' right, title and interest in and to all such property.
(b) All Permits required to have been issued or appropriate to
enable all real property owned or leased by the Borrower or any of its
Subsidiaries to be lawfully occupied and used for all of the purposes for
which they are currently occupied and used have been lawfully issued and are
in full force and effect, other than those, which in the aggregate, would
have no Material Adverse Effect.
(c) Neither the Borrower nor any of its Subsidiaries has
received any notice, or has anyknowledge, of any pending, threatened or
contemplated condemnation proceeding affecting any real property owned or
leased by the Borrower or any of its Subsidiaries or any part thereof except
those which, in the aggregate, would have no Material Adverse Effect.
(d) No portion of any real property owned or leased by the
Borrower or any of its Subsidiaries has suffered any material damage by fire
or other casualty loss which has not heretofore been completely repaired and
restored to its original condition.
4.21. Restricted Payments. Since December 31, 1994,except
as permitted by Section 7.4, the Borrower has not (a) declared or made any
dividend payment or other distribution of assets, properties, cash, rights,
obligations or securities on account of any shares of any class of its Stock
or Stock Equivalents, or (b) purchased, redeemed, or otherwise acquired for
value or made any payment in respect of any of its Stock or Stock Equivalents.
4.22. SEC Documents. The Borrower and its Subsidiaries have
filed all required documents with the SEC since December 31, 1994 (the "SEC
Documents"). As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Securities Act of 1933, as
amended, or the Exchange Act, as the case may be, and none of the SEC Documents
contained any untrue statement of a material fact or omitted to state a
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. As of their respective dates, the financial statements of
the Borrower and its Subsidiaries included in the SEC Documents complied as
to form in all material respects with then applicable accounting requirements
and published rules and regulations of the SEC with respect thereto, have
been prepared in conformity with GAAP and fairly presented the financial
condition of the Borrower and its Subsidiaries on a consolidated basis as at
the dates thereof and the results of operations and cash flows for the
periods then ended.
ARTICLE V
FINANCIAL COVENANTS
As long as any Obligation, Letter of Credit or Revolving
Credit Commitment remains outstanding, unless the Majority Lenders otherwise
consent in writing, the Borrower agrees with the Lenders, the Issuers and the
Agent that:
5.1. Fixed Charge Coverage Ratio. The Borrower shall maintain
for each computation period set forth below a Fixed Charge Coverage Ratio
not less than the minimum set forth below for such computation period, with
each computation period being the four consecutive Fiscal Quarters ending on
the date set forth below (except that, with respect to March 31, 1996, the
determination shall be on the basis of the three consecutive Fiscal Quarters
ending on March31, 1996):
For the Computation Minimum Fixed
Period Ending On Charge Coverage Ratio
March 31, 1996 .1 : 1.0
June 30, 1996 .2 : 1.0
September 30, 1996 1.0 : 1.0
December 31, 1996 1.0 : 1.0
March 31, 1997 1.0 : 1.0
June 30, 1997 1.4 : 1.0
September 30, 1997 1.8 : 1.0
December 31, 1997 2.0 : 1.0
and thereafter
5.2. Interest Coverage Ratio. The Borrower shall maintain for
each computation period set forth below an Interest Coverage Ratio not less
than the minimum set forth below for such computation period, with each
computation period being the four consecutive Fiscal Quarters ending on the
date set forth below (except that, with respect to March 31, 1996, the
determination shall be on the basis of the three consecutive Fiscal Quarters
ending on March 31, 1996):
For the Computation Minimum Interest
Period Ending On Coverage Ratio
March 31, 1996 7.0 : 1.0
June 30, 1996 7.0 : 1.0
September 30, 1996 10.0 : 1.0
December 31, 1996 12.0 : 1.0
March 31, 1997 12.0 : 1.0
June 30, 1997 14.0 : 1.0
September 30, 1997 15.0 : 1.0
and thereafter
5.3. Maintenance of Net Worth. The Borrower shall at all times
maintain during each Fiscal Quarter set forth below a Net Worth of not less
than the minimum amount set forth below for such Fiscal Quarter:
For the Fiscal Quarter Minimum
Ending On Net Worth
September 30, 1995 $450,000,000
December 31, 1995 $460,000,000
March 31, 1996 $460,000,000
June 30, 1996 $460,000,000
September 30, 1996 $470,000,000
December 31, 1996 $480,000,000
March 31, 1997 $490,000,000
June 30, 1997 $500,000,000
September 30, 1997 $510,000,000
December 31, 1997 $530,000,000
March 31, 1998 $540,000,000
June 30, 1998 $550,000,000
5.4. Capital Expenditures, Etc. The Borrower shall not permit
the sum of Capital Expenditures and Capitalized Software Development Costs to
exceed the amount set forth below for the period set forth below:
Period Maximum Amount
Three months ending $18,000,000
September 30, 1995
Six months ending The lesser of (x) 100% of
December 31, 1995 EBITDA of the Borrower for
such six month period
and (y) $40,000,000
Nine months ending The lesser of (x) 100% of
March 31, 1996 the EBITDA of the Borrower
for such nine month
period and (x)
$60,000,000
Twelve months ending The lesser of (x) 100% of
June 30, 1996 EBITDA of the Borrower for
such twelve month period
and (y) $80,000,000
Twelve months ending on The lesser of (x) 80% of
each of September 30, 1996 EBITDA of the Borrower for
and December 31, 1996 such twelve month period
and (y) $84,000,000
Twelve months ending on The lesser of (x) 80% of
each of March 31, 1997, EBITDA of the Borrower for
June 30, 1997, such twelve month period
September 30, 1997, and (y) $88,000,000
December 31, 1997,
March 30, 1998 and
June 30, 1998
ARTICLE VI
AFFIRMATIVE COVENANTS
As long as any Obligation, Letter of Credit or
Revolving Credit Commitment remains outstanding, unless the Majority Lenders
otherwise consent in writing, the Borrower agrees with the Lenders, the
Issuers and the Agent that:
6.1. Compliance with Laws, Etc. The Borrower shall, and
shall cause each of its Subsidiaries to, comply in all material respects with
all applicable Requirements of Law, Contractual Obligations and Permits;
provided, however, that the Borrower shall not be deemed in default of this
Section 6.1 if all such non-compliances, in the aggregate, would have no
Material Adverse Effect.
6.2. Conduct of Business. The Borrower shall (a) conduct,
and shall cause each of its Subsidiaries to conduct, its business in the
ordinary course, (b) use, and cause each of its Subsidiaries to use, its
reasonable efforts, in the ordinary course and consistent with past practice,
to preserve its business and the goodwill and business of the customers,
advertisers, suppliers and others having business relations with the
Borrower or any of its Subsidiaries, (c) preserve, and cause each of its
Subsidiaries to preserve, all registered patents, trademarks, trade names,
copyrights and service marks with respect to its business, and (d) perform
and observe, and cause each of its Subsidiaries to perform and observe, all
the terms, covenants and conditions required to be performed and observed
by it under its Contractual Obligations (including to pay all rent and other
charges payable under any lease and all debts and other obligations as the
same become due), and do, and cause its Subsidiaries to do, all things
necessary to preserve and to keep unimpaired its rights under such
Contractual Obligations; provided, however, that, in the case of each of
clauses (a) through (d), the Borrower shall not be deemed in default of this
Section 6.2 if all such failures in the aggregate would have no Material
Adverse Effect.
6.3. Payment of Taxes, Etc. The Borrower shall pay and
discharge, and shall cause each of its Subsidiaries to pay and discharge,
before the same shall become delinquent, all lawful governmental claims,
taxes,assessments, charges and levies, except where contested in good faith,
by proper proceedings and if adequate reserves therefor have been established
on the books of the Borrower or the appropriate Subsidiary in conformity
with GAAP.
6.4. Maintenance of Insurance. The Borrower shall
maintain, and shall cause to be maintained for each of its Subsidiaries,
insurance with responsible and reputable insurance companies or associations
in such amounts and covering such risks as is usually carried by companies
engaged in similar businesses and owning similar properties in the same
general areas in which the Borrower or such Subsidiary operates and such
other insurance as may be reasonably requested by the Majority Lenders and,
in any event, all insurance required by any Collateral Document, other than
directors and officers liability insurance. All such general liability
insurance shall name the Agent, on behalf and for the ratable benefit of the
Secured Parties, as additional insureds, and all such property insurance
shall name the Agent, on behalf and for the ratable benefit of the Secured
Parties, as loss payee, as the Agent shall determine. The Borrower will
furnish to the Agent from time to time such information as may be reasonably
requested by any Lender through the Agent as to such insurance.
6.5. Preservation of Corporate Existence, Etc. The Borrower
shall preserve and maintain, and shall cause each of its Subsidiaries to
preserve and maintain, its corporate (or other comparable) existence, rights
(charter and statutory) and franchises, except as permitted by Section 7.5.
6.6. Access. The Borrower shall, from time to time at any
reasonable time, permit the Agent and the Lenders or any of their respective
agents or representatives within two Business Days after written notice
thereof (except that during a continuance of a Default or Event of Default,
no such prior notice shall be necessary), to (a) examine and make copies of
and abstracts from the records and books of account of the Borrower and each
of its subsidiaries, (b) visit the properties of the Borrower and each of its
Subsidiaries, (c) discuss the affairs, finances and accounts of the Borrower
and each of its Subsidiaries with any of their respective officers or
directors, and (d) as long as a Responsible Officer of the Borrower has been
notified at least one Business Day in advance in respect thereof (except
that during a continuance of a Default or Event of Default, no such prior
notice shall be necessary) communicate directly with the Borrower's
independent certified public accountants and with the management consulting
firm referred to in Section 6.18 if still engaged. The Borrower shall
authorize its independent certified public accountants to disclose to the
Agent or any Lender any and all financial statements and other information
of any kind as the Agent or any Lender (through the Agent) reasonably
requests from the Borrower and which such accountants have with respect to
the business, financial condition, results of operations or other affairs of
the Borrower or any of its Subsidiaries.
6.7. Keeping of Books. The Borrower shall keep, and shall
cause each of its Subsidiaries to keep, proper books of record and account,
in which full and correct entries shall be made of all financial transactions
and the assets and business of the Borrower and each such Subsidiary.
6.8. Maintenance of Properties, Etc. The Borrower shall
maintain and preserve, and shall cause each Guarantor to maintain and
preserve, (a) all of its properties which are necessary in the conduct of its
business in good working order and condition, and (b) all rights, permits,
licenses, approvals and privileges (including, without limitation, all
Permits) which are necessary in the conduct of its business; provided,
however, that the Borrower shall not be deemed in default of this Section
6.8 if all such failures, in the aggregate, have no and would have no
Material Adverse Effect.
6.9. Performance and Compliance with Other Covenants.
The Borrower shall perform and comply with, and shall cause each of its
Subsidiaries to perform and comply with each Contractual Obligation to which
it or any of its Subsidiaries is a party; provided, however, that the
Borrower shall not be deemed in default of this Section 6.9 if all such
failures, in the aggregate, would have no Material Adverse Effect.
6.10. Application of Proceeds. The Borrower shall use the
entire amount of the proceeds of the Revolving Credit Loans as provided in
Section 4.17.
6.11. Financial Statements. The Borrower shall furnish to the
Agent for the benefit of the Lenders (with sufficient copies for each of the
Lenders):
(a) as soon as available and in any event within 45 days after
the end of each month, (i) unaudited consolidated balance sheets of the
Borrower and its Subsidiaries as of the end of such month and consolidated
statements of income, retained earnings and cash flows of the Borrower and
its Subsidiaries for such month and for the period from the beginning of
the Fiscal Year to the end of such month and for the comparable period from
the prior Fiscal Year, all prepared in conformity with GAAP except for (x)
the absence of footnotes thereto and (y) statements of cash flows for a
period ending at the end of a month which is not the end of a Fiscal Quarter,
which are prepared on management's basis, and certified by the chief
financial officer of the Borrower as fairly presenting the financial
condition and results of operations of the Borrower and its Subsidiaries at
such date and for such period, subject to normal year-end adjustments, and
(ii) unaudited consolidating (by geographic region) balance sheets of the
Borrower and its Subsidiaries as of the end of such month, consolidating (by
geographic region) statements of income and cash flows of the Borrower and
its Subsidiaries for such month and for the period from the beginning of the
Fiscal Year to the end of such month, and consolidating (by product line)
statements of income of the Borrower and its Subsidiaries for such month
and for the period from the beginning of the Fiscal Year to the end of such
month, all prepared on management's basis and showing the Borrower's actual
performance as compared to the Borrower's projected performance under the
Cost Reduction Plan, and in each of clauses (i) and (ii), together with (i)
a certificate of said officer stating that no Default or Event of Default
has occurred and is continuing or, if a Default or an Event of Default has
occurred and is continuing, a statement as to the nature thereof and the
action which the Borrower proposes to take with respect thereto, (ii) a
schedule in form satisfactory to the Agent of the computations used by the
Borrower in determining compliance with all financial covenants contained
herein, and (iii) a written discussion and analysis by the management of the
Borrower of all of the unaudited consolidated and consolidating (by
geographic region and by product line) financial statements furnished in
respect of such month;
(b) as soon as available and in any event within 90 days after
the end of each Fiscal Year, consolidated balance sheets of the Borrower and
its Subsidiaries as of the end of such year and consolidated statements of
income, retained earnings and cash flows of the Borrower and its Subsidiaries
for such Fiscal Year, all prepared in conformity with GAAP and certified, in
the case of such consolidated financial statements, without qualification as
to the scope of the audit or as to the Borrower being a going concern by
Ernst & Young LLP or any other independent public accountants of recognized
national standing acceptable to the Agent, together with (i) a certificate
of such accounting firm stating that in the course of the regular audit of
the business of the Borrower and its Subsidiaries, which audit was conducted
by such accounting firm in accordance with generally accepted auditing
standards, such accounting firm has obtained no knowledge that a Default or
Event of Default has occurred and is continuing, a statement as to the
nature thereof, (ii) a schedule in form satisfactory to the Agent of the
computations used by such accountants in determining, as of the end of such
Fiscal Year, the Borrower's compliance with all financial covenants contained
herein, and (iii) a written discussion and analysis by the management of the
Borrower of the consolidated financial statements furnished in respect of
such Fiscal Year;
(c) promptly after the same are received by the Borrower, a
copy of each management letter provided to the Borrower by its independent
certified public accountants which refers in whole or in part to any
inadequacy, defect, problem, qualification or other lack of full satisfactory
accounting controls utilized by the Borrower or any of its Subsidiaries; and
(d) as soon as available and in any event within 45 days after
the end of each month, financial information and other updates and
information reasonably satisfactory to the Agent concerning the Borrower's
actual performance as compared to the Borrower's projected performance under
the Cost Reduction Plan.
6.12. Reporting Requirements. The Borrower shall furnish to
the Agent for the benefit of the Lenders (with sufficient copies for each of
the Lenders):
(a) prior to any Asset Sale involving the sale or other
disposition of Collateral which is anticipated to generate in excess of
$1,000,000 in Asset Sales Proceeds, a notice (i) describing the assets being
sold or the nature and material terms and conditions of such transaction and
(ii) stating the estimated Asset Sales Proceeds anticipated to be received
by the Borrower or any of its Subsidiaries;
(b) as soon as available and in any event within the first 60
days of each Fiscal Year, in form and detail satisfactory to the Agent, an
annual budget, business and financial plan of the Borrower and its
Subsidiaries for such Fiscal Year and forecasts prepared by management of
the Borrower for such Fiscal Year, displaying on a monthly basis for such
Fiscal Year and for the two year period subsequent to such Fiscal Year,
financial statements consisting of balance sheets and statements of income
and cash flows, all on a consolidated and consolidating (by geographic
region) basis and statements of income on a consolidating (by product line)
basis;
(c) as soon as available and in any event within 14 days after
the 15th day and the last day of each month, a Borrowing Base Certificate
for each semi-monthly period, certified by the chief financial officer of the
Borrower as being true, accurate and complete based upon eligibility criteria
and reserves as set forth herein and as most recently communicated by the Agent
to the Borrower;
(d) (i) promptly and in any event within 30 days after the
Borrower, any of its Subsidiaries or any ERISA Affiliate knows or has reason
to know that any ERISA Event has occurred, and (ii) promptly and in any event
within 10 days after the Borrower, any of its Subsidiaries or any ERISA
Affiliate knows or has reason to know that a request for a minimum funding
waiver under Section 412 of the Code has been filed with respect to any
Qualified Plan, a written statement of the chief financial officer or other
appropriate officer of the Borrower describing such ERISA Event or waiver
request and the action, if any, which the Borrower, its Subsidiaries and
ERISA Affiliates propose to take with respect thereto and a copy of any
notice filed with the PBGC or the IRS pertaining thereto;
(e) promptly after the commencement thereof, notice of the
commencement of, or any material decision in, all actions, suits and
proceedings before any Governmental Authority or arbitrator, affecting the
Borrower or any of its Subsidiaries, except those which in the aggregate, if
adversely determined, would not result in liability in excess of $5,000,000;
(f) promptly and in any event within 30 days after receipt
thereof, a copy of any order from or agreement with any Governmental
Authority or other Person regarding any administrative proceeding involving
a Government Contract, other than those which in the aggregate, if adversely
determined, would not result in liability in excess of $5,000,000;
(g) promptly and in any event within two Business Days after the
Borrower becomes aware of the existence of (i) any Default or Event of
Default or (ii) any Material Adverse Change or any event, development or
other circumstance which has a reasonable likelihood of causing or resulting
in a Material Adverse Change, notice (which may be telephonic or by facsimile)
in reasonable detail specifying the nature of the Default, Event of Default,
event, development or circumstance, including, without limitation, the
anticipated effect thereof, which notice, if given orally, shall be promptly
confirmed in writing within five days;
(h) promptly after the sending or filing thereof, copies of
all reports which the Borrower sends to its security holders generally, and
copies of all reports and registration statements which the Borrower or any of
its Subsidiaries files with the Securities and Exchange Commission or any
national securities exchange;
(i) upon the request of any Lender, through the Agent, copies of
all federal, state, local and foreign tax returns and reports filed by the
Borrower or any of its Subsidiaries in respect of taxes measured by income
(excluding sales, use and like taxes);
(j) promptly and in any event within 30 days of the Borrower
learning of any of the following, written notice to the Agent of any of the
following:
(i) the Borrower or any Guarantor is or may be
liable to any Person as a result of a Release or threatened Release
which could reasonably be expected to subject the Borrower or any
Guarantor to Environmental Liabilities and Costs of $5,000,000 or more;
(ii) any Remedial Action taken by the Borrower or
any Guarantor or any other Person in response to any Contaminant on,
under or about any real property owned, operated or leased by the
Borrower or any Guarantor unless such Remedial Action would have no
reasonable likelihood of subjecting the Borrower and the Guarantors
collectively to Environmental Costs and Liabilities of $5,000,000 or
more;
(iii) the receipt by the Borrower or any
Guarantor of notification that any real or personal property of the
Borrower or any Guarantor is subject to any Environmental Lien;
(iv) the receipt by the Borrower or any Guarantor
of any notice of violation of any Environmental Law, except for
violations which in the aggregate would have no reasonable likelihood of
subjecting the Borrower and Guarantors collectively to Environmental
Liabilities and Costs of $5,000,000 or more;
(v) the commencement of any judicial or
administrative proceeding or investigation alleging a violation of any
Environmental Law, other than those which in the aggregate would have
no reasonable likelihood of subjecting the Borrower and Guarantors
collectively to Environmental Liabilities and Costs of $5,000,000 or
more;
(vi) any proposed acquisition of stock, assets or
real estate, or any proposed leasing of property, or any other action by
the Borrower or any Guarantor, other than those which in the aggregate
have no reasonable likelihood of subjecting the Borrower and Guarantors
collectively to Environmental Liabilities and Costs of $5,000,000 or
more; and
(vii) any proposed action taken by the Borrower
or any Guarantor to commence, recommence or cease manufacturing,
industrial or other operations other than those actions which in the
aggregate have no reasonable likelihood of requiring the Borrower and
Guarantors to obtain additional Permits required under Environmental
Laws that collectively require the expenditure of $5,000,000 or more or
become subject to additional Environmental Liabilities and Costs of
$5,000,000 or more;
(k) upon written request by any Lender through the Agent, a
written report providing an update of the status of any environmental, health
or safety compliance, hazard or liability issue identified in any notice or
report delivered pursuant to this Agreement and any other environmental,
health or safety compliance obligation, remedial obligation or liability;
(l) within 30 days after the end of each Fiscal Quarter, a list
of all Instruments (as defined in the Borrower Security Agreement) evidencing
any amount in excess of $500,000 individually owed under any Contractual
Obligation or Account in respect of which the Borrower is an obligee;
(m) during the continuance of an Event of Default, monthly aging
reports of accounts payable of the Borrower and Intergraph Canada within 20
days after each month-end;
(n) promptly and in any event within two Business Days thereof,
notice of any (i) refusal of insurance for which the Borrower or any
Guarantor has applied or (ii) the termination of any insurance policy
maintained by the Borrower or any Guarantor, in each case, for reasons of
uninsurability;
(o) on each of the first and second anniversaries of the Closing
Date, updated appraisals of the Eligible Machinery and Equipment from AccuVal
Associates, Incorporated (such appraisals to be done on an orderly
liquidation value basis), and Eligible Real Property from Jackson-Cross
Company, or such other appraisal firm selected by the Agent, unless otherwise
waived in writing by the Majority Lenders;
(p) promptly upon the occurrence thereof, notice of any material
default in the Borrower's or Intergraph Canada's obligations under a lease
which covers property on which Collateral is located; and
(q) such other information respecting the business, properties,
condition, financial or otherwise, or operations of the Borrower or any of
its Subsidiaries as any Lender through the Agent may from time to time
reasonably request.
6.13. Employee Plans. With respect to any Qualified Plan
hereafter adopted or maintained by the Borrower, any of its Subsidiaries or
any ERISA Affiliate, the Borrower shall (i) seek, and cause such of its
Subsidiaries and ERISA Affiliates to seek, and receive determination letters
from the IRS to the effect that such Qualified Plan is qualified within the
meaning of Section 401(a) of the Code, and (ii) from and after the adoption
of any such Qualified Plan, cause such plan to be qualified within the meaning
of Section 401(a) of the Code and to be administered in all material respects
in accordance with the requirements of ERISA and Section 401(a) of the Code.
6.14. Fiscal Year. The Borrower shall maintain as its Fiscal
Year the twelve month period ending on December 31 of each year.
6.15. Borrowing Base Determination. (a) The Borrower shall
conduct, or shall cause to be conducted, at its expense, upon request of the
Agent, and present to the Agent for approval, such appraisals, investigations
and reviews as the Agent shall reasonably request for the purpose of
determining the Borrowing Base, all upon reasonable notice and at such
reasonable times during normal business hours and as often as may be
reasonably requested, and the Lenders and their respective representatives
shall be entitled to participate with the Agent, at their own expense, in
any such appraisals, investigations and reviews so requested by the Agent.
The Borrower shall furnish to the Agent any information which the Agent may
reasonably request regarding the determination and calculation of the
Borrowing Base, including correct and complete copies of any invoices,
underlying agreements, instruments or other documents and the identity of all
obligors.
(b) The Borrower shall promptly notify the Agent and the Lenders
in writing in the event that at any time the Borrower or any of its
Subsidiaries receives or otherwise gains knowledge that (i) the Borrowing Base
is less than 80% of the Borrower's Borrowing Base reflected in the most
recent Borrowing Base Certificate delivered by the Borrower pursuant to
Section 6.12(c) or that (ii) the outstanding Revolving Credit Loans borrowed
and Letters of Credit issued under Article II at such time exceed the
Available Credit as a result of any decrease in the Borrowing Base and the
amount of such excess.
(c) The Agent may make test verifications of the Accounts and
physical verifications of the Inventory in any reasonable manner and through
any medium that the Agent considers advisable, and the Borrower shall furnish
all such assistance and information as the Agent may require in connection
therewith.
6.16. Environmental. Upon the occurrence of any event
specified in Section 6.12(j), the Borrower shall, at its cost, upon request
from the Agent, provide the Agent with such reports, engineering studies or
other written material or data as the Lenders may reasonably require so as
to demonstrate compliance in all material respects with all applicable
Environmental Laws.
6.17. Cash Management System. Except for the bank accounts
permitted pursuant to Section 7.18, the Borrower and each of the Guarantors
shall establish and maintain a cash management system, including one or more
lockboxes, which provides for all funds received by, or payable to, the
Borrower and the Guarantors to be deposited in the Cash Collateral Account.
6.18. Management Consulting Firm. Within 60 days after
September 12, 1995, the Borrower shall engage a management consulting firm
to examine and evaluate (i) management's practices and performance and (ii)
the Borrower's strategic business plan, and such firm and the scope of its
examination and evaluation shall be reasonably acceptable to the Agent.
6.19. Foreign Accounts Receivable. As soon as practicable
and in any event within 60 days after the issuance of any Letter of Credit
for which a Designated Subsidiary is required hereunder to be a co-applicant,
such Designated Subsidiary shall have executed and delivered to the Agent
all documents, in form and substance reasonably satisfactory to the Agent,
and taken all such other action reasonably required by the Agent, to pledge
and grant a security interest in all of the accounts receivable of such
Designated Subsidiary to the Agent, in its capacity as security trustee or
agent for the Issuers, solely to secure the Letter of Credit Obligations of
such Designated Subsidiary with respect to the Credit (as defined in the
Designated Subsidiary Letter of Credit Reimbursement Agreement) issued for
the benefit of such Designated Subsidiary. Notwithstanding any other
provision of this Agreement, the Lenders and the Issuers acknowledge that
such pledge and security interest shall not under any circumstances secure
any other obligations or liabilities.
6.20. Landlord Waivers and Consents. The Borrower shall, and
shall cause Intergraph Canada to, use its best efforts to obtain and deliver
to the Agent a landlord waiver and consent (a "Landlord Waiver and Consent")
in form and substance reasonably satisfactory to the Agent, for each property
leased by the Borrower and Intergraph Canada on which Collateral is located
as set forth on Schedule 6.20 and for each additional property leased by the
Borrower and Intergraph Canada after the date hereof on which Collateral with
an aggregate Fair Market Value in excess of $100,000 is located and providing
for the waiver of such landlord's liens, if any, on such Collateral, and
consenting to the Agent's entry onto the premises solely for the purpose of
removing such Collateral from such premises within 30 days after the
occurrence of an Event of Default; provided, however, that "best efforts"
shall not include the expenditure of money or the bringing of any action or
proceeding to induce any landlord to execute a Landlord Waiver and Consent.
6.21. Government Contracts. The Borrower shall, and shall
cause Intergraph Canada to, execute and deliver to the Agent, a notice of
assignment form for each Government Contract entered into after the date
hereof by the Borrower and Intergraph Canada where the transaction
represented thereby is in excess of $1,000,000, assigning its rights to
receive payment from the Governmental Authority that is the account debtor
with respect thereto to the Agent pursuant to the Assignment of Claims Act of
1940, as amended, in the case of a United States federal Governmental
Authority, or to applicable state law, if any, in the case of any other
domestic Governmental Authority, or to applicable Canadian federal or
provincial law, if any, in the case of a Canadian Governmental Authority,
except for (i) those Government Contracts which, pursuant to the terms
thereof, are classified and are prohibited from being disclosed and (ii)
those United States state Government Contracts and those Canadian federal and
provincial Government Contracts which shall be delivered as soon as
practicable and in any event within 60 days after the Closing Date with
respect to those state Government Contracts in effect on the Closing Date or
which were entered into within such 60 day period.
6.22. Lockbox Agreements. As soon as practicable and in any
event within 30 days after the Closing Date, the Borrower shall enter into a
Lockbox Agreement with a bank acceptable to the Agent in replacement for the
Lockboxes it maintains with The First National Bank of Chicago and First
Chicago National Processing Corporation ("FNBC") and shall take all steps
necessary or desirable, as the Agent shall determine, to cause its account
debtors to mail their remittances to such new Lockbox, and until such time,
the Borrower shall transfer to the Cash Collateral Account, in available
funds, by 11:00 A.M. (New York City time) on each Business Day, all amounts
deposited on the prior Business Day into each of lockbox account no. 59-32203
and 52-28883 it maintains with FNCB.
6.23. Pledged Shares. As soon as practicable and in any
event within 90 days after the Closing Date, the Borrower shall, and shall
cause each of its applicable Subsidiaries to, pledge to the Agent pursuant
to the Pledge Agreement and any other agreements required by local law,
including letters from local counsel confirming such pledge documentation,
65% of the outstanding Stock of all of the Subsidiaries set forth on Schedule
6.23, and the Borrower shall pledge to the Agent pursuant to the Pledge
Agreement all of the shares of Stock of Silicon Valley Research, Inc. owned
by it or all of the voting trust certificates representing such Stock issued
to it pursuant to a voting trust agreement, which agreement shall be in form
and substance satisfactory to the Agent.
6.24. Alabama Real Property Documents. As soon as
practicable and in any event within 60 days after the Closing Date, the
Borrower shall deliver to the Agent a current ALTA survey and surveyor's
certification, each in form and substance satisfactory to the Agent with
respect to the Alabama Real Property as set forth in Section 3.1(j)(iv),
together with (i) a letter or endorsement issued by a title company
satisfactory to the Agent insuring the Alabama Real Property, which letter
shall be in form and substance satisfactory to the Agent and shall delete
from the applicable Title Insurance Policy the exception to insurance
coverage on account of matters that would be disclosed by an accurate ALTA
survey and (ii) a survey endorsement (ALTA 116.1) to such Title Insurance
Policy.
ARTICLE VII
NEGATIVE COVENANTS
As long as any Obligation, Letter of Credit or Revolving Credit
Commitment remains outstanding, unless the Majority Lenders otherwise consent
in writing, the Borrower agrees with the Lenders, the Issuers and the Agent
that:
7.1. Liens, Etc. The Borrower shall not create or suffer to
exist, and shall not permit Intergraph Canada or any Designated Subsidiary
to create or suffer to exist, any Lien upon or with respect to any of its
properties, whether now owned or hereafter acquired, or assign, or permit
Intergraph Canada or any Designated Subsidiary to assign, any right to
receive income, except for:
(a) Liens created pursuant to the Loan Documents;
(b) purchase money Liens or purchase money security interests
upon or in any property (other than Collateral) acquired or held by the
Borrower or any of its Subsidiaries to secure the purchase price of such
property or to secure Indebtedness incurred solely for the purpose of
financing the acquisition of such property, and Liens existing on such
property at the time of its acquisition (other than any such Lien created in
contemplation of such acquisition); provided, however, that the aggregate
principal amount of the Indebtedness secured by the Liens permitted by this
subsection (b) (and which Indebtedness is permitted to be incurred pursuant
to Section 7.2(c)) and the aggregate amount of Indebtedness incurred pursuant
to Section 7.2(e) shall not exceed $10,000,000 at any time outstanding;
(c) any Lien securing the renewal, extension, refinancing or
refunding of any Indebtedness or other obligation secured by any Lien
permitted by Sections 7.1(b) or (i) without any increase in excess of costs
and expenses associated therewith in the outstanding aggregate principal
amount of Indebtedness secured thereby or in the assets subject to such Lien;
(d) Liens (other than Environmental Liens) arising by operation
of law in favor of materialmen, mechanics, warehousemen, carriers, landlords,
bankers, lessors or other similar Persons incurred by the Borrower or any of
its Subsidiaries in the ordinary course of business which secure its
obligations to such Person; provided, however, that (i) the Borrower or such
Subsidiary is not in default with respect to such payment obligation to such
Person or the Borrower or such Subsidiary is in good faith and by appropriate
proceedings diligently contesting such obligation and adequate provision is
made for the payment thereof on the books of the Borrower or the appropriate
Subsidiary in conformity with GAAP and (ii) all such Liens, in the
aggregate, would have no Material Adverse Effect;
(e) Liens (excluding Environmental Liens) securing taxes,
assessments or governmental charges, claims or levies; provided, however,
that (i) the Borrower or any of its Subsidiaries is not in default in
respect of any payment obligation with respect thereto or the Borrower or
such Subsidiaries is in good faith and by appropriate proceedings diligently
contesting such obligation and adequate provision is made for the payment
thereof on the books of the Borrower or the appropriate Subsidiary in
accordance with GAAP and (ii) all such Liens, in the aggregate, would have
no Material Adverse Effect;
(f) Liens incurred or pledges and deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance, old-age pensions, other social security benefits;
(g) Liens securing the performance of bids, tenders, leases,
contracts (other than for the repayment of borrowed money), statutory
obligations, surety and performance bonds and other obligations of like
nature, in each case, incurred as an incident to and in the ordinary course
of business, and appeal bonds and judgment liens; provided, however, that
all such Liens (i) do not in the aggregate materially detract from the value
of the Borrower's or any of its Subsidiary's assets or property or materially
impair the use thereof in the operation of the Borrower's or such
Subsidiary's business and (ii) with respect to appeal bonds and judgment
liens, such Liens do not secure directly or indirectly judgments in excess
of $10,000,000 (in excess of insurance proceeds in respect thereto for which
the Borrower or such Subsidiary's insurance carrier has admitted liability);
(h) zoning restrictions, easements, licenses, reservations, or
restrictions on the use of real property or minor irregularities of title
incident thereto which do not in the aggregate render title thereto
unmarketable or impair, in any material manner, the use of such property for
the purposes for which such property is held by the Borrower or any of its
Subsidiaries;
(i) Liens existing on the date hereof and disclosed on Schedule
7.1;
(j) expired financing statements, financing statements filed
for precautionary purposes in respect of operating leases, and financing
statements filed in respect of Liens permitted hereby;
(k) software escrow arrangements entered into in the ordinary
course of business consistent with past practice; and
(l) Liens not otherwise permitted by Sections 7.1(a) through
(k) securing the obligations or other liabilities (other than Indebtedness)
of the Borrower or any of its Subsidiaries; provided, however, that the
aggregate amount of such obligations and liabilities secured by such Liens
shall not exceed $5,000,000 at any time outstanding.
7.2. Indebtedness. The Borrower shall not create or
suffer to exist, or permit any of its Subsidiaries to create or suffer to
exist, any Indebtedness except:
(a) the Obligations;
(b) Indebtedness (i) owing to any Subsidiary of the Borrower by
the Borrower or (ii) owing to the Borrower or any other Subsidiary of the
Borrower by any Subsidiary of the Borrower; provided, however, that the
aggregate amount of the Indebtedness owing to the Borrower incurred pursuant
to this subsection (b)(ii) shall not exceed $10,000,000 in any Fiscal Year
in excess of the aggregate amount of such Indebtedness permitted to be
incurred pursuant to this subsection (b)(ii) in the prior Fiscal Year or,
in the case of the 1995 Fiscal Year, in excess of the amount currently
outstanding; provided, further, however, that for the purposes of this
subsection (b), all obligations of any Subsidiary of the Borrower owing to
the Borrower constituting trade debt shall not be considered Indebtedness
until it shall remain unpaid for 120 days past the original invoice date
thereof;
(c) Indebtedness secured by Liens permitted by Section 7.1(b);
provided, however, that the aggregate amount of such Indebtedness incurred
pursuant to this subsection (c) and Section 7.2(e) shall not exceed $10,000,000
at any time outstanding, exclusive of amounts permitted to be incurred
pursuant to Section 7.3(a);
(d) obligations pursuant to Interest Rate Contracts and
Currency Agreements referred to in Section 7.12;
(e) Indebtedness of the Borrower or any of its Subsidiaries
under Capitalized Lease Obligations; provided, however, that the aggregate
amount of Capitalized Lease Obligations incurred under this subsection (e)
and the aggregate amount of Indebtedness incurred pursuant to Section 7.2(c)
shall not exceed $10,000,000 at any time outstanding, exclusive of amounts
permitted to be incurred pursuant to Section 7.3(a);
(f) Indebtedness of the Borrower and its Subsidiaries listed on
Schedule 7.2 and refinancings thereof without any increase in the amount of
such Indebtedness and without giving effect to any currency translation
adjustment associated therewith; provided, however, that the refinancing by
ING Bank of the ABN-AMRO mortgage loans referred to on Schedule 7.2 (the
"ING Loan") shall be in an amount no less than the principal amount of the
Indebtedness of such ABN-AMRO mortgage loans outstanding at the time of the
refinancing thereof by ING Bank less the Dutch guilder equivalent of
$7,500,000, but in no event greater than the amount of such Indebtedness in
existence on the date hereof as set forth on Schedule 7.2, and shall be on
terms substantially similar to those set forth in that certain letter
agreement (the "ING Letter"), dated September 11, 1995, among ING Bank,
Intergraph Benelux B.V. and Intergraph European Manufacturing, LLC;
(g) Indebtedness in respect of the receipt of advance payments
made by customers in the ordinary course of business consistent with past
practice;
(h) Indebtedness of any foreign Subsidiary other than
Indebtedness owing to the Borrower in amounts, at times and on terms
incurred in the ordinary course of business consistent with past practice;
provided, however, that all such Indebtedness incurred pursuant to this
subsection (h) (other than reimbursement and similar obligations with respect
to surety bonds, letters of credit and bankers' acceptances (collectively
"Foreign Reimbursement Obligations")) shall not exceed $10,000,000 at any
time outstanding, and such Foreign Reimbursement Obligations shall not
exceed $15,000,000 at any time outstanding;
(i) Contingent Obligations with respect to Indebtedness of the
Borrower or any of its Subsidiaries to the extent such Indebtedness is
permitted to be incurred hereunder; provided, however, that any Contingent
Obligations existing on the date hereof shall be set forth on Schedule 7.2;
provided, further, however, that any guarantee by the Borrower of the ING
Loan referred to in Section 7.2(f) shall be limited to interest and scheduled
principal payments at the rates and on the dates set forth in the ING Letter
referred to in Section 7.2(f); and
(j) other unsecured Indebtedness not referred to in Sections
7.2(a) through (i) in an aggregate principal amount at any time outstanding
not in excess of $5,000,000.
7.3. Lease Obligations; Sale/Leasebacks.
(a) The Borrower shall not create or suffer to exist, or permit
any of the its Subsidiaries to create or suffer to exist, any obligations as
lessee for the rental or hire of real or personal property of any kind under
leases or agreements to lease having an original term of one year or more
which would cause the direct or contingent liabilities of the Borrower and
any of its Subsidiaries, on a consolidated basis, in respect of all such
obligations payable in any period of 12 consecutive months to be an amount
in excess of 115% of all such obligations paid in the prior Fiscal Year
exclusive of (i) all Indebtedness permitted to be incurred pursuant to
Sections 7.2(c) and (e), (ii) such obligations of the Borrower resulting
from any sale/leaseback transaction with respect to any part of the Alabama
Real Property, (iii) such obligations of the Borrower resulting from any
sale/leaseback transaction with respect to any part of the Virginia Real
Property, and (iv) such obligations of the Borrower and its Subsidiaries
resulting from any sale/leaseback transaction with respect to computer work
stations and related equipment up to an aggregate maximum amount at any time
outstanding not in excess of $10,000,000.
(b) The Borrower shall not, and shall not permit any of its
Subsidiaries to, become or remain liable as lessee or guarantor or other
surety with respect to any lease, whether an operating lease or a
Capitalized Lease, of any property (whether real or personal or mixed),
whether now owned or hereafter acquired, which (i) the Borrower or any of its
Subsidiaries has sold or transferred or is to sell or transfer to any other
Person, or (ii) the Borrower or any of its Subsidiaries intends to use for
substantially the same purposes as any other property which has been or is
to be sold or transferred by that entity to any other Person in connection
with such lease; provided, however, that the Borrower and any of its
Subsidiaries may become and remain so liable if (i) the proceeds from such a
sale or transfer or series of related sales or transfers are applied in the
same manner as if such proceeds constituted Asset Sale Proceeds or (ii) such
sale/leaseback transaction is between any of the Borrower's Subsidiaries or
between the Borrower and any of its Subsidiaries.
7.4. Restricted Payments. The Borrower shall not and
shall not permit any of its Subsidiaries to (a) declare or make any dividend
payment or other distribution of assets, properties, cash, rights,
obligations or securities on account or in respect of, or purchase,
redeem or otherwise acquire for value, any of its Stock or Stock Equivalents
other than declarations and payments of dividends and other distributions to
the Borrower or any of its Subsidiaries by any of the Borrower's Subsidiaries,
or (b) purchase, redeem, prepay, defease or otherwise acquire for value or
make any payment (other than required purchases, redemptions and other
payments) on account or in respect of any principal amount of Indebtedness for
borrowed money, now or hereafter outstanding, except (i) the Obligations,
(ii) in the case of a Subsidiary of the Borrower, payments to the Borrower
or any of its other Subsidiaries on account of any Indebtedness owing to the
Borrower or such other Subsidiary by such Subsidiary, (iii) in the case of
any foreign Subsidiary of the Borrower, payments on any Indebtedness to the
extent such Indebtedness is permitted by Section 7.2 and (iv) in connection
with a refinancing of any Indebtedness permitted by Section 7.2.
7.5. Mergers, Stock Issuances, Sale of Assets, Etc. (a)
The Borrower shall not and shall not permit any of its Subsidiaries to (i)
merge with any Person, (ii) consolidate with any Person, (iii) acquire all
or substantially all of the Stock or Stock Equivalents of any Person, (iv)
acquire all or substantially all of the assets of any Person or all or
substantially all of the assets constituting the business of a division,
branch or other unit operation of any Person, (v) enter into any joint
venture or partnership with any Person, except for any Strategic Alliance
entered into in the ordinary course of business consistent with past
practice, or (vi) sell, lease, transfer or otherwise dispose of, whether in
one transaction or in a series of transactions any of its assets, including,
without limitation, substantially all assets constituting the business of a
division, branch or other unit operation, except as permitted pursuant to
Section 7.3, 7.5(c) or 7.6 and except that (A) any Subsidiary of the
Borrower may merge into or consolidate with any other Subsidiary of the
Borrower provided that, in the case of any such merger or consolidation, the
Person formed by such merger or consolidation shall be a wholly-owned
Subsidiary of the Borrower and if one such Subsidiary is a Guarantor, the
surviving entity must be a Guarantor and (B) any of the Borrower's
Subsidiaries may merge into the Borrower; provided, however, that, in each
case, immediately after giving effect thereto, no event shall occur and be
continuing that constitutes a Default or an Event of Default and, in the
case of any merger to which the Borrower is a party, the Borrower is the
surviving corporation.
(b) The Borrower shall not transfer, or permit any of its
Subsidiaries to issue or transfer, any Stock of a Subsidiary of the Borrower
or Stock Equivalents of a Subsidiary of the Borrower, other than any such
issuance or transfer (A) by a Subsidiary of the Borrower to another
wholly-owned Subsidiary of the Borrower or to another Subsidiary of the
Borrower that is wholly-owned other than for those shares of Stock owned by
any nominees comprising 1% or less of such Subsidiary's outstanding Stock,
(B) by a Subsidiary of the Borrower to the Borrower or (C) as permitted by
Section 7.5(c) or 7.7.
(c) The Borrower shall not and shall not permit any of its
Subsidiaries to sell, convey, transfer, lease or otherwise dispose of any of
its assets or any interest therein to any Person, or permit or suffer any
other Person to acquire any interest in any of the assets of the Borrower or
any such Subsidiary except (i) any lease or licensing of software source
codes in the ordinary course of business, (ii) the sale or disposition of
(A) inventory in the ordinary course of business or (B) equipment or motor
vehicles which have become obsolete, are replaced in the ordinary course of
business, or which are no longer necessary or useful in the reasonable
judgment of the Borrower for the conduct of the business of the Borrower
or any of its Subsidiaries, (iii) any such sale, conveyance, transfer,
lease or other disposition by the Borrower or any Subsidiary of the Borrower
to the Borrower or to any wholly-owned Subsidiary of the Borrower or to
another Subsidiary of the Borrower that is wholly-owned other than for those
shares of Stock owned by any nominees comprising 1% or less of such
Subsidiary's outstanding Stock, (iv) the lease or sublease of real property
(including, without limitation, office and retail space), that is not part
of a sale and leaseback that is otherwise prohibited by this Agreement, (v)
the making of Investments permitted by Section 7.6 and the liquidation
thereof, (vi) the sale of those assets of the Borrower previously disclosed
in writing to the Agent pursuant to that certain letter agreement, dated as
of the date hereof from the Company to the Agent, in accordance with the
terms of such letter agreement, and (vii) except as otherwise permitted
pursuant to this Agreement, as long as no Default or Event of Default is
continuing or would result therefrom, the sale of any asset for the Fair
Market Value thereof, payable in cash upon such sale; provided, however,
that, with respect to any such sale pursuant to this clause (vii) made by
the Borrower and any of its Subsidiaries (other than any of its foreign
Subsidiaries but including Intergraph Canada), the aggregate Fair Market
Value of all assets so sold by the Borrower and such Subsidiaries during any
Fiscal Year shall not exceed $5,000,000 and that all Asset Sale Proceeds of
any such sale are applied to the prepayment of the Revolving Credit Loans to
the extent required by Section 2.6(c); provided, further, however, that, with
respect to any such sale pursuant to this clause (vii) made by any foreign
Subsidiaries (other than Intergraph Canada) of the Borrower, the aggregate
Fair Market Value of all assets so sold by such foreign Subsidiaries during
any Fiscal Year shall not exceed $5,000,000.
(d) The Borrower shall not sell or otherwise dispose of, or
factor, or permit any of its Subsidiaries to sell or otherwise dispose of,
or factor, any Accounts.
7.6. Investments in Other Persons. The Borrower shall not,
directly or indirectly, make or maintain, or permit any of its Subsidiaries
to make or maintain, any loan or advance to any Person or own, purchase or
otherwise acquire, or permit any of its Subsidiaries to own, purchase or
otherwise acquire, any Stock, Stock Equivalents, other equity interest,
obligations or other securities of, or any assets constituting the purchase
of a business or line of business, or make or maintain, or permit any of its
Subsidiaries to make or maintain, any capital contribution to, or otherwise
invest in, any other Person (any such transaction being an "Investment"),
except:
(a) Investments in accounts, contract rights and chattel paper
(each as defined in the Uniform Commercial Code), notes receivable and
similar items arising or acquired in the ordinary course of business
consistent with the past practice of the Borrower and its Subsidiaries;
(b) Investments in the Guarantors for general corporate
purposes in the ordinary course of business;
(c) loans to employees of the Borrower or any of its
Subsidiaries under the Executive Loan Program, outstanding on the date
hereof, which loans (i) shall not exceed the respective amounts thereof
outstanding on the date hereof and (ii) once repaid may not be reborrowed;
(d) advances to employees of the Borrower or any of its
Subsidiaries in respect of expenses incurred by them on behalf of the
Borrower or any of its Subsidiaries in the ordinary course of business and
loans to employees to facilitate relocation, but in no event for purposes
set forth in the loan program referred to in Section 7.6(c), which advances
and loans shall not in the aggregate exceed the sum of $1,000,000 outstanding
at any time and those Investments set forth on Part I of Schedule 7.6;
(e) loans or advances to customers or suppliers of the Borrower
for any of its Subsidiaries in the ordinary course of business, which loans
and advances do not in the aggregate exceed $5,000,000 outstanding at any
time;
(f) Investments in checking, demand deposit and other bank
accounts and Cash Equivalents;
(g) Investments existing on the date hereof and set forth on
Part II of Schedule 7.6;
(h) Investments made after the date hereof not otherwise
permitted hereby which do not exceed $5,000,000 in the aggregate;
(i) Investments comprised of securities received by the
Borrower or any of its Subsidiaries from a reorganization or liquidation of
an account debtor on account of an Account incurred in the ordinary course
of business;
(j) equity Investments made after the date hereof in
Subsidiaries now existing or hereafter formed pursuant to Section 7.14;
provided, however, that the aggregate amount of the Investments permitted by
this subsection (j) net of amounts repatriated (whether by dividend,
repayment of loan or otherwise) shall not exceed $10,000,000 at any time
outstanding exclusive of (i) any Indebtedness permitted to be incurred
pursuant to Section 7.2(b) and (ii) any Investment made by the Borrower in
Intergraph European Manufacturing, LLC and/or Intergraph Benelux B.V. in
connection with the ING Loan referred to in Section 7.2(f), provided that
any such Investment shall not exceed $7,500,000;
(k) Investments in Strategic Alliances entered into in the
ordinary course of business consistent with past practice; and
(l) Indebtedness permitted to be incurred pursuant to Section 7.2.
7.7. Maintenance of Ownership of Subsidiaries. Except as
permitted by Section 7.5, the Borrower shall not sell or otherwise dispose
of any shares of Stock or any Stock Equivalent of any of its Subsidiaries
other than to a wholly-owned Subsidiary of the Borrower or permit any of its
Subsidiaries to issue, sell or otherwise dispose of any shares of its Stock
or any Stock Equivalent or the Stock or any Stock Equivalent of any other
Subsidiary of the Borrower other than to the Borrower or to any wholly-owned
Subsidiary of the Borrower, and in each case only if all of the Stock and
Stock Equivalents of such Subsidiary are pledged to the Agent (to the extent
not theretofore pledged) pursuant to the Borrower Pledge Agreement or a
pledge agreement that is substantially similar thereto (except, that if such
Stock or Stock Equivalents is of a Subsidiary that is a foreign Subsidiary
of the Borrower (other than Intergraph Canada), no more than 65% of the
outstanding Stock of such Subsidiary shall be pledged to secure the
Obligations).
7.8. Change in Nature of Business. The Borrower shall not
make, and shall not permit any of its Subsidiaries to make, any change in
any of its business objectives, purposes or operations, other than changes
permitted in this Agreement or changes which, in the aggregate, would have no
Material Adverse Effect.
7.9. Modification of Material Agreements. The Borrower
shall not, and shall not permit any of its Subsidiaries to, alter, amend,
modify, rescind, terminate or waive any of their respective rights under, or
fail to comply in all material respects with, any of its material Contractual
Obligations; provided, however, that the Borrower shall not be deemed in
default of this Section 7.9 if all such actions, in the aggregate, would not
have a Material Adverse Effect; and provided, further, that in the event of
any breach or event of default by a Person other than the Borrower or any
of its Subsidiaries, the Borrower shall promptly notify the Agent of any
such breach or event of default and take all such action as may be
reasonably necessary to avoid having such breach or event of default have a
Material Adverse Effect.
7.10. Accounting Changes. The Borrower shall not make, nor
permit any of its Subsidiaries to make, any change in accounting treatment
and reporting practices, except as required by GAAP and promptly disclosed
in writing to the Lenders and the Agent.
7.11. Transactions with Affiliates. The Borrower shall not,
and shall not permit any of its Subsidiaries, except as otherwise expressly
permitted herein, to do any of the following: (a) make any Investment in an
Affiliate of the Borrower which Affiliate is not a Subsidiary, (b) transfer,
sell, lease, assign or otherwise dispose of any asset to any Affiliate of the
Borrower which is not a Subsidiary, (c) merge or consolidate with or
purchase or acquire assets from any Affiliate of the Borrower other than a
Subsidiary, (d) repay any Indebtedness to any Affiliate of the Borrower other
than a Subsidiary or (e) enter into any other transaction directly or
indirectly with or for the benefit of any Affiliate of the Borrower which is
not a Subsidiary, including, without limitation, employment contracts or
contracts involving the payment of management or consulting fees and
guaranties or assumptions of obligations of any such Affiliate (other than in
connection with the salary or other compensation of an officer or director
of the Borrower or any Subsidiary commensurate with current compensation
levels), except, in the case of each of clauses (a) through (e) above, for
(i) transactions in the ordinary course of business on a basis no less
favorable to the Borrower or such Subsidiary as would be obtained in a
comparable arm's length transaction with a Person not an Affiliate and (ii)
arrangements with Affiliates of the Borrower or any of its Subsidiaries in
existence on the date hereof and heretofore disclosed to the Agent in writing.
7.12. Interest Rate Contracts; Currency Agreements. The
Borrower shall not, and shall not permit any of its Subsidiaries to, enter
into any Interest Rate Contract or Currency Agreement, except for those
entered into on terms satisfactory to the Agent and with counterparty risk
of less than $15,000,000 in the aggregate, which risk shall be calculated by
the Agent using calculations customarily used by the Agent for similar
contracts and agreements.
7.13. Cancellation of Indebtedness Owed to It. The Borrower
shall not, and shall not permit any of its Subsidiaries to, cancel any claim
or Indebtedness owed to it except for adequate consideration and in the
ordinary course of business and except for the loans and advances referred
to in Section 7.6(c).
7.14. New Subsidiaries. The Borrower shall not, and shall
not permit any of the Guarantors to, incorporate or otherwise organize any
Subsidiary which was not in existence on the Closing Date unless (a) all of
the Stock and Stock Equivalents of such Subsidiary are (i) owned by the
Borrower or a Subsidiary in existence on the Closing Date and (ii) pledged
to the Agent pursuant to the Pledge Agreement or a pledge agreement that is
substantially similar thereto (except, that if such Subsidiary is a foreign
Subsidiary of the Borrower (other than Intergraph Canada and Intergraph
Corporation Pty., Ltd., an Australian corporation), no more than 65% of the
outstanding Stock of such Subsidiary shall be pledged to secure the
Obligations), and (b) such Subsidiary, to the extent it is incorporated
under the laws of any state of the United States of America or the District
of Columbia executes and delivers to the Agent a Guaranty, and if
incorporated under the laws of any province of Canada executes and delivers
the Canadian Guaranty; provided, however, that no Stock or Stock Equivalents
shall be required to be pledged pursuant to subsection (a) above and no
Guaranty shall be required to be executed and delivered pursuant to
subsection (b) above unless and until such time as such Subsidiary, if
incorporated under the laws of any state of the United States of America or
the District of Columbia or the laws of any province of Canada shall have
Total Assets of $100,000 or more, and as to any such other Subsidiary,
unless and until such time as such other Subsidiary shall have Total Assets
of $5,000,000 or more.
7.15. Capital Structure of the Borrower and its Subsidiaries.
The Borrower shall not make, and shall not permit any of its Subsidiaries to
make, any change in its capital structure (including in the terms of its
outstanding Stock and Stock Equivalents), amend its certificate or articles
of incorporation, by-laws, other constituent documents or partnership
agreement, as the case may be, other than for such changes which in the
aggregate, would have no Material Adverse Effect.
7.16. No Speculative Transactions. The Borrower shall not,
and shall not permit any of its Subsidiaries to, engage in any speculative
transaction or in any transaction involving derivatives or commodity options,
futures or forward contracts, except for the sole purpose of hedging in the
normal course of business and consistent with past practices.
7.17. Environmental. The Borrower shall not, and shall not
permit any of its Subsidiaries to, and shall not fail to require any lessee
to, dispose of, and the Borrower shall use its best efforts to prevent any
other Person from disposing of, any Contaminant in violation of any
Environmental Law by placing it in or on the ground or waters of any property
owned or leased by the Borrower or any of its Subsidiaries.
7.18. Bank Accounts. The Borrower shall not, and shall not
permit any of its domestic Subsidiaries to, maintain any bank accounts with
funds on deposit therein in an amount in excess of $1,000,000 in the
aggregate for all such accounts at any time other than (i) payroll accounts,
(ii) as provided for in Section 2.15, (iii) the Lockbox Accounts (as defined
in each Lockbox Agreement) and (iv) as consented to by all the Lenders in
writing.
7.19. Prohibition on Negative Pledges. The Borrower shall
not enter into or be bound by, and shall not cause any of its Subsidiaries
to enter into or be bound by, any agreement, contract or other arrangement
that limits the creation or existence of any Lien upon or with respect to
any of its or such Subsidiary's properties, whether now owned or hereafter
acquired, except for limitations provided for under the Loan Documents and
under the documents relating to the Borrower's BEST Australia Project.
7.20. Compensation. The Borrower shall not, in any Fiscal
Year, increase the aggregate cash Compensation of the five highest paid
executive officers of the Borrower and its Subsidiaries identified in the
Borrower's proxy statement dated March 31, 1995 filed with the SEC by more
than 25% of the aggregate cash Compensation for such employees from the
prior Fiscal Year exclusive of (i) any cash Compensation required to be paid
to any such officer to match a bona fide offer of employment made by a third
party to any such officer and (ii) any cash bonus payments or other
comparable incentive payments required to be paid to any such officer
pursuant to such officer's employment contract in existence on the date
hereof.
ARTICLE VIII
EVENTS OF DEFAULT
8.1. Events of Default. Each of the following events shall
be an Event of Default:
(a) The Borrower shall fail to pay any principal (including,
without limitation, mandatory prepayments of principal) of any Revolving
Credit Loan when the same becomes due and payable; or
(b) The Borrower shall fail to pay any interest on any Revolving
Credit Loan, any fee or any other amount due hereunder or under the other
Loan Documents or any of the Other Obligations within five days after the
same becomes due and payable; or
(c) Any representation or warranty made or deemed made by any
Loan Party in any Loan Document or by any Loan Party (or any of its officers)
in connection with any Loan Document, shall prove to have been incorrect in
any material respect when made or deemed made; or
(d) Any Loan Party shall fail to perform or observe (i) any
term, covenant or agreement contained in Articles V or VII, or (ii) any
other term, covenant or agreement contained in this Agreement, including,
without limitation, Article VI, or in any other Loan Document if such
failure under this clause (ii) shall remain unremedied for 10 days after the
earlier of the date on which (A) a Responsible Officer of the Borrower
becomes aware of such failure or (B) written notice thereof shall have been
given to the Borrower by the Agent or any Lender; or
(e) Any Loan Party shall fail to make any payment in respect of
any Indebtedness for borrowed money of such Loan Party (or any Contingent
Obligation in respect of Indebtedness for borrowed money of any other Person)
having a principal amount of $1,000,000 or more (other than the Indebtedness
evidenced by the Revolving Credit Notes), when the same becomes due and
payable (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise) or any other event shall occur or condition shall exist
under any agreement or instrument relating to any such Indebtedness, if the
effect of such event or condition is, after giving effect to any applicable
grace period, to accelerate, or to permit the acceleration of, the maturity
of such Indebtedness, or any such Indebtedness shall become or be declared to
be due and payable, or required to be prepaid (other than by a regularly
scheduled required prepayment), or any Loan Party shall be required to
repurchase or offer to repurchase such Indebtedness, prior to the stated
maturity thereof; or
(f) Any Loan Party shall generally not pay its debts as such
debts become due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of creditors,
or any proceeding shall be instituted by or against any Loan Party seeking
to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or composition
of it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for
relief or the appointment of a custodian, receiver, trustee or other similar
official for it or for any substantial part of its property and, in the case
of any such proceedings instituted against any Loan Party (but not instituted
by it), either such proceedings shall remain undismissed or unstayed for a
period of 60 days or any of the actions sought in such proceedings shall
occur, or any Loan Party shall take any corporate action to authorize any of
the actions set forth above in this subsection (f); or
(g) Any judgment or order for the payment of money (to the
extent fully not covered by insurance or an indemnity from a creditworthy
party who, in either case, has acknowledged coverage or is required to honor
the same pursuant to any final judgment or order) in excess of $10,000,000
shall be rendered against any Loan Party and shall remain unpaid and either
(i) enforcement proceedings shall have been commenced by any creditor upon
such judgment or order or (ii) there shall be any period of 10 consecutive
days during which a stay of enforcement of such judgment or order, by reason
of a pending appeal or otherwise, shall not be in effect; or
(h) (i) With respect to any Qualified Plan, any Loan Party or
any ERISA Affiliate shall incur an accumulated funding deficiency or request
a funding waiver from the IRS or (ii) with respect to any Title IV Plan or
Multiemployer Plan, an ERISA Event not described in clause (i) hereof shall
occur; provided, however, that the events listed in clauses (i) and (ii)
hereof shall constitute Events of Default only if the liability, deficiency
or waiver request of any Loan Party or any ERISA Affiliate, whether or not
assessed, exceeds $5,000,000 in the aggregate for all such cases;
(i) Any provision of any Collateral Document or any Guaranty
after delivery thereof under Section 3.1 shall for any reason cease to be
valid and binding on, or enforceable against, any Loan Party thereto, or any
Loan Party shall so state in writing; or
(j) Except as expressly set forth in any of the Collateral
Documents or Section 4.10, any Collateral Document after delivery thereof
pursuant to Section 3.1 shall, for any reason, ceases to create a valid Lien
on the Collateral purported to be covered thereby or any Loan Party shall so
state in writing; or
(k) There shall occur any Change of Control; or
(l) There shall occur any default, or event which, but for the
requirement that notice be given or time elapse or both, would be a default
under any Mortgage; or
(m) There shall occur a Material Adverse Change; or
(n) Any Loan Party shall have entered into any consent or
settlement decree or agreement or similar arrangement with any Governmental
Authority or any judgment, order, decree or similar action shall have been
entered against any Loan Party, in either case based on or arising from the
violation of or pursuant to any Environmental Law, or the generation, storage,
transportation, treatment, disposal or Release of any Contaminant and, in
connection with all the foregoing, the Borrower and the Guarantors are
likely to incur Environmental Liabilities and Costs (to the extent not
covered by insurance or an indemnity from a creditworthy party who, in
either case, has acknowledged coverage or is required to honor the same
pursuant to any final judgment or order) in excess of $10,000,000 in any
Fiscal Year.
8.2. Remedies. During the continuance of any Event of
Default, except to the extent such Event of Default is waived in accordance
with the terms of this Agreement, the Agent (a) shall at the request, or may
with the consent, of the Majority Lenders by notice to the Borrower, declare
the obligation of each Lender to make Revolving Credit Loans and each Issuer
to issue Letters of Credit to be terminated, whereupon the same shall
forthwith terminate, (b) shall at the request, or may with the consent, of
the Majority Lenders by notice to the Borrower, declare the Revolving Credit
Loans, all interest thereon and all other amounts and Obligations payable
under this Agreement to be forthwith due and payable, whereupon the Revolving
Credit Notes, all such interest and all such amounts and Obligations shall
become and be forthwith due and payable, without presentment, demand, protest
or further notice of any kind, all of which are hereby expressly waived by
the Borrower and (c) may, and shall at the direction of the Majority Lenders,
transmit (to the extent not previously transmitted by the Agent) any notice
of assignment of any Government Contract received by it from the Borrower to
the United States Government or by it from Intergraph Canada to any Canadian
Governmental Authority; provided, however, that upon the occurrence of the
Event of Default specified in Section 8.1(f), the obligation of each Lender
to make Revolving Credit Loans and of each Issuer to issue Letters of Credit
shall automatically be terminated and the Revolving Credit Loans, all such
interest and all such amounts and Obligations shall automatically become
and be due and payable, without presentment, demand, protest or any notice of
any kind, all of which are hereby expressly waived by the Borrower. In
addition to the remedies set forth in this Agreement, the Agent may exercise
any remedies provided for by the Collateral Documents in accordance with the
terms thereof or any other remedies provided by applicable law.
8.3. Actions in Respect of Letters of Credit and Other
Obligations. Upon the Revolving Credit Loans becoming due and payable as a
result and in the manner set forth in Section 8.2 or upon the termination of
the Revolving Credit Commitments, the Borrower shall pay to the Agent in
immediately available funds for deposit into the Cash Collateral Account, an
amount equal to the sum of all outstanding Letter of Credit Obligations plus
all outstanding Other Obligations to the extent that the then outstanding
balance in the Cash Collateral Account is less than the outstanding
Obligations. The Agent may, from time to time after funds are deposited in
the Cash Collateral Account, apply funds then held in the Cash Collateral
Account in accordance with the provisions of Section 2.15.
ARTICLE IX
THE AGENT
9.1. Authorization and Action. (a) Each Lender and each
Issuer hereby appoints and authorizes the Agent to take such action as agent
on its behalf and to exercise such powers under this Agreement and the other
Loan Documents as are delegated to the Agent by the terms hereof and thereof,
together with such powers as are reasonably incidental hereto and thereto.
Without limitation of the foregoing, each Lender and each Issuer hereby
authorizes the Agent to execute and deliver, and to perform its obligations
under, each of the Loan Documents to which the Agent is a party, and to
exercise all rights, powers and remedies that the Agent may have under such
Loan Documents and agrees, that to the extent the Agent is acting in its
capacity as security trustee holding German trust property of any Designated
Subsidiary consisting of receivables governed by German law, the Agent, in
such capacity, shall hold such trust property as a German law trustee
(Treuhander).
(b) As to any matters not expressly provided for by this
Agreement and the other Loan Documents (including, without limitation,
enforcement or collection of the Revolving Credit Notes), the Agent shall
not be required to exercise any discretion or take any action, but shall be
required to act or to refrain from acting (and shall be fully protected in
so acting or refraining from acting) upon the instructions of the Majority
Lenders (and the Issuers to the extent provided in the third proviso to
Section 10.1), and such instructions shall be binding upon all Lenders and
all holders of Revolving Credit Notes (and all Issuers, to the extent
applicable); provided, however, that the Agent shall not be required to take
any action which the Agent in good faith believes exposes it to personal
liability or is contrary to this Agreement or applicable law. The Agent
agrees to give to each Lender prompt notice of each notice given to it by
any Loan Party pursuant to the terms of this Agreement or the other Loan
Documents.
9.2. Agent's Reliance, Etc. None of the Agent, nor any of
its Affiliates or any of the respective directors, officers, agents or
employees of the Agent or any such Affiliate shall be liable for any action
taken or omitted to be taken by it, him, her or them under or in connection
with this Agreement or the other Loan Documents, except for its, his, her or
their own gross negligence or wilful misconduct. Without limitation of the
generality of the foregoing, the Agent (a) may treat the payee of any
Revolving Credit Note as the holder thereof until the Agent receives written
notice that such Revolving Credit Note has been assigned in accordance with
Section 10.7, (b) may rely on the Register to the extent set forth in
Section 10.7(c), (c) may consult with legal counsel (including, without
limitation, counsel to the Borrower or any other Loan Party), independent
public accountants and other experts selected by it and shall not be liable
for any action taken or omitted to be taken in good faith by it in accordance
with the advice of such counsel, accountants or experts, (d) makes no warranty
or representation to any Lender and shall not be responsible to any Lender
for any of the statements, warranties or representations made by or on behalf
of the Borrower or any other Loan Party in or in connection with this
Agreement or any of the other Loan Documents, (e) shall not have any duty to
ascertain or to inquire as to the performance or observance of any of the
terms, covenants or conditions of this Agreement or any of the other Loan
Documents on the part of the Borrower or any other Loan Party or to inspect
the property (including, without limitation, the books and records) of the
Borrower or any other Loan Party, (f) shall not be responsible to any Lender
for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any of the other Loan Documents or
any other instrument or document furnished pursuant hereto or thereto, and
(g) shall incur no liability under or in respect of this Agreement or any of
the other Loan Documents by acting upon any notice, consent, certificate or
other instrument or writing (which may be by telegram, cable, telex or
facsimile transmission) believed by it to be genuine and signed or sent by
the proper party or parties.
9.3. Citicorp USA and Affiliates. With respect to its
Revolving Credit Commitment, the Revolving Credit Loans made by it and the
Revolving Credit Note issued to it and the Letters of Credit issued by it,
Citicorp USA and its Affiliates shall have the same rights and powers under
this Agreement as any other Lender or Issuer and may exercise the same as
though it were not the Agent; and the term "Lender" or "Lenders" shall,
unless otherwise expressly indicated, include Citicorp USA in its individual
capacity. Citicorp USA and its Affiliates may accept deposits from, lend
money to, act as trustee under indentures of, and generally engage in any
kind of business with, the Borrower or any of its Subsidiaries and any
Person who may do business with or own securities of the Borrower or any of
its Subsidiaries, all as if Citicorp USA were not the Agent and without any
duty to account therefor to the Lenders.
9.4. Lender Credit Decision. Each Lender acknowledges
that it has, independently and without reliance upon the Agent, any other
Lender or Issuer and based on the financial statements referred to in Article
IV and such other documents and information as it has deemed appropriate,
made its own credit analysis and decision to enter into this Agreement.
Each Lender also acknowledges that it will, independently and without
reliance upon the Agent, any other Lender or Issuer and based on such
documents and information as it shall deem appropriate at the time, continue
to make its own credit decisions in taking or not taking action under this
Agreement and other Loan Documents.
9.5. Indemnification. The Lenders agree to indemnify the
Agent and its Affiliates, and their respective directors, officers,
employees, agents and advisors (to the extent not reimbursed by the Borrower
or the other Loan Parties), ratably according to the respective principal
amounts of the Revolving Credit Notes then held by each of them owing to them
(or if no Revolving Credit Notes and are at the time outstanding, ratably
according to the respective amounts of the aggregate of their Revolving
Credit Commitments), from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses and
disbursements (including, without limitation, fees and disbursements of
legal counsel) of any kind or nature whatsoever which may be imposed on,
incurred by, or asserted against, the Agent, any of its Affiliates or any of
its directors, officers, employees, agents or advisors in any way relating
to or arising out of this Agreement or the other Loan Documents or any action
taken or omitted by the Agent under this Agreement or the other Loan
Documents; provided, however, that no Lender shall be liable for any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the
Agent's or any such Affiliate's gross negligence or wilful misconduct.
Without limitation of the foregoing, each Lender agrees to reimburse the
Agent promptly upon demand for its ratable (determined as set forth above in
this Section 9.5) share of any out-of-pocket expenses (including, without
limitation, fees and disbursements of legal counsel) incurred by the Agent
in connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of its rights or
responsibilities under, this Agreement or any of the other Loan Documents,
to the extent that the Agent is not reimbursed for such expenses by the
Borrower or another Loan Party.
9.6. Successor Agent. The Agent may resign only with the
consent of each Lender, if any, who was an original signatory hereto as a
Lender (collectively, the "Initial Lenders") (which consent shall not be
unreasonably withheld), and upon written notice thereof to the Borrower, and
may be removed upon the written consent of the Majority Lenders if the Agent
shall have acted with gross negligence or willful misconduct as determined by
a final judgment of a court of competent jurisdiction. Upon any such
resignation, the Majority Lenders shall have the right to appoint a
successor Agent that is reasonably satisfactory to the Borrower. If no
successor Agent shall have been so appointed by the Majority Lenders, and
shall have accepted such appointment, within 30 days after the retiring
Agent's receipt of consent from the Initial Lenders to so resign, then the
retiring Agent may, on behalf of the Lenders, appoint a successor Agent,
which shall be a commercial bank organized under the laws of the United
States of America or of any State thereof and having a combined capital and
surplus of at least $100,000,000. Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and
duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations under this Agreement and the other Loan
Documents. After any retiring Agent's resignation hereunder as Agent, the
provisions of this Article IX shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Agreement and
the other Loan Documents. Upon any such succession, references in Section 9.3
to Citicorp USA shall be deemed to refer to each such successor acting as
the Agent. The Borrower shall be given prompt notice by the Successor Agent
of its appointment hereunder.
ARTICLE X
MISCELLANEOUS
10.1. Amendments, Etc. Except as expressly provided elsewhere in
this Agreement to the contrary, no amendment or waiver of any provision of
this Agreement nor consent to any departure by the Borrower therefrom shall
in any event be effective unless the same shall be in writing and signed by
the Majority Lenders, and then any such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given;
provided, however, that no amendment, waiver or consent shall, unless in
writing and signed by all the Lenders, do any of the following: (a) waive
any of the conditions specified in Article III except as otherwise provided
therein, (b) increase the Revolving Credit Commitments of the Lenders or
subject the Lenders to any additional obligations, (c) reduce the principal
of, or interest (including default interest) on, the Revolving Credit Loans
or any fees or other amounts payable hereunder (other than the waiver of the
right to receive default interest), (d) postpone any date fixed for any
payment of principal of, or interest on, the Revolving Credit Loans or any
fees or other amounts payable hereunder, (e) change the percentage of the
Revolving Credit Commitments or the aggregate unpaid principal amount of the
Revolving Credit Loans which shall be required for the Lenders or any of
them to take any action hereunder, (f) release any of the Collateral, except
as shall otherwise be provided for herein or in the Collateral Documents,
(g) release any Guarantor from a Guaranty, except as shall otherwise be
provided in such Guaranty and except for any Guarantor which in accordance
with the terms hereof ceases to be a Subsidiary, (h) waive any failure by
the Borrower to attain the Cumulative EBITDA set forth in the definition of
"Trigger Event" or waive or amend Section 2.4(b), (i) waive or amend Section
2.15(e), or (j) amend this Section 10.1 or the definition of the terms
"Borrowing Base" (including increasing the advance rates set forth in the
Borrowing Base Certificate but excluding any changes to the reserves referred
to therein and any reduction in value as a result of the sale of certain
assets referred to therein, each of which shall be determined by the Agent,
and excluding the eligibility requirements relating thereto which are to be
determined by the Majority Lenders), "Majority Lenders" and "Trigger Event"
contained in Section 1.1; and provided further that no amendment, waiver or
consent shall, unless in writing and signed by the Agent in addition to the
Lenders required above to take such action, affect the rights or duties of
the Agent under this Agreement or the other Loan Documents; and provided,
further that no amendment, waiver or consent shall, unless in writing and
signed by each Issuer in addition to the Lenders required above to take such
action, affect the rights and duties of the Issuers under this Agreement or
the other Loan Documents.
10.2. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including, without limitation,
by telecopy) and mailed by postage prepaid registered mail, return receipt
requested, telecopied or delivered by hand, if to the Borrower, at
Huntsville, Alabama 35894-0001 (telecopy number: (205) 730-2742) (telephone
number: (205) 730-2000), Attention: Chief Financial Officer; if to any
Lender, at its Domestic Lending Office specified opposite its name on
Schedule II; if to any Issuer, at its address specified opposite its name on
Schedule III; if to the Agent for all notices and other communications other
than those required to be provided pursuant to Sections 6.11 and 6.12, at
its address at 399 Park Avenue, New York, New York 10043 (telecopy number
(212) 793-1290)(telephone number: (212) 559-4659), Attention: Timothy L.
Freeman; and if to the Agent for all notices and other communications
required to be provided pursuant to Sections 6.11 and 6.12, at its address at
One Court Square, Long Island City, New York 11120, (telecopy number (718)
248-4480), (telephone number (718) 248-4657), Attention: Jeff Stern; or, as
to the Borrower, any Lender, any Issuer or the Agent, at such other address
as shall be designated by such party in a written notice to the other parties
and, as to each other party, at such other address as shall be designated by
such party in a written notice to the Borrower and the Agent. All such
notices and communications shall, when mailed, telecopied or delivered, be
effective three Business Days after being deposited in the mails, when
telecopied with confirmation of receipt or when delivered by hand to the
addressee or its agent, respectively, except that notices and communications
to the Agent pursuant to Article II or IX shall not be effective until
received by the Agent.
10.3. No Waiver; Remedies. No failure on the part of any Lender
or the Agent to exercise, and no delay in exercising, any right hereunder or
under any Revolving Credit Note shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right preclude any other or
further exercise thereof or the exercise of any other right. The remedies
herein provided are cumulative and not exclusive of any remedies provided by
law.
10.4. Costs; Expenses; Indemnities. (a) The Borrower agrees to
pay promptly after a demand therefor (i) all reasonable out-of-pocket costs
and expenses of the Agent in connection with the preparation, execution,
delivery, administration, modification and amendment of this Agreement, each
of the other Loan Documents and each of the other documents to be delivered
hereunder and thereunder, including, without limitation, (A) the reasonable
fees and out-of-pocket expenses of Weil, Gotshal & Manges, counsel to the
Agent and all other attorneys fees incurred by the Agent, (B) all search,
filing and recording fees (including, sales, excise and similar taxes), and
all due diligence, syndication (including printing, distribution and bank
meetings), transportation, computer, duplication, messenger and audit costs
and expenses, and (C) fees and out-of-pocket expenses of accountants,
appraisers, consultants or industry experts retained by the Agent with
respect hereto, and (ii) all costs and expenses of the Agent, each Issuer
and each Lender in connection with the restructuring or enforcement (whether
through negotiation, legal proceedings or other wise) of this Agreement and
the other Loan Documents (including, without limitation, the reasonable fees
and out-of-pocket expenses of counsel, accountants, appraisers, consultants
or industry experts retained in connection therewith by the Agent, any Issuer
or any Lender).
(b) The Borrower agrees to indemnify and hold harmless the
Agent, each Issuer and each Lender and their respective Affiliates, and the
directors, officers, employees, agents, attorneys, consultants and advisors
of or to any of the foregoing (including, without limitation, those retained
in connection with the satisfaction or attempted satisfaction of any of the
conditions set forth in Article III) (each of the foregoing being an
"Indemnitee") from and against any and all claims, damages, liabilities,
obligations, losses, penalties, actions, judgments, suits, costs,
disbursements and expenses of any kind or nature (including, without
limitation, fees and disbursements of counsel to any such Indemnitee) which
may be imposed on, incurred by or asserted against any such Indemnitee in
connection with or arising out of any investigation, litigation or
proceeding, whether or not any such Indemnitee is a party thereto, whether
direct, indirect, or consequential and whether based on any federal, state
or local law or regulation, under common law or in equity, on contract, tort
or otherwise, in any manner relating to or arising out of this Agreement,
any other Loan Document, any Obligation, any Letter of Credit, or any act,
event or transaction related or attendant to any thereof, including, without
limitation, (i) all Environmental Liabilities and Costs arising from or
connected with the past, present or future operations of the Borrower or any
of its Subsidiaries involving any property subject to a Collateral Document,
or damage to real or personal property or natural resources or harm or
injury alleged to have resulted from any Release of Contaminants on, upon or
into such property or any contiguous real estate, (ii) any costs or
liabilities incurred in connection with any Remedial Action undertaken or
required to be taken by the Borrower or any of its Subsidiaries, (iii) any
costs or liabilities incurred in connection with any Environmental Lien,
(iv) any costs or liabilities incurred in connection with any other matter
under any Environmental Law, including, without limitation, CERCLA and
applicable state property transfer laws, whether, with respect to any of the
foregoing, such Indemnitee is a mortgagee pursuant to any leasehold mortgage,
a mortgagee in possession, the successor in interest to the Borrower or any
of its Subsidiaries, or the owner, lessee or operator of any property of the
Borrower or any of its Subsidiaries by virtue of foreclosure or the exercise
of other rights provided by any of the Collateral Documents, except, with
respect to any of the foregoing referred to in clauses (i), (ii), (iii) and
(iv), as set forth in the following proviso or to the extent incurred
following foreclosure by the Agent, any Issuer or any Lender, or the Agent,
any Issuer or any Lender having become the successor in interest to the
Borrower or any of its Subsidiaries, and attributable solely to acts of the
Agent, such Issuer or such Lender or any agent on behalf of the Borrower,
such Issuer or such Lender (and not to the acts of the Borrower, any of its
Affiliates or any other Person), (v) the making of any assignments of or
participations in the Revolving Credit Loans or Letters of Credit in
accordance with the terms of this Agreement and the management of such
Revolving Credit Loans and Letters of Credit, (vi) the use or intended use
of the proceeds of the Revolving Credit Loans or Letters of Credit or (vii)
in connection with any investigation of any potential matter covered hereby
(collectively, the "Indemnified Matters"); provided, however, that the
Borrower shall not have any obligation under this Section 10.4(b) to an
Indemnitee with respect to any Indemnified Matter caused by or resulting
from the gross negligence or willful misconduct of that Indemnitee, as
determined by a court of competent jurisdiction in a final non-appealable
judgment or order, but in no event shall any Indemnitee be liable for any
exemplary or punitive damages to the extent permitted by applicable law.
(c) If any Lender receives any payment of principal of, or is
subject to a conversion of, any Eurodollar Rate Loan other than on the last
day of an Interest Period relating to such Eurodollar Rate Loan, as a result
of any payment or conversion made by the Borrower or acceleration of the
maturity of the Revolving Credit Loans pursuant to Section 8.2 or for any
other reason, the Borrower shall, upon demand by such Lender (with a copy of
such demand to the Agent), pay to the Agent for the account of such Lender
all amounts required to compensate such Lender for any additional losses,
costs or expenses which it may reasonably incur as a result of such payment
or conversion, including, without limitation, any loss (including, without
limitation, loss of anticipated profits), cost or expense incurred by reason
of the liquidation or reemployment of deposits or other funds acquired by
such Lender to fund or maintain such Eurodollar Rate Loan, assuming for such
purpose that such Lender has funded such Eurodollar Rate Loan in the London
interbank eurodollar market with a loan of the same amount and Interest
Period as such Eurodollar Rate Loan.
(d) The Borrower shall indemnify the Agent, the Issuers and the
Lenders for, and hold the Agent, the Lenders and the Issuers harmless from
and against, any and all claims for brokerage commissions, fees and other
compensation made against the Agent, the Issuers and the Lenders for any
broker, finder or consultant with respect to any agreement, arrangement or
understanding made by or on behalf of the Borrower or any of its Subsidiaries
in connection with the financing contemplated by this Agreement.
(e) The Borrower agrees that any indemnification or rights in
respect thereof provided to any Indemnitee pursuant to this Agreement
(including, without limitation, pursuant to this Section 10.4) or any other
Loan Document shall (i) survive payment of the Obligations and (ii) inure to
the benefit of any Person who was at any time an Indemnitee under this
Agreement or any other Loan Document.
10.5. Right of Set-off. Upon the occurrence and during the
continuance of any Event of Default, each Lender and each Issuer is hereby
authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by such Lender or such Issuer to or for the
credit or the account of the Borrower against any and all of the Obligations
now or hereafter existing irrespective of whether or not such Lender or such
Issuer shall have made any demand under this Agreement or any Revolving
Credit Note or any Reimbursement Agreement or any other Loan Document and
although such Obligations may be unmatured. Each Lender and each Issuer
agrees promptly to notify the Borrower after any such set-off and
application made by such Lender; provided, however, that the failure to give
such notice shall not affect the validity of such setoff and application.
The rights of each Lender and each Issuer under this Section 10.5 are in
addition to the other rights and remedies (including, without limitation,
other rights of set-off) which such Lender or such Issuer may have.
10.6. Binding Effect. This Agreement shall become effective when
it shall have been executed by the Borrower and the Agent and when the Agent
shall have been notified by each Lender and each Issuer that the Lenders and
the Issuers have executed it and thereafter shall be binding upon and inure
to the benefit of the Borrower, the Agent, each Lender and each Issuer and
their respective successors and permitted assigns, except that the Borrower
shall not have the right to assign its rights hereunder or any interest
herein without the prior written consent of the Lenders and the Agent.
10.7. Assignments and Participations. (a) With the consent of
the Agent (which consent shall not be unreasonably withheld), each Lender
may sell, transfer, negotiate or assign to one or more Eligible Assignees
all or a portion of its Revolving Credit Commitment, to issue Letters of
Credit, the Revolving Credit Loans and Letter of Credit Obligations owing to
it and the Revolving Credit Note held by it and a commensurate portion of
its rights and obligations hereunder and under the other Loan Documents, and
any other sale, transfer, negotiation or assignment shall require the consent
of the Borrower and the Agent (each of whose consent shall not be
unreasonably withheld), except that during the continuance of a Default or
an Event of Default, no such consent of the Borrower shall be necessary;
provided, however, that the aggregate amount being assigned pursuant to each
such assignment (determined as of the date of the Assignment and Acceptance
with respect to such assignment) shall in no event (if less than the
Assignor's entire interest) be less than $5,000,000 or an integral multiple
of $1,000,000 in excess thereof. The parties to each assignment shall
execute and deliver to the Agent, for its acceptance and recording, an
Assignment and Acceptance, together with the Revolving Credit Notes subject
to such assignment. Upon such execution, delivery, acceptance and recording
and the receipt by the Agent from the assignee in respect thereof of an
assignment fee in the amount of $3,000, from and after the effective date
specified in such Assignment and Acceptance, (A) the assignee thereunder shall
become a party hereto and, to the extent that rights and obligations under the
Loan Documents have been assigned to such assignee pursuant to such Assignment
and Acceptance, have the rights and obligations of a Lender, and if such
Lender was an Issuer, of an Issuer hereunder and thereunder, and (B) the
assignor thereunder shall, to the extent that rights and obligations under
this Agreement have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights (except those which survive the payment
in full of the Obligations) and be released from its obligations under the
Loan Documents, other than those relating to events or circumstances
occurring prior to such assignment (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's
rights and obligations under the Loan Documents, such Lender shall cease to
be a party hereto).
(b) By executing and delivering an Assignment and Acceptance,
the Lender assignor thereunder and the assignee thereunder confirm to and
agree with each other and the other parties hereto as follows: (i) other
than as provided in such Assignment and Acceptance, such assigning Lender
makes no representation or warranty and assumes no responsibility with
respect to any of the statements, warranties or representations made in or
in connection with this Agreement or any other Loan Document furnished
pursuant thereto or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or any other Loan
Document or any other instrument or document furnished pursuant hereto or
thereto; (ii) such assigning Lender makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower or any of its Subsidiaries or the performance or observance by any
Loan Party of any of its obligations under this Agreement or any other Loan
Document or of any other instrument or document furnished pursuant hereto or
thereto; (iii) such assigning Lender confirms that it has delivered to the
assignee and the assignee confirms that it has received a copy of this
Agreement and each of the Loan Documents together with a copy of the most
recent financial statements delivered by the Borrower to the Lenders pursuant
Section 6.11 (or if no such statements have been delivered, the financial
statements referred to in Section 4.5 of this Agreement) and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance; (iv) such
assignee will, independently and without reliance upon the Agent, such
assigning Lender or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Agreement;
(v) such assignee confirms that it is an Eligible Assignee; (vi) such
assignee appoints and authorizes the Agent to take such action as agent on
its behalf and to exercise such powers under this Agreement and the other
Loan Documents as are delegated to the Agent by the terms hereof and thereof,
together with such powers as are reasonably incidental hereto and thereto;
(vii) Sections 2.12(f) and 10.7 have been complied with; and (viii) such
assignee agrees that it will perform in accordance with their terms all of
the obligations which by the terms of this Agreement are required to be
performed by it as a Lender and if such assignor Lender was an Issuer, as an
Issuer.
(c) The Agent shall maintain at its address referred to in
Section 10.2 a copy of each Assignment and Acceptance delivered to and
accepted by it and a register for the recordation of the names and addresses
of the Lenders and the Revolving Credit Commitment of, commitment, if any, to
issue Letters of Credit, Letter of Credit Obligations owing to, and
principal amount of the Revolving Credit Loans owing to each Lender from
time to time (the "Register"). The entries in the Register shall be
conclusive and binding for all purposes, absent manifest error, and the Loan
Parties, the Agent and the Lenders may treat each Person whose name is
recorded in the Register as a Lender or an Issuer, as the case may be, for
all purposes of this Agreement. The Register shall be available for
inspection by the Borrower, the Agent or any Lender at any reasonable time
and from time to time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender and an assignee representing that it is an Eligible
Assignee, together with the Revolving Credit Note subject to such assignment,
the Agent shall, if such Assignment and Acceptance has been completed, (i)
accept such Assignment and Acceptance, (ii) record the information contained
therein in the Register and (iii) give prompt notice thereof to the Borrower.
Within 10 Business Days after its receipt of such notice and a request
therefor, the Borrower, at its own expense, shall execute and deliver to the
Agent, in exchange for such surrendered Revolving Credit Note, a new
Revolving Credit Note to the order of such Eligible Assignee in an amount
equal to the Revolving Credit Commitment assumed by it pursuant to such
Assignment and Acceptance and, if the assigning Lender has retained a
Revolving Credit Commitment hereunder, a new Revolving Credit Note to the
order of the assigning Lender in an amount equal to the Revolving Credit
Commitment retained by it hereunder. Each such new Revolving Credit Note
shall be dated the same date as the surrendered Revolving Credit Note and be
in substantially the form of Exhibit A.
(e) In addition to the other assignment rights provided in this
Section 10.7, each Lender may assign, as collateral or otherwise, any of its
rights under this Agreement (including, without limitation, rights to
payments of principal or interest on the Revolving Credit Note) to any
Federal Reserve Bank without notice to or consent of the Borrower or the
Agent; provided, however, that no such assignment shall release the
assigning Lender from any of its obligations hereunder. The terms and
conditions of any such assignment and the documentation evidencing such
assignment shall be in form and substance satisfactory to the assigning
Lender and the assignee Federal Reserve Bank.
(f) Each Lender may sell participations to one or more banks or
other Persons in or to all or a portion of its rights and obligations under
the Loan Documents (including, without limitation, all or a portion of its
Revolving Credit Commitment, commitment, if any, to issue Letters of Credit,
the Letter of Credit Obligations owing to it, the Revolving Credit Loans
owing to it and the Revolving Credit Notes held by it). The terms of such
participation shall not, in any event, require the participant's consent to
any amendments, waivers or other modifications of any provision of any Loan
Documents, the consent to any departure by any Loan Party therefrom, or to
the exercising or refraining from exercising any powers or rights which such
Lender may have under or in respect of the Loan Documents (including,
without limitation, the right to enforce the obligations of the Loan
Parties), except if any such amendment, waiver or other modification or
consent would (i) reduce the amount, or postpone any date fixed for, any
amount (whether of principal, interest or fees) payable to such participant
under the Loan Documents, to which such participant would otherwise be
entitled under such participation or (ii) result in the release of all or
substantially all of the Collateral other than in accordance with the Loan
Documents. In the event of the sale of any participation by any Lender, (A)
such Lender's obligations under the Loan Documents (including, without
limitation, its Revolving Credit Commitment and commitment, if any,
hereunder to issue Letters of Credit) shall remain unchanged, (B) such
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations, (C) such Lender shall remain the holder of
such Revolving Credit Note and the Obligations for all purposes of this
Agreement, and (D) the Borrower, the Agent and the other Lenders shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement.
(g) In addition to the other assignment rights provided in this
Section 10.7, any Issuer may at any time assign, in whole or in part, its
rights and obligations hereunder to any other Lender, any Affiliate of any
Lender or any other financial institution mutually acceptable to the Agent
and the Borrower, in each case, by an instrument in form and substance
satisfactory to the Agent and the parties thereto.
(h) Subject to clause (D) of the last sentence of Section
10.7(f), each participant shall be entitled to the benefits of Sections 2.10
and 2.12 as if it were a Lender; provided, however, that anything herein to
the contrary not withstanding, the Borrower shall not, at any time, be
obligated to pay, in the aggregate, to or for the benefit of the participants
of the interest of any Lender and such Lender, under Section 2.10 or 2.12,
any sum in excess of the sum which the Borrower would have been obligated to
pay to such assigning Lender in respect of such interest had such
participations not been sold.
10.8. Governing Law. This Agreement and the Revolving Credit
Notes and the rights and obligations of the parties hereto and thereto shall
be governed by, and construed and interpreted in accordance with, the law of
the State of New York.
10.9. Submission to Jurisdiction; Service of Process. (a) Any
legal action or proceeding with respect to this Agreement or the Revolving
Credit Notes or any document related hereto or thereto may be brought in the
courts of the State of New York or of the United States of America for the
Southern District of New York and, by execution and delivery of this
Agreement, the Borrower hereby accepts for itself and in respect of its
property, generally and unconditionally, the jurisdiction of the aforesaid
courts. The parties hereto hereby irrevocably waive any objection,
including, without limitation, any objection to the laying of venue or based
on the grounds of forum non conveniens, which any of them may now or
hereafter have to the bringing of any such action or proceeding in such
respective jurisdictions.
(b) The Borrower irrevocably consents to the service of process
of any of the aforesaid courts in any such action or proceeding by the mailing
of a copy thereof by registered or certified mail, postage prepaid, to the
Borrower at its address provided herein.
(c) Nothing contained in this Section 10.9 shall affect the
right of the Agent, any Lender, any Issuer or any holder of a Revolving
Credit Note to serve process in any other manner permitted by law or
commence legal proceedings or otherwise proceed against the Borrower in any
other jurisdiction.
10.10. Section Titles. The Section titles contained in this
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement among the parties hereto.
10.11. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto on
separate counterparts, each of which when so executed shall be deemed to be
an original and all of which taken together shall constitute one and the same
agreement.
10.12. Entire Agreement. This Agreement, together with all of
the other Loan Documents, embody the entire agreement of the parties and
supersedes all prior agreements and understandings relating to the subject
matter hereof.
10.13. Confidentiality. Each Lender, the Agent and each Issuer
agree to keep information obtained by it pursuant hereto and the other Loan
Documents confidential in accordance with such Lender's, the Agent's or such
Issuer's, as the case may be, customary practices and agrees that it will
only use such information in connection with the financing contemplated by
this Agreement and not disclose any of such information other than (a) to
such Lender's, the Agent's or such Issuer's, as the case may be, employees,
representatives, agents and affiliates who are or are expected to be
involved in the evaluation of such information in connection with the
financing contemplated by this Agreement and who are advised of the
confidential nature of such information, (b) to the extent such information
presently is or hereafter becomes available to such Lender, the Agent or such
Issuer, as the case may be, on a non-confidential basis from a source other
than the Borrower or any of its Subsidiaries, (c) to the extent disclosure is
required by law, regulation or judicial order or requested or required by any
bank regulator or auditor, or (d) to assignees or participants or potential
assignees or participants who agree in writing for the benefit of the
Borrower to be bound by the provisions of this sentence.
10.14. Waiver of Jury Trial. Each of the parties hereto waives
any right it may have to trial by jury in respect of any litigation based
on, or arising out of, under or in connection with this Agreement or any
other Loan Document, or any course of conduct, course of dealing, verbal or
written statement or action of any party hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers thereunto duly authorized, as of
the date first above written.
INTERGRAPH CORPORATION
By: /s/ James H. Dorton
-------------------------
Name: James H. Dorton
Title: Treasurer
CITICORP USA, INC.,
as Agent
By: /s/ Timothy L. Freeman
--------------------------
Name: Timothy L. Freeman
Title: Atty In-fact
Lenders
CITICORP USA, INC.
By: /s/ Timothy L. Freeman
--------------------------
Name: Timothy L. Freeman
Title: Atty In-fact
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Elaine L. Moore
--------------------------
Name: Elaine L. Moore
Title: Senior Vice President as Duly Authorized
INTERNATIONALE NEDERLANDEN BANK N.V.
By: /s/ C.W.M.H. Schoermakers /s/ W.G.M. v. Baars
-------------------------------------------------
Name:
Title: C.W.M.H. Schoermakers W.G.M. v. Baars
General Manager Managing Director
Corporate Banking Corporate Banking
MERIDIAN COMMERCIAL FINANCE
CORPORATION
By: /s/ Christopher J. Calabrese
--------------------------------
Name: Christopher J. Calabrese
Title: Vice President
SANWA BUSINESS CREDIT CORPORATION
By: /s/ Peter L. Skavla
-----------------------------
Name: Peter L. Skavla
Title: Vice President
Issuers:
--------
CITIBANK, N.A.
By: /s/ Timothy L. Freeman
------------------------
Name: Timothy L. Freeman
Title: Atty In-fact
<TABLE>
Five-Year Financial Summary
<CAPTION>
- ----------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------
(In thousands except per share amounts)
<S> <C> <C> <C> <C> <C>
Revenues $1,097,978 $1,041,403 $1,050,277 $1,176,661 $1,195,378
Restructuring charge (credit) 6,040 ( 4,826) 89,806 4,418 ---
Net income (loss) ( 45,348) ( 70,220) (116,042) 8,442 71,108
Net income (loss) per share ( .98) ( 1.56) ( 2.51) .18 1.47
Working capital 261,140 282,893 348,756 430,974 502,152
Total assets 826,045 839,618 855,329 986,663 996,615
Total debt 69,541 61,114 26,606 21,887 27,661
Shareholders' equity 504,064 522,337 588,710 736,863 754,994
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Summary. Over the past several years, the industry in which the Company
competes has been characterized by rapidly changing technologies, a move to
higher performance, lower priced product offerings, intense price and
performance competition, shorter product cycles, and by development and
support of software standards that result in less specific hardware and
software dependencies by customers. During late 1992 and 1993, the Company
made strategic decisions regarding its operating systems and hardware
architecture designed to better position the Company to effectively compete
in this environment.
Operating Systems. In November 1992, the Company announced its decision to
port its technical software applications to Microsoft Corporation's Windows
NT operating system, and to make Windows NT available on Intergraph
workstations. Microsoft's standard Windows system has been widely accepted
in the personal computing (PC) market, and Windows NT is Microsoft's
operating system for high-end computing. The effect of this decision has
been to expand the availability of the Company's workstations and software
applications to Windows-based computing environments not previously addressed
by the Company, including the availability of Intergraph software
applications that operate across a variety of hardware architectures,
including those of other hardware vendors that use the Windows NT operating
system. Prior to this decision, the Company's software applications operated
principally on Intergraph hardware platforms. At the same time, the Company
has continued to enhance and maintain products in the UNIX operating system
environment, the foundation for its software applications prior to Windows
NT, thereby offering existing and potential customers a choice of UNIX or
Windows NT operating systems as well as a path to the Windows NT system if
and when the customer chooses. Limited shipments of Windows NT-based
software began in the fourth quarter of 1993. As of the end of 1994,
the Company had completed the port of its applications software to Windows
NT for all applications scheduled for conversion, and sales of Windows-based
software grew to represent 48% of software revenues in 1994 and 70% in 1995.
Hardware Architecture. The Company believes that Intel Corporation's
hardware architecture has an important role in the computing markets it
serves. During the last half of 1993, the Company began to offer a hardware
platform (in addition to its own) based on Intel microprocessors.
Previously, the Company's hardware platform offering had been based on
its own microprocessor. The Company ceased design of its microprocessor
at the end of 1993, and Intel-based systems grew to represent 74% of
hardware unit sales in 1994 and 95% in 1995.
Operating Results During Transition. These industry conditions and
resulting changes in operating system and hardware architecture strategies
resulted in a transition period for the Company characterized by revenues
that declined from 1992 through 1994, by restructuring charges in 1993 and
1995, and by annual net losses since 1993. The Company lost $2.51 per share
in 1993, the result of a 15% decline in systems revenue, an 8.8 point
decline in systems gross margin, and a $1.34 per share charge for
restructuring of the business to effect the new strategies. Systems revenue
declined a further 1% in 1994 which, together with an additional systems
margin decline of 5.1 points and the expiration of tax loss benefits,
produced a net loss for 1994 of $1.56 per share. In 1995, the Company lost
$.98 per share, but increased its systems revenue by 7%, reduced its
operating expenses by 4% from the 1994 level, and earned its first quarterly
profit since 1992 in the fourth quarter.
The Company believes that its transition period is substantially completed,
and that its new operating system and hardware architecture strategies, the
availability of new products, and the cost benefits of the restructuring of
its business will restore full year profitability in 1996. However, to
achieve sustained profitability the Company must substantially increase
sales volume while continuing to control cost. The Company believes that
industry trends toward high performance, lower priced products, intense
competition, and rapidly changing technology will continue, and that
improvement in its operating results will further depend on the ability to
accurately anticipate customer requirements and technological trends and to
rapidly and continuously develop and deliver new hardware and software
products that are competitively priced, deliver enhanced performance, and
meet customer requirements for standardization and interoperability. In
addition, while the Company believes Windows NT will become the dominant
operating system in the markets it serves, acceptance of this system by
customers has been slower than anticipated, and adoption of any new
operating system requires considerable effort by customers, the timing of
which is unpredictable. Competing operating systems are available in the
market, and several competitors of the Company offer or are adopting Windows
NT as operating systems for their products. There can be no assurance that
the Windows NT operating system will become dominant in the markets served
by the Company or that the Company's new strategies will restore
profitability.
Restructuring Charges. The strategic decisions described above led to
actions that resulted in an $89.8 million pretax restructuring charge in
1993 ($61.7 million after related tax benefit, or $1.34 per share). The
1993 restructuring charge was comprised of $10.5 million for direct
workforce reductions, $17.1 million for elimination of operations, primarily
the Company's European manufacturing and distribution facility (IEM), $56.1
million for revaluation of assets resulting from new product strategies
(primarily spares inventory, goodwill, and investments in other companies),
and $6.1 million for restructuring of the Company's electronics business.
The Company's 1993 restructuring plan has been completed substantially as
planned, with the exception of disposition of the IEM facility. In the
fourth quarter of 1994, the Company determined that it would utilize a
portion of this facility as a distribution center for Europe and began to
do so in early 1995. All manufacturing activity continues to be performed in
the U.S. Included in the statement of operations for the year ended
December 31, 1994, is a $4.8 million credit representing reversal of the
remaining unincurred portion of the restructuring charge related to IEM.
The Company estimates that restructuring actions taken in 1993 have reduced
annual operating expenses by approximately $50 million, as expected,
primarily in the areas of selling, product support, and product development
expenses. However, the beneficial effect of these savings has been partially
offset to date by the continuing decline in systems margins and by increases
in certain sales and marketing expenses. Cash outlays during 1994 related
to the 1993 restructuring were approximately $10 million ($1 million in
1995), which were less than anticipated, primarily for severance pay and
associated personnel costs, all of which were funded by cash from operations
or borrowings under credit facilities. There are no significant remaining
cash requirements from the 1993 restructuring, and the Company expects no
long-term adverse effects on its liquidity and sources and uses of capital.
During the second quarter of 1995, the Company undertook a second
restructuring program designed to further adapt the Company's cost
structure to the changed industry and market conditions described above.
The program as originally planned consisted of direct reductions in
workforce, other workforce reductions through attrition, and disposition of
four unprofitable business units over the twelve month period ending June
30, 1996. The program, had it been fully executed with respect to the four
business units, would have provided an operating expense reduction of
approximately $100 million annually on a prospective basis. Of this total
anticipated annual savings, approximately $66 million was to be derived from
disposition of the four business units. Subsequent to formulation of the
restructuring plan, the Company determined that, based on their improved
profitability outlook, future prospects, and strategic value to other
business units, two of the original four business units designated for
disposal (representing $45 million of the original $100 million in
annual operating expense reduction) will not currently be considered for
disposal. This revision to the original plan, together with adjustments
relating to the final workforce reduction via attrition, has resulted in
a revised total anticipated annual operating expense reduction under the
June 1995 restructuring plan of approximately $50 million, if the two
business units being considered for disposal are sold. Revenues and losses
of the two business units that continue to be considered for disposal, both
of which develop computer products for the printing and publishing industry,
totaled $43 million and $7 million, respectively, for 1995, and their total
assets are approximately $25 million. The Company anticipates disposal of
these two business units by sale to third parties. The Company does not
have committed buyers for these two business units but does not anticipate
incurrence of a loss on sale of the units.
The 1995 restructuring charge totaled $6 million, primarily for employee
severance pay and related costs. Approximately 450 positions were
eliminated through direct reductions in workforce, with approximately 350
others eliminated through attrition. All employee groups were affected,
but the majority of eliminated positions derived from the research and
development, systems engineering and support, and sales and marketing areas.
Cash expenditures related to the restructuring totaled $3.6 million through
December 31, 1995, with an insignificant amount to be paid in 1996. The
$6 million charge is included in "Restructuring charge" in the 1995
consolidated statement of operations.
Orders. Systems orders for 1995 were $717 million, a 12% increase over
the prior year after an increase of 2% in 1994 and a 23% decline in 1993.
Orders in 1993 were adversely affected by product transition and general
economic weakness, particularly in the Company's primary U.S. and European
markets. Product transition similarly affected 1994 orders as did slower
than anticipated customer acceptance of the Windows NT operating system.
The Company's product transition carried over into 1995, but with growing
availability of new products and gradually increasing acceptance of the
Windows NT operating system, orders sequentially improved with each quarter
to end the year with a 12% increase over 1994.
Geographic Regions. European orders totaled $232 million for the year, up
19% after declines of 4% and 30% in the two preceding years. The Company
believes acceptance of the Windows NT operating system to be slower in
Europe than in other regions in which the Company operates, but momentum was
evident in the third and fourth quarters of 1995 with the winning of several
large individual orders. U.S. orders, including federal government orders,
totaled $353 million for the year, up 11% after a 1% increase in 1994 and a
26% decline in 1993. Weakness in the U.S. commercial market sector,
primarily in the Company's indirect selling channels, was offset by stronger
orders from the federal government and in the Company's U.S. divisional
operations. Other international systems orders totaled $132 million, up
2% after a 12% increase in 1994 and flat orders in 1993.
NAVAIR Contract. In July 1994, the U.S. Navy awarded the Company the Naval
Air Systems Command and Space and Naval Warfare Command contract ("NAVAIR
and SPAWAR") to provide computer-aided design, manufacturing and engineering
(CAD/CAM/CAE) systems and services for electronics and mechanical
applications. The contract is an indefinite delivery, indefinite quantity
(IDIQ) contract. IDIQ contracts generally provide for the purchase of
indefinite quantities of goods and services, with stated minimum and maximum
amounts eligible for order, and with deliveries scheduled by placing
specific orders with the vendor. Funding for other than the stated minimum
quantities is obligated by each delivery order and not by the contract
itself. The estimated maximum value of the NAVAIR/SPAWAR contract is $398
million, and the term of the contract is twelve years, assuming all optional
annual renewals of the contract are exercised. Under the terms of the
contract, the customer is obligated to purchase only $1 million in systems
and services, and there can be no assurance that the Company will receive
orders for the maximum value of the contract. Products and services are
sold to the Navy over the term of the contract at firm, fixed prices, with
escalation of certain prices allowed under certain circumstances. Given
the nature of the contract, the Company cannot determine the amount of
orders that will be received or anticipate the level of annual revenues over
the term of the contract. Orders and revenues under this contract in 1995
were not significant to the Company's results of operations.
Soon after the original award, the NAVAIR/SPAWAR contract was formally
protested by one of the losing bidders. The Company supported the efforts
of the Navy in defending against the protest, and in October 1994, the
Company was notified that the original award was upheld. This holding is
currently being appealed through the federal court system, and the Company
is awaiting the outcome of the appeals process. The Company does not
expect this process to significantly delay orders and revenues under the
contract.
Revenues. Total revenues for 1995 of $1.10 billion were up 5% for the
year, representing the first annual increase in revenues since 1991.
Revenues declined by 1% in 1994 and 11% in 1993.
Systems. Sales of Intergraph systems in 1995 were $710 million, up 7% after
declines of 1% and 15% in the two preceding years. Factors previously cited
as adversely affecting systems orders also affected systems revenues over
the three-year period. Competitive conditions manifested in declining per
unit sales prices continue to adversely affect the Company's systems
revenues; workstation and server unit volume increased 22% in 1995 and 41%
in 1994, while workstation and server revenue increased only 4% in each of
those years. Systems revenues were flat during the first two quarters of
1995, but with the availability of new products and growing acceptance of
the Company's new product strategies, grew sequentially by 12% in third
quarter and by an additional 12% in fourth quarter, helping provide the
Company's first quarterly profit since 1992.
Geographic Regions. U.S. systems sales, including sales to the federal
government, declined by 6% in 1995 after growth of 7% in 1994 and a decline
of 15% in 1993, reflecting the continuation of product transition and
weakness in U.S. indirect selling channels. European sales were up 19% in
1995 on the strength of third and fourth quarter sales, after particularly
weak years in 1994 (a 12% decline) and 1993 (a 23% decline) due to product
transition and poor economic conditions. Other international systems
sales were up 25% in 1995 after flat 1994 sales and 6% growth in 1993.
Much of the 1995 sales growth occurred in the Asia Pacific region.
Software. Sales of the Company's software declined slightly in 1995, led
by MicroStation, the Company's highest volume software offering, which
declined by 38% from the 1994 level (see Bentley Systems, Inc. section
below), and by the Company's mechanical software applications, which
declined by 23% for the year as customers await the introduction of new
mechanical applications in early 1996. However, sales of the Company's
mapping, plant design, utilities, electronics, and plotting software
applications increased by a combined 34% to soften the effect of the loss
in MicroStation and mechanical sales. In terms of broad market segments,
the Company's mapping/geographic information systems, architecture/
engineering/construction, and mechanical design, engineering and
manufacturing product applications continue to dominate the Company's
product mix at approximately 43%, 34%, and 14%, respectively, of total
systems sales in 1995, representing only a slight change in mix from the
prior two years. Sales of Windows-based software represented approximately
70% of total software sales in 1995, up from approximately 50% in 1994.
UNIX-based software comprised approximately 30% of total 1995 software
sales, down from approximately 50% in 1994.
Federal Government Sales. Total revenue from the United States government
was approximately $159 million in 1995 (15% of total revenue) versus
approximately $167 million in both 1994 and 1993 (16% of total revenue in
both of these years). The Company sells to the U.S. government under
long-term contractual arrangements, primarily IDIQ and cost-plus award fee
contracts, and through commercial sales of products not covered by long-term
contracts. Approximately 45% of total federal government revenues are
earned under long-term contracts. The Company believes its relationship
with the federal government to be good. While it is fully anticipated that
these contracts will remain in effect through their expiration, the
contracts are subject to termination (with damages paid to the Company)
at the election of the government. Any loss of a significant government
contract would have an adverse impact on the results of operations of the
Company.
Bentley Systems, Inc. Through the end of 1994, the Company had an exclusive
license agreement with Bentley Systems, Inc. (BSI), a 50%-owned affiliate
of the Company, under which the Company distributed MicroStation, a
software product developed and maintained by BSI and utilized in many of the
Company's software applications. BSI notified Intergraph in February 1994
that, in its opinion, certain events had occurred that, under the terms of
the license agreement, made the Company's license nonexclusive and, as a
result, BSI could compete with Intergraph in the distribution of
MicroStation and in the development and distribution of additional software
products. The Company disputed that the license agreement had changed and,
pursuant to the license agreement, submitted the dispute to arbitration
under the rules of the American Arbitration Association. Related lawsuits
were filed in February 1994 among BSI, Intergraph, and the other 50%
shareholders of BSI.
In May 1994, the Company and BSI completed negotiations settling this matter
and terminated all related arbitration and lawsuits then pending. Under
the terms of the settlement, the Company's exclusive worldwide license to
distribute MicroStation, including related financial terms, remained in
effect through December 31, 1994. Effective January 1, 1995, both BSI and
the Company were permitted to distribute MicroStation. The Company has a
nonexclusive license to sell MicroStation via its direct sales force, and
to sell MicroStation via its indirect sales channels if MicroStation is
sold with other Intergraph products. In addition, effective January 1,
1995, the per copy fee payable by the Company to BSI was increased and,
for 1995 only, BSI paid the Company a per copy distribution fee based on
BSI's MicroStation sales to resellers.
During 1995, the Company's sales of MicroStation declined by 38% to
approximately $50 million. The Company estimates that this revenue decline,
together with other provisions of the settlement with BSI, adversely
affected its results of operations in 1995 by approximately $17 million,
or $.37 per share. Adverse financial effects of the settlement are
mitigated by the Company's 50% interest in existing and incremental profits,
if any, earned by BSI, and by reduction in the Company's MicroStation
product marketing and support expenses, which have become the responsibility
of BSI. It is possible that the Company's MicroStation sales will be further
reduced, but the Company is at present unable to predict the level of
MicroStation sales that will occur in future years. The Company will not
receive per copy distribution fees from BSI in 1996 (such fees were $7
million in 1995), and will pay per copy fees to BSI at a 31% higher rate
in 1996.
Risks and Uncertainties. In addition to those described elsewhere in this
Management's Discussion and Analysis of Financial Condition and Results of
Operations, the Company has certain business risks related to revenues
earned under long-term contractual arrangements, and to its ability to obtain
patents, trademarks, and copyrights on products it develops, obtain the
patented technology of other companies if required as part of the Company's
product offerings, and obtain third party product licenses, all of which are
important to success in the industry in which the Company does business.
See Notes 1 and 12 of Notes to Consolidated Financial Statements for further
discussion of these risks and uncertainties.
Maintenance and Services. Maintenance and services revenue consists of
revenues from maintenance of Company systems and from Company-provided
training, consulting and other services. These forms of revenue totaled
$388 million in 1995, up 3% after flat revenues in 1994 and 1993.
Maintenance revenues grow as the Company's installed base of systems grows.
The trend in the industry toward lower priced products and longer warranty
periods has reduced the rate of increase in maintenance revenue, and the
Company believes this trend will continue in the future.
Pentium Processors. In late November 1994, it was disclosed that a rare
problem existed with Intel's Pentium microprocessor, which is used in many
of the Company's workstations and servers. The problem related to an
unlikely sequence of operations that could produce a round-off error when
dividing certain numbers and carrying the answer to several decimal places.
The Company had shipped several thousand Pentium processor-based workstations
and servers at that date.
Although the Company had no reason to believe that its customers would
experience this problem, the Company in 1994 committed to a plan of
replacement of all such processors in its customer base. That plan is at
present approximately 80% completed. The Company's business arrangement
with Intel provides warranty coverage of the Pentium microprocessor by
Intel. Neither the discovery of the Pentium problem nor the replacement of
the affected units significantly affected the Company's results of
operations or cash flows in 1994 or 1995, and no significant effects are
expected through completion of the replacement plan in 1996. All shipments
of the Company's workstations and servers since January 1, 1995, have
contained the corrected versions of the Pentium processor.
The Company has ceased design and production of its microprocessor.
Substantially all of the Company's microprocessor needs are currently
supplied by Intel. The Company does not have a fixed quantity commitment
for microprocessors in its agreements with Intel, but believes it has a good
relationship with Intel and is unaware of any reason that Intel might
encounter difficulties in meeting the Company's microprocessor needs. Other
microprocessors are available in the market, but a change by the Company
from Intel to another microprocessor would significantly disrupt the
Company's development and manufacturing activities and result in delayed
or lost sales, which could have a significant adverse effect on the
Company's results of operations and financial position.
Gross Margin. The Company's total gross margin was 39.1% in 1995, down
1.4 points after remaining relatively stable in 1994 and declining by 5.9
points in 1993.
Margin on systems sales declined 1.6 points in 1995, 5.1 points in 1994,
and 8.8 points in 1993. This decline of 15.5 points since 1992 is the
result primarily of competitive pricing conditions in the industry. The
rate of decline in 1995 was limited by a higher percentage of international
to total systems sales (margins earned on international sales are generally
higher than on domestic sales) and by the weakness of the U.S. dollar in
international markets during the year.
The primary reason for the Company's lower systems margin is price
competition, but systems margin may also be lowered by a stronger dollar
in international markets, the effects of technological changes on the value
of existing inventories, and a higher mix of federal government sales, which
generally produce lower margins than commercial sales, to total systems
sales. Systems margins may be improved by higher software content in the
product, a weaker dollar in international markets, a higher mix of
international systems sales to total systems sales, and reductions in prices
of component parts, which generally tend to decline over time in the
industry. The Company is unable to predict the effects that many of these
factors may have, but expects continuing pressure on its systems margin due
primarily to industry price competition.
The industry in which the Company competes is characterized by rapid
technological change. This technological change is an important
consideration in the Company's overall inventory management program, in
which the Company endeavors to carry only parts and systems utilizable with
the technology of its current product offerings and as spares for the
contracted maintenance of systems in its installed customer base. The
Company regularly estimates the degree of technological obsolescence in its
inventories and provides inventory reserves on that basis. Though the
Company believes it has adequately provided for any such declines in
inventory value to date, any unanticipated change in technology could
significantly affect the value of the Company's inventories and thereby
adversely affect margins and reported results of operations.
Margin on maintenance and services revenue declined by 1.1 points in 1995
after improvements of 8.6 points and 1.3 points in the preceding two years.
Improvement in 1994 was the result of changes in product strategy in 1993,
in which oldest generation spare parts were revalued, resulting in lower
obsolescence charges. The Company believes that the trend in the industry
toward lower priced products and longer warranty periods will limit growth
in maintenance revenues, which will pressure maintenance margin in the
absence of corresponding cost reductions or additional consulting services
revenues.
Operating Expenses (exclusive of restructuring charges and credits).
Operating expenses declined by 4% in 1995, 1% in 1994, and 3% in 1993.
The total number of employees of the Company declined by 8% in 1995 after
5% and 8% declines in the two preceding years.
Product development expense declined 19% in 1995 after a 14% decline in
1994 and a 7% increase in 1993. Employee headcount in the development
areas has been significantly reduced over the last two years through the
cessation of microprocessor design activities and through restructuring
actions. In addition, new product development costs qualifying for
capitalization substantially increased in 1995. Sales and marketing expense
increased 2% in 1995 and 10% in 1994 after a 6% decline in 1993. The
Company achieved substantial sales and marketing headcount and related
expense reductions in 1995, but those gains were offset by weakness of the
U.S. dollar in international locations and by expenses of pursuit of new
business in the Asia Pacific region. Savings from restructuring actions in
1993 were offset in 1994 by increased costs of presales support activities
and advertising and promotion costs of the Company's new product offerings.
General and administrative expense declined by 2.5% in 1995, 4% in 1994,
and 10% in 1993. Savings in 1993 and 1994 were the result of workforce
reductions and other cost control measures, partially offset in 1994 by a
$5.5 million write-off of an account receivable from a Middle Eastern
customer. The expense reduction in 1995 was the result of further headcount
reductions, but was limited by the weakness of the U.S. dollar in
international locations and by the increasing level of business activity in
the Asia Pacific region.
The Company capitalizes a portion of the cost of development of new products
and amortizes those costs against revenues later generated by those
products. Though the Company regularly reviews its capitalized development
costs to ensure recognition of any decline in value, it is possible that
revenues will not materialize in amounts anticipated due to industry
conditions that include intense price and performance competition, or that
product lives will be reduced due to shorter product cycles. Should either
of these events occur, the carrying amount of capitalized development costs
would be reduced, producing adverse effects on product development expenses
and results of operations.
Nonoperating Income and Expense. Interest expense was $4.2 million in 1995,
$2.4 million in 1994, and $2.1 million in 1993. Both the Company's average
outstanding debt and average rate of interest have increased over the period.
Through March 1995, the Company had interest rate swap agreements in the
principal amounts of its two European floating rate mortgages (approximately
$20 million for the period the agreements were outstanding). The agreements
were for an original term of two years and were entered into to reduce the
risk of increase in interest rates. The swap agreements expired in March
1995. Under the agreements, the Company paid a fixed rate of interest and
received payment based on a variable rate of interest, and was thus exposed
to market risk of potential future decreases in interest rates. The
weighted average pay and receive rates of the agreements at termination in
1995 were 7.36% and 5.22%, respectively, (7.36% and 5.91%, respectively,
at December 31, 1994). The agreements had an insignificant effect on the
total cash flows of the Company in 1995 and 1994. The Company does no
trading in this form of derivative instrument.
"Other income (expense) - net" in the consolidated statements of operations
consists primarily of foreign exchange losses, other miscellaneous items of
nonoperating income and expense, and nonrecurring charges other than
restructuring. For 1995, the total as shown in the consolidated statement
of operations consists primarily of a gain of $5 million on the sale of a
subsidiary company. The 1994 amount includes a charge of $3.4 million for
write-down of the Company's investments in two affiliates and a gain of
$5.8 million from sale of an investment in an affiliated company. The
1993 amount includes a $3.3 million write-off of an investment in an
affiliated company. Foreign exchange losses were not significant to the
Company's results of operations in any of the three years ended December 31,
1995. See Impact of Currency Fluctuations and Currency Risk Management
section for further details.
Income Taxes. The Company incurred a loss before income tax benefit of
$45.3 million in 1995, $74.2 million in 1994, and a loss before income tax
benefit and the cumulative effect of a change in method of accounting for
income taxes of $172.6 million in 1993. Both the 1995 and 1994 loss
generated minimal net financial statement tax benefit, as the majority of
available tax benefits were exhausted with the 1993 loss or offset by tax
expenses in individual profitable international subsidiaries.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". The resulting
change in method of accounting did not significantly affect 1993 results
of operations.
Note 7 of Notes to Consolidated Financial Statements contains a
reconciliation of statutory to actual income tax benefit and further details
of the Company's tax position, including net operating loss carryforwards.
Operating Results, Geographic Areas. International markets, particularly
Europe, continue in importance to the industry and to the Company. For
1995, sales outside the U.S. represented 54% of total revenues versus 49%
in 1994 and 51% in 1993. European revenues were 36% of total revenues in
1995, 33% in 1994, and 35% in 1993. The Company's operations are subject
to and may be adversely affected by a variety of risks inherent in doing
business internationally, such as government policies or restrictions,
currency exchange fluctuations, and other factors.
The Company incurred a loss from operations of $54.1 million in 1995
(including a restructuring charge of $6 million), a loss from operations
of $72.6 million in 1994 (including a credit from revision of the 1993
restructuring charge of $4.8 million), and a loss from operations of $164.6
million in 1993 (including a restructuring charge of $89.8 million). The
factors that have limited the Company's revenue growth and reduced
profitability over the past three years have similarly affected each of
the geographic areas in which the Company does business. Product transition
and declining per unit sales prices due to competitive conditions negatively
impacted systems revenues throughout 1993 and 1994 and into the third
quarter of 1995, when full availability of products and growing acceptance
of the Windows NT operating system provided improved revenue growth,
particularly outside the U.S.
The U.S. geographic region incurred a loss from operations of $12.3 million
in 1995 (including a restructuring charge of $4.8 million) after an
operating loss of $27.6 million in 1994 and $116.5 million in 1993
(including a restructuring charge of $55.5 million). U.S. systems revenue
declined by 6% in 1995, and systems margin declined slightly, reflecting
continued product transition and weakness in indirect selling channels.
These negative factors were more than offset by a 17% decline in product
development expense in 1995, the result of employee headcount reductions
and increased development costs qualifying for capitalization.
The European geographic region incurred losses from operations of $27.7
million in 1995 (including a restructuring charge of $1 million), $33.1
million in 1994 (including a restructuring credit of $4.8 million from
revision of the 1993 restructuring charge), and $43.3 million in 1993
(including a restructuring charge of $31 million). Improvement in 1995 is
the result of a 19% increase in systems revenue (a portion of which relates
to weakness of the U.S. dollar in Europe for most of 1995), and reduced
operating expenses as the result of restructuring actions and other cost
control measures. Operations from 1993 through mid-1995 were adversely
affected by product transition but also by poor economic conditions,
particularly in 1994, in the Company's primary German and U.K. markets.
Other international regions are comprised primarily of the Asia Pacific and
Middle East regions and Canada, with the Asia Pacific region representing
approximately 57% of total revenues generated in those regions in 1995 (60%
in 1994). These regions incurred operating losses of $20.9 million in 1995,
$17.4 million in 1994 (including the write-off of a $5.5 million Middle
Eastern account receivable), and $16.8 million in 1993 (including an $8.3
million restructuring charge). The increased loss from operations in 1995
is the result of increased operating expenses incurred primarily in pursuit
of new business in the Asia Pacific region. Sales of the Company's systems
in these regions increased by 25% over the 1994 level.
See Note 10 of Notes to Consolidated Financial Statements for further
details of operations by geographic area.
Impact of Currency Fluctuations and Currency Risk Management. Fluctuations
in the value of the U.S. dollar in international markets can have a
significant impact on the Company's results of operations. For 1995,
approximately 54% of the Company's revenues were derived from customers
outside the United States (49% for 1994 and 51% for 1993), primarily through
subsidiary operations. Most subsidiaries sell to customers and incur and
pay operating expenses in local currency. These local currency revenues
and expenses are translated to dollars for U.S. reporting purposes. A
weaker U.S. dollar will increase the level of reported U.S. dollar orders
and revenues, increase the dollar gross margin, and increase reported dollar
operating expenses of the international subsidiaries. During 1995, the U.S.
dollar weakened on average from its 1994 level, which increased reported
dollar revenues, orders, and gross margin, but also increased reported
dollar operating expenses in comparison to the prior year period. The
Company estimates that weakness of the U.S. dollar in its international
markets, primarily Europe, improved results of operations by approximately
$.22 per share in 1995. Such currency effects did not materially affect
the Company's results of operations in 1994 or 1993.
The Company conducts business in all major markets outside the U.S., but the
most significant of these operations with respect to currency risk are
located in Europe, specifically Germany, U.K., The Netherlands, France and
Spain. Primarily but not exclusively in these locations, the Company has
certain currency related asset and liability exposures against which certain
measures, primarily hedging, are taken to reduce currency risk. With
respect to these exposures, the objective of the Company is to protect
against financial statement volatility arising from changes in exchange
rates with respect to amounts denominated for balance sheet purposes in a
currency other than the functional currency of the local entity. The
Company therefore enters into forward exchange contracts primarily related
to these balance sheet items (intercompany receivables, payables, and
formalized intercompany debt). Periodic changes in the value of these
contracts offset exchange rate-related changes in the financial statement
value of these balance sheet items. Forward exchange contracts are
purchased with maturities reflecting the expected settlement dates of these
balance sheet items (generally three months or less), and only in amounts
sufficient to offset possible significant currency rate-related changes in
the recorded values of these balance sheet items, which represent a
calculable exposure for the Company from period to period. Since this risk
is calculable and these contracts are purchased only in offsetting amounts,
neither the contracts themselves nor the exposed foreign currency
denominated balance sheet items are likely to have a significant effect on
the Company's financial position or results of operations. Based on the
terms of contracts outstanding and the amount of the Company's balance sheet
exposures at December 31, 1995, the Company's results of operations would
not be materially affected by a 10% increase or decrease in exchange rates
underlying the contracts and the exposures being hedged. The Company's
positions in these derivatives are continuously monitored to ensure
protection against the known balance sheet exposures described above. By
policy, the Company is prohibited from market speculation via such
instruments and therefore does not take currency positions exceeding its
known financial statement exposures, and does not otherwise trade in
currencies.
At December 31, 1995, the Company had net outstanding forward exchange
contracts of approximately $46 million ($41 million at December 31, 1994),
maturing at various dates through January 31, 1996. The fair values of
these contracts approximated original contract amounts based on the
insignificant amounts the Company would pay or receive to transfer the
contracts to third parties at those dates. Neither the gains and losses
resulting from changes in exchange rates underlying the exposed balance
sheet amounts nor the offsetting gains and losses from the Company's hedging
activity were material to results of operations in 1995, 1994, or 1993.
Net negative cash flow from forward contract activity, consisting of
realized gains and losses from settlement of exposed assets and liabilities
at exchange rates in effect at the settlement date rather than at the time
of recording, settlement of the forward contracts purchased to mitigate
these exposures, and payment of bank fees on the forward contracts, was
$825,000 in 1995, $1.8 million in 1994, and $5.1 million in 1993. Deferred
gains and losses as of December 31, 1995 and 1994 were not significant.
See Notes 1 and 3 of Notes to Consolidated Financial Statements for further
information related to management of currency risk.
Acquisitions and Dispositions. In January 1995, the Company acquired all
of the outstanding stock of InterCAP Graphics Systems, Inc. for total
consideration of $7.5 million, consisting of issuance of 797,931 shares of
the Company's common stock and assumption of InterCAP obligations under its
employee stock option plan. InterCAP is engaged in the business of
designing and producing computer software systems that assist in creating,
editing, converting, and presenting technical illustrations used by large
manufacturing firms. The accounts and results of operations of InterCAP
have been combined with those of the Company since the date of acquisition
using the purchase method of accounting. The acquisition did not have a
material effect on the results of operations of the Company in 1995.
In May 1995, the Company sold one of its subsidiaries at a pretax gain of
$5 million ($.11 per share). The subsidiary was not significant to the
Company's results of operations or financial position.
Under terms of its October 1995 revolving credit agreement, the Company is
prohibited from acquisitions of or investments in other companies and from
dispositions of material amounts of its assets, including business units
and subsidiaries, without permission of the lending organizations.
In February 1993, the Company acquired Bestinfo, Inc. for $9.5 million in
cash and other consideration. Bestinfo is a producer of merchandise
advertising technology for the retail/catalog markets. The accounts and
results of operations of Bestinfo have been combined with those of the
Company since the date of acquisition using the purchase method of accounting.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1995, cash and short-term investments totaled $56.4 million,
down $6 million from year end 1994. Cash generated from operations in 1995
was $55.4 million ($35.7 million in 1994 and $71 million in 1993), including
$22.3 million in tax refunds ($34.5 million in tax refunds in 1994)
resulting primarily from carryback of U.S. taxable losses to prior years.
Net cash used for investing activities totaled $78.5 million in 1995, $54.4
million in 1994, and $58.9 million in 1993. Included in investing
activities were capital expenditures of $55.6 million in 1995, primarily
for Intergraph products used in hardware and software development and for
facilities and equipment utilized in a long-term Australian public safety
contract, $68 million in 1994, and $65.4 million in 1993. Capital
expenditures in 1994 and 1993 were primarily for Intergraph products used
in product development activities. Other significant investing activities
included expenditures of $25.4 million in 1995 and $16.6 million in 1994 for
capitalizable software development costs, and $8.1 million in 1993 for
business acquisitions and investments in other businesses.
Net cash generated from financing activities totaled $17.8 million in 1995
and $26.1 million in 1994 versus a net use of cash for financing activities
of $18.4 million in 1993. Significant sources of cash included $8.3
million from exercise of employee stock options in 1995 and a net borrowing
of $32.5 million to fund capital expenditures and restructuring charges in
1994. Cash used to purchase Company stock for the treasury totaled $10.4
million in 1994 and $29.7 million in 1993.
The Company's collection period for accounts receivable was approximately
100 days as of December 31, 1995, down by approximately 20 days from
December 31, 1994. Approximately 69% of the Company's 1995 revenues were
derived from the U.S. government and international customers, both of which
traditionally carry longer collection periods. Slower collection periods
adversely affect liquidity. The Company is experiencing slow collection
periods throughout the Middle East region, particularly in Saudi Arabia.
Total accounts receivable from Middle Eastern customers as of the end of
1995 was $21.5 million ($18 million at December 31, 1994). Total U.S.
government accounts receivable was $54 million at December 31, 1995 ($69
million at December 31, 1994). The Company endeavors to enforce its payment
terms with these and other customers, and grants extended payment terms only
in very limited circumstances.
Over the last eight years, the Board of Directors of the Company has
authorized the purchase of up to 20 million shares of the Company's stock
in the open market. As of December 31, 1995, the Company had purchased
approximately 18.8 million shares for the treasury. There were no treasury
stock purchases in 1995. Under the terms of its revolving credit agreement,
the Company is prohibited from further purchases of its stock in the open
market without the consent of the lending organizations.
The Company expects that capital expenditures will require $40 million to
$50 million in 1996, primarily for Intergraph products used in product
development activity. The Company's revolving credit agreement contains
certain restrictions on the level of the Company's capital expenditures.
In October 1995, the Company entered into a three-year revolving credit
agreement with a group of lenders. Borrowings available under the agreement
are determined by the amounts of eligible assets of the Company, as defined
in the agreement, including cash, accounts receivable, inventory, and
property, plant, and equipment, with maximum borrowings of $100 million. At
December 31, 1995, the Company had outstanding borrowings of $15 million,
and an additional $20 million of the available credit line was allocated to
support letters of credit issued by the Company. Borrowings are secured by
a pledge of substantially all of the Company's assets in the U.S. and
Canada and, under certain circumstances, the accounts receivable of some
European subsidiaries of the Company. The rate of interest on all
borrowings under the agreement is, at the Company's option, the Citibank
base rate of interest plus 1.75% or the Eurodollar rate plus 2.75%. The
average effective rate of interest was 9.6% for the period of time in 1995
during which the Company had outstanding borrowings under the agreement.
The agreement requires the Company to pay a commitment fee of .5% annually
on the average unused daily portion of the revolving credit commitment.
The revolving credit agreement contains certain financial covenants of the
Company, including minimum net worth, minimum fixed charge coverage, minimum
interest coverage, and maximum levels of capital expenditures and
capitalized software development costs. In addition, the agreement includes
restrictive covenants that limit various business transactions (including
repurchases of the Company's stock, dividend payments, mergers, acquisitions
of or investments in other businesses, and disposal of assets including
individual businesses, subsidiaries, and divisions) and limit or prevent
certain other business changes.
At December 31, 1995, the Company had $51 million in debt, primarily its
short-term credit facilities, revolving credit arrangement, mortgages, and
term loan, on which interest is charged under various floating rate
arrangements (see Note 6 to Notes to Consolidated Financial Statements).
The Company is exposed to market risk of future increases in interest rates
on these loans.
The Company believes that existing cash balances, together with cash
generated by operations and cash available under its revolving credit
agreement, will be adequate to meet cash requirements for 1996.
FOURTH QUARTER 1995
Revenues for the fourth quarter were $301 million, up 1.5% from fourth
quarter 1994. The Company had net income of $7.1 million ($.15 per share)
for the quarter versus a fourth quarter 1994 loss of $18.5 million ($.41
per share). The improvement in earnings is due primarily to slightly
improved margin over the same prior year period and a 14% reduction in
operating expenses (excluding restructuring credits).
STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS EFFECTIVE FOR 1996
The Financial Accounting Standards Board (FASB) has issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", effective
for fiscal years beginning after December 15, 1995 (calendar year 1996 for
the Company). For long-lived assets and certain identifiable intangible
assets, including related goodwill, to be held and used by an entity, the
Statement requires a review for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable, including an estimate of the future cash flows expected to
result from the use of the asset and its eventual disposition. An
impairment loss, based on comparison of carrying value to the fair value of
the asset, must be recognized if the sum of the expected future cash flows
is less than the carrying amount of the asset. For long-lived assets and
certain identifiable intangible assets to be disposed of, the Statement
requires financial statement reporting at the lower of carrying amount or
fair value less cost to sell. The Company has reviewed its long-lived
assets and their carrying amounts as of December 31, 1995, and does not
expect application of this Statement in 1996 to significantly affect its
results of operations or financial position.
The FASB has also issued Statement of Financial Accounting Standards No.
123,"Accounting For Stock-Based Compensation", effective for transactions
entered into in fiscal years beginning after December 15, 1995 (calendar
year 1996 for the Company). The Statement establishes financial accounting
and reporting standards for stock-based employee compensation plans,
including all arrangements by which employees receive shares of stock or
other equity instruments of the employer or the employer incurs liabilities
to employees in amounts based on the price of the employee's stock,
including, with respect to the Company, stock options and employee stock
purchase plans.
The Statement defines a fair value based method of accounting for employee
stock options, under which compensation cost is measured at the date
options are granted and recognized by charges to expense over the employees'
service periods (usually the vesting period), and it encourages entities to
adopt that method of accounting. It also allows entities to continue to
measure compensation cost using the method prescribed under Accounting
Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to
Employees", under which compensation expense is recognized for the excess,
if any, of the market price of the stock at grant date over the amount the
employee must pay to acquire the stock. The Company, under the provisions
of APB No. 25, recognizes no compensation expense for employee stock options
when options are granted to employees at a price equal to the market price
of the Company's stock at the date of grant, and recognize no compensation
expense for the price discount given its employees under its employee
stock purchase plan. The Company has reviewed the provisions of Statement
No. 123 and elected to remain under the provisions of APB No. 25 with
respect to its employee stock options that are granted at market price at
date of grant, and with respect to its employee stock purchase plan. This
decision will result in recognition of no compensation expense for stock
options and employee stock purchases in 1996 and future years. However,
in accordance with the disclosure provisions of Statement No. 123, the
Company commencing in 1996 will disclose proforma basis information to
reflect its net income and earnings per share had compensation expense
been recognized for these items.
INTERGRAPH CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- -----------------------------------------------------------------------------
December 31, 1995 1994
- -----------------------------------------------------------------------------
(In thousands except share and per share amounts)
Assets
Cash and cash equivalents $ 56,407 $ 61,393
Short-term investments --- 1,023
Accounts receivable, net 324,051 344,957
Inventories 111,813 114,444
Refundable income taxes 6,391 22,784
Other current assets 43,190 30,097
- -----------------------------------------------------------------------------
Total current assets 541,852 574,698
Investments in affiliated companies 11,636 9,453
Other assets 54,509 28,194
Property, plant, and equipment, net 218,048 227,273
- -----------------------------------------------------------------------------
Total Assets $826,045 $839,618
=============================================================================
Liabilities and Shareholders' Equity
Trade accounts payable $ 54,352 $ 51,224
Accrued compensation 51,301 47,533
Other accrued expenses 72,479 69,241
Billings in excess of sales 63,707 79,265
Income taxes payable 6,720 6,816
Short-term debt and current
maturities of long-term debt 32,153 37,726
- -----------------------------------------------------------------------------
Total current liabilities 280,712 291,805
Deferred income taxes 3,881 2,088
Long-term debt 37,388 23,388
- -----------------------------------------------------------------------------
Total liabilities 321,981 317,281
- -----------------------------------------------------------------------------
Shareholders' equity:
Common stock, par value $.10 per share --
100,000,000 shares authorized;
57,361,362 shares issued 5,736 5,736
Additional paid-in capital 233,940 243,295
Retained earnings 408,791 454,139
Cumulative translation adjustment 8,650 2,458
- -----------------------------------------------------------------------------
657,117 705,628
Less -- cost of 10,501,309 treasury shares
at December 31, 1995, and 12,576,082
treasury shares at December 31, 1994 (153,053) (183,291)
- -----------------------------------------------------------------------------
Total shareholders' equity 504,064 522,337
- -----------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $826,045 $839,618
=============================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
INTERGRAPH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
- -----------------------------------------------------------------------------
Year Ended December 31, 1995 1994 1993
- -----------------------------------------------------------------------------
(In thousands except per share amounts)
Revenues
Systems $ 710,168 $ 665,583 $ 672,790
Maintenance and services 387,810 375,820 377,487
- -----------------------------------------------------------------------------
Total revenues 1,097,978 1,041,403 1,050,277
- -----------------------------------------------------------------------------
Cost of revenues
Systems 439,502 401,515 371,157
Maintenance and services 228,785 217,756 251,129
- -----------------------------------------------------------------------------
Total cost of revenues 668,287 619,271 622,286
- -----------------------------------------------------------------------------
Gross profit 429,691 422,132 427,991
Product development 111,587 137,247 160,294
Sales and marketing 268,702 262,322 238,054
General and administrative 97,507 100,031 104,459
Restructuring charge (credit) 6,040 ( 4,826) 89,806
- -----------------------------------------------------------------------------
Loss from operations ( 54,145) ( 72,642) (164,622)
Interest expense ( 4,198) ( 2,359) ( 2,097)
Interest income 1,843 3,049 4,467
Equity in earnings (losses) of
affiliated companies 4,322 ( 3,055) 1,027
Other income (expense) -- net 6,830 816 ( 11,325)
- -----------------------------------------------------------------------------
Loss before income tax benefit
and cumulative effect of change
in accounting for income taxes ( 45,348) ( 74,191) (172,550)
Income tax benefit --- 3,971 54,008
- -----------------------------------------------------------------------------
Loss before cumulative effect of
change in accounting for income
taxes ( 45,348) ( 70,220) (118,542)
Cumulative effect as of January 1, 1993,
of change in method of accounting
for income taxes --- --- 2,500
- -----------------------------------------------------------------------------
Net loss $( 45,348) $( 70,220) $(116,042)
=============================================================================
Loss per share:
Loss before cumulative effect of
change in accounting for income
taxes $( .98) $( 1.56) $( 2.56)
Cumulative effect of change in
accounting for income taxes --- --- .05
- -----------------------------------------------------------------------------
Net loss per share $( .98) $( 1.56) $( 2.51)
=============================================================================
Weighted average shares outstanding 46,077 44,860 46,199
=============================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
INTERGRAPH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
- ------------------------------------------------------------------------------
Year Ended December 31, 1995 1994 1993
- ------------------------------------------------------------------------------
(In thousands)
Cash provided by (used for):
Operating Activities:
Net loss $( 45,348) $( 70,220) $(116,042)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Cumulative effect of change in method
of accounting for income taxes --- --- ( 2,500)
Depreciation and amortization 80,157 73,640 85,124
Non-cash portion of restructuring
charge (credit) 2,449 (4,826) 79,565
Deferred income tax expense (benefit) 3,175 15,625 (20,348)
Collection of income tax refunds 22,264 34,472 10,697
Gains on sales of subsidiary and
investment in affiliated company ( 5,024) ( 5,815) ---
Equity in (earnings) losses of
affiliated companies ( 4,322) 3,055 ( 1,027)
Write-off of investments in affiliated
companies --- 3,361 3,273
Net changes in current assets and
liabilities 2,041 ( 13,610) 32,224
- -----------------------------------------------------------------------------
Net cash provided by operating activities 55,392 35,682 70,966
- -----------------------------------------------------------------------------
Investing Activities:
Net decrease in short- and long-term
securities investments --- --- 12,376
Purchases of securities --- ( 86,620) ---
Sales and maturities of securities 1,000 118,441 ---
Proceeds from sale of subsidiary 6,434 --- ---
Purchase of property, plant, and
equipment ( 55,639) ( 67,967) ( 65,414)
Capitalized software development costs ( 25,370) ( 16,584) ( 9,735)
Investments in other businesses, and
business acquisitions net of cash
acquired --- ( 770) ( 8,057)
Repayment of loan by affiliated company --- --- 6,994
Other ( 4,934) ( 913) 4,917
- -----------------------------------------------------------------------------
Net cash used for investing activities ( 78,509) ( 54,413) ( 58,919)
- -----------------------------------------------------------------------------
Financing Activities:
Gross borrowings 65,652 44,609 8,236
Debt repayment ( 59,800) ( 12,138) ( 2,097)
Proceeds of employee stock purchases 3,716 4,019 4,409
Proceeds of exercise of stock options 8,267 --- 829
Acquisition of treasury stock --- ( 10,379) ( 29,734)
- -----------------------------------------------------------------------------
Net cash provided by (used for)
financing activities 17,835 26,111 ( 18,357)
- -----------------------------------------------------------------------------
Effect of exchange rate changes on cash 296 ( 1,963) ( 4,908)
- -----------------------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents ( 4,986) 5,417 ( 11,218)
Cash and cash equivalents at beginning
of year 61,393 55,976 67,194
- -----------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 56,407 $ 61,393 $ 55,976
=============================================================================
The accompanying notes are an integral part of these consolidated
financial statements.
<TABLE>
INTERGRAPH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Common Stock Treasury Stock Additional Cumulative Total
Paid-in Retained Translation Shareholders'
Shares Amount Shares Amount Capital Earnings Adjustment Equity
- ------------------------------------------------------------------------------------------------------------------------------
(In thousands except share amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1993 57,361,362 $5,736 (9,803,371) $(160,035) $250,549 $640,401 $212 $736,863
Treasury shares acquired --- --- (2,805,000) ( 29,734) --- --- --- ( 29,734)
Shares issued under employee
stock purchase plan --- --- 494,462 7,656 ( 3,247) --- --- 4,409
Shares issued upon exercise of
stock options --- --- 107,082 1,692 ( 863) --- --- 829
Translation adjustments --- --- --- --- --- --- (10,570) ( 10,570)
Recognition of net cumulative
translation loss resulting
from restructuring --- --- --- --- --- --- 2,752 2,752
Other --- --- --- --- 203 --- --- 203
Net loss for the year --- --- --- --- --- (116,042) --- (116,042)
- -----------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1993 57,361,362 5,736 (12,006,827) (180,421) 246,642 524,359 ( 7,606) 588,710
Treasury shares acquired --- --- ( 1,080,000) ( 10,379) --- --- --- ( 10,379)
Shares issued under employee
stock purchase plan --- --- 510,625 7,508 (3,489) --- --- 4,019
Translation adjustments --- --- --- --- --- --- 10,064 10,064
Other --- --- 120 1 142 --- --- 143
Net loss for the year --- --- --- --- --- ( 70,220) --- (70,220)
- -----------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 57,361,362 5,736 (12,576,082) (183,291) 243,295 454,139 2,458 522,337
Shares issued under employee
stock purchase plan --- --- 358,687 5,228 (1,512) --- --- 3,716
Shares issued upon exercise of
stock options --- --- 836,469 12,192 (3,881) --- --- 8,311
Shares issued upon purchase of a
business --- --- 797,931 11,630 (4,130) --- --- 7,500
Translation adjustments --- --- --- --- --- --- 6,192 6,192
Other --- --- 81,686 1,188 168 --- --- 1,356
Net loss for the year --- --- --- --- --- (45,348) --- (45,348)
- ------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 57,361,362 $5,736 (10,501,309) $(153,053) $233,940 $408,791 $8,650 $504,064
==============================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
INTERGRAPH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES.
Basis of Presentation: The consolidated financial statements include the
accounts of Intergraph Corporation and its majority-owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities,
revenues, and expenses, and determine the disclosure of contingent assets
and liabilities, if any. The ultimate resolution of issues requiring these
estimates and assumptions could differ significantly from the resolution
currently expected by management and on which the financial statements are
based.
The Company's business is principally in one industry segment - the
development, manufacturing, marketing, and service of interactive computer
graphics systems. Graphics workstations, servers, and peripheral hardware
manufactured by the Company and others are combined with operating systems
developed by others and application-specific software programs developed by
the Company and third-party applications software developers. The Company's
hardware products and integrated software applications are used for
computer-aided design, manufacturing, and engineering, mapping and
geographic information services, electronic publishing, and technical
information management in technical fields such as utilities, facilities
management, architecture, engineering, construction, mechanical and
electronics design, and mapping and geographic information systems. The
Company's products are sold worldwide, with United States and European
revenues representing approximately 82% of the total for 1995. See Note 10.
Cash Equivalents and Short-Term Investments: The Company's excess funds
are generally invested in short-term, highly liquid, interest-bearing
securities, which may include short-term municipal bonds, time deposits,
money market preferred stocks, commercial paper, and U.S. government
securities. The Company's investment policy limits the amount of credit
exposure to any single issuer of securities. All cash equivalents and
short-term investments are stated at fair market value based on quoted
market prices. Investments with original maturities of three months or less
are considered to be cash equivalents for purposes of financial statement
presentation.
The Company's investments in debt securities are valued at fair market
value with any unrealized gains and losses due to market value changes
reported as a component of shareholders' equity, net of tax. Interest on
these securities is included in "Interest income" in the consolidated
statements of operations.
At December 31, 1995 and 1994, the Company held various debt securities with
a fair market value of $27,241,000 and $32,780,000 at those respective
dates. These investment securities, all of which were within three months
of maturity at those dates, are included in "Cash and cash equivalents" and
"Short-term investments" in the consolidated balance sheets.
Gross realized gains and losses on securities sold during the years ended
December 31, 1995 and 1994, were not significant. There were no unrealized
holding gains or losses at December 31, 1995 or 1994.
Inventories: Inventories are stated at the lower of average cost or market
and are summarized as follows:
- --------------------------------------------------------
December 31, 1995 1994
- --------------------------------------------------------
(In thousands)
Raw materials $ 36,336 $ 29,734
Work-in-process 25,037 35,617
Finished goods 17,140 14,198
Service spares 33,300 34,895
- --------------------------------------------------------
Totals $111,813 $114,444
========================================================
The industry in which the Company competes is characterized by rapid
technological change. This technological change is an important
consideration in the Company's overall inventory management program, in
which the Company endeavors to carry only parts and systems utilizable with
the technology of its current product offerings and as spares for the
contracted maintenance of systems in its installed customer base. The
Company regularly estimates the degree of technological obsolescence in its
inventories and provides inventory reserves on that basis. Though the
Company believes it has adequately provided for any such declines in
inventory value to date, any unanticipated change in technology could
significantly affect the value of the Company's inventories and thereby
adversely affect gross margins and reported results of operations.
Investments in Affiliated Companies: Investments in companies in which the
Company has the ability to influence operations or finances, generally 20%-
to 50%-owned companies, are accounted for by the equity method. Investments
in companies in which the Company does not exert such influence, generally
in less than 20%-owned companies, are accounted for by the cost method.
Property, Plant, and Equipment: Property, plant, and equipment, summarized
below, is stated at cost. Depreciation is provided using the straight-line
method over the estimated useful lives of the assets.
- ------------------------------------------------------------------------
December 31, 1995 1994
- ------------------------------------------------------------------------
(In thousands)
Land and improvements $ 15,256 $ 14,950
Buildings and improvements 152,759 147,632
Equipment, furniture, and fixtures 354,654 349,702
- ------------------------------------------------------------------------
522,669 512,284
Allowances for depreciation and amortization (304,621) (285,011)
- ------------------------------------------------------------------------
Totals $218,048 $227,273
========================================================================
See Management's Discussion and Analysis of Financial Condition and Results
of Operations for a discussion of the provisions of Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of", which will become
effective for the Company's calendar year 1996. The Company does not expect
adoption of this new accounting standard to significantly affect its 1996
results of operations.
Treasury Stock: Treasury stock is accounted for by the cost method. The
Board of Directors of the Company has authorized the purchase of up to
20,000,000 shares of the Company's common stock in the open market. From
the initial authorization in 1987 through the end of 1995, the Company had
purchased approximately 18,800,000 shares for the treasury. Further
purchases of treasury stock are restricted by terms of the Company's
revolving credit agreement (see Note 6). Treasury stock activity is
presented in the consolidated statements of shareholders' equity.
Revenue Recognition: Revenues from systems sales with no significant post-
shipment obligations are recognized as equipment and software are shipped,
with any post-shipment costs accrued at that time. Revenues on systems
sales with significant post-shipment obligations are recognized by the
percentage-of-completion method with progress to completion measured on the
basis of labor costs incurred currently versus the total estimated cost of
performing the contract over its term, and other factors. The total amount
of revenues to be earned under these contracts is generally fixed by
contractual terms. The Company regularly reviews its progress on these
contracts and revises the estimated costs of fulfilling its obligations.
Due to uncertainties inherent in the estimation process, it is possible that
completion costs will be further revised on some of the Company's long-term
contracts, which could delay revenue recognition and decrease the gross
margin to be earned on these contracts. Any losses identified in the review
process are recognized in full in the period in which determined.
Revenues from certain contracts with the U.S. government, primarily cost-
plus award fee contracts, are recognized monthly as costs are incurred and
fees are earned under the contracts. Maintenance and services revenues are
recognized ratably over the lives of the maintenance contracts or as services
are performed.
Billings may not coincide with the recognition of revenue. Unbilled
accounts receivable occur when revenue recognition precedes billing to the
customer and arise primarily from commercial sales with predetermined
billing schedules, U.S. government sales with billing at the end of a
performance period, and U.S. government cost-plus award fee contracts.
Billings in excess of sales occur when billing to the customer precedes
revenue recognition, and arise primarily from maintenance revenue billed in
advance of performance of the maintenance activity and systems revenue
recognized on the percentage-of-completion method.
Product Development Costs: The Company capitalizes certain costs of
computer software development incurred after the technological feasibility
of the product has been established. Such capitalized costs are amortized
over a two-year period on a straight-line basis. Amortization expense
included in "Cost of revenues - Systems" in the consolidated statements of
operations amounted to $14,697,000 in 1995, $11,278,000 in 1994, and
$8,409,000 in 1993. The unamortized balance of capitalized software
development costs, included in "Other assets" in the consolidated balance
sheets, totaled $27,005,000 and $16,068,000 at December 31, 1995 and 1994,
respectively.
Although the Company regularly reviews its capitalized development costs to
ensure recognition of any decline in value, it is possible that revenues
expected to be generated by these development activities will not
materialize in amounts anticipated due to industry conditions that include
intense price and performance competition, or that product lives will be
reduced due to shorter product cycles. Should either of these events occur,
the carrying amount of capitalized development costs would be reduced,
producing adverse effects on product development expenses and results of
operations.
Foreign Currency Exchange and Translation: Local currencies are the
functional currencies for the Company's European subsidiaries. The U.S.
dollar is the functional currency for all other international subsidiaries.
Foreign currency gains and losses resulting from remeasurement or settlement
of receivables and payables denominated in a currency other than the
functional currency, together with gains and losses and fees paid in
connection with the Company's forward exchange contracts, are included in
"Other income (expense) - net" in the consolidated statements of operations.
Such gains and losses were not significant to the Company's results of
operations in any of the three years ended December 31, 1995. Translation
gains and losses resulting from translation of subsidiaries' financial
statements from the functional currency into dollars for U.S. reporting
purposes and foreign currency gains and losses resulting from remeasurement
of intercompany advances of a long-term investment nature are included in
the "Cumulative translation adjustment" component of shareholders' equity.
Derivative Financial Instruments: Derivatives utilized by the Company
consist of forward exchange contracts and interest rate swap agreements.
Realized and unrealized gains and losses on forward exchange contracts are
recognized as offsets to gains and losses resulting from the underlying
hedged transactions in the period in which exchange rates change. Bank
fees charged on the contracts are amortized over the period of the contract.
The Company accounts for its interest rate swaps as hedges of its debt
obligations. The difference in amounts paid and received under the
contracts is accrued and recognized as an adjustment to interest expense
on the debt. Deferred gains related to terminated interest rate swap
agreements, which are not significant to the Company's results of
operations, are amortized to interest expense over the remaining terms of
the agreements.
Amounts payable to or receivable from counterparties related to derivative
financial instruments are included in "Other accrued expenses" or "Other
current assets" in the consolidated balance sheets. These amounts were
not significant at December 31, 1995 or 1994. Cash flows from derivative
financial instruments are classified in the consolidated statements of
cash flows consistent with the cash flows from the assets and liabilities
being hedged.
See Note 3 for further details of the Company's derivative financial
instruments.
Stock Option and Employee Stock Purchase Plans: Stock options may be
granted to employees at fair market value or at a price less than fair
market value at the date of grant. No compensation expense is recognized
for options granted at fair market value. Expense associated with grants
at less than fair market value, equal to the difference in fair market
value at the date of grant and exercise price, is recognized over the
vesting period of the options.
Employees purchase stock of the Company at 85% of the closing market price
of the Company's stock as of the last pay date of each calendar month.
No compensation expense is recognized for the difference in price paid by
employees and the fair market value of the Company's stock at the date of
purchase.
See Management's Discussion and Analysis of Financial Condition and Results
of Operations for a discussion of the provisions of Statement of Financial
Accounting Standards No. 123, "Accounting For Stock-Based Compensation",
which will become effective for the Company's calendar year 1996. As
allowed by this Statement, the Company will not change its accounting
policy for stock otpions and employee stock purchases.
Income Taxes: Effective January 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes", which
changed the Company's method of accounting for income taxes from the
deferred method to an asset and liability approach. The provision for
income taxes includes Federal, foreign, and state income taxes currently
payable or refundable and income taxes deferred because of temporary
differences between the financial statement and tax bases of assets and
liabilities. See Note 7.
Net Loss Per Share: Net loss per share is computed using the weighted
average number of common and equivalent common shares outstanding. Stock
options are the only common stock equivalent. See Note 8.
NOTE 2 -- RESTRUCTURING.
1995 Charge. During the second quarter of 1995, the Company undertook a
second restructuring plan designed to further adapt the Company's cost
structure to changed industry and market conditions (see discussion of
these conditions and the 1993 plan below). The program as originally
planned consisted of direct reductions in workforce, other workforce
reductions through attrition, and disposition of four unprofitable business
units over the twelve-month period ending June 30, 1996. Subsequent to
formulation of the restructuring plan, the Company determined that, based
on their improved profitability outlook, future prospects, and strategic
value to other business units, two of the original four business units
designated for disposal will not currently be considered for disposal.
Revenues and losses of the two business units that continue to be considered
for disposal, both of which develop computer products for the printing and
publishing industry, totaled $43 million and $7 million, respectively, for
1995, and their total assets are approximately $25 million. The Company
at present anticipates disposal of these two business units by sale to third
parties. The Company does not have committed buyers for these two business
units but does not anticipate incurrence of a loss on sale of the units.
The 1995 restructuring charge totaled $6,040,000, primarily for employee
severance pay and related costs. Approximately 450 positions were
eliminated through direct reductions in workforce, with approximately 350
others eliminated through attrition. All employee groups were affected,
but the majority of eliminated positions derived from the research and
development, systems engineering and support, and sales and marketing areas.
Cash expenditures related to the restructuring totaled $3.6 million through
December 31, 1995, with an insignificant amount to be paid in 1996. The
charge is included in "Restructuring charge" in the 1995 consolidated
statement of operations.
1993 Charge. During late 1992 and 1993, the Company made several changes
in its product, sales, and manufacturing strategies designed to make the
Company more competitive in its industry and economic environment, and
took actions based on those decisions that resulted in a before-tax charge
to 1993 earnings of $89,806,000 ($61,697,000 after related tax benefit, or
$1.34 per share). Industry conditions considered by the Company in its
decisions included the trend toward higher performance, lower priced
products and intense competition that have resulted in lower gross margins
in the industry and for the Company, shorter product cycles, and development
and support of software standards that have resulted in less specific
hardware and software dependencies by customers. Changes in strategy
included closure over the course of 1994 of the Company's European
manufacturing and distribution facility (IEM) and consolidation of worldwide
manufacturing and distribution activities in the U.S., cessation of the
design and manufacture of the Company's microprocessor that resulted in
closure of the Company's Advanced Processor Division at the end of 1994,
porting of the Company's technical software applications to a new operating
system (Microsoft Corporation's Windows NT), and the offering of a new
hardware platform based on Intel Corporation microprocessors.
The Company's 1993 restructuring plan has been completed substantially as
planned, with the exception of disposition of the IEM facility as described
below. Cash outlays during 1994 and 1995 related to the 1993 restructuring
were $10 million and $1 million, respectively, which were less than
anticipated, primarily for severance pay and associated personnel costs.
There are no significant remaining cash requirements related to the 1993
plan.
The 1993 restructuring charge was comprised of $10,467,000 for direct
workforce reductions, $17,136,000 for elimination of operations, primarily
IEM, $56,082,000 for revaluation of assets resulting from new product
strategies (primarily spares inventory, goodwill, and investments in other
companies), and $6,121,000 for restructure of the Company's electronics
business unit. These charges are described individually below.
Reduction in Workforce: This portion of the restructuring charge was the
result of termination of approximately 450 employees, primarily in the
Company's European and U.S. sales and support operations. The charge
consisted of severance pay and other personnel related charges.
Elimination of Operations: In January 1994, the Company announced its
decision to close IEM over the course of 1994 and transfer related
activities to its U.S. manufacturing facility. The related restructuring
charge consisted primarily of the costs of severance and other personnel
related costs for the 130 employees that were affected. Also included in
this amount were charges related to consolidation of sales and support
facilities, primarily in Europe, connected with the direct reductions in
workforce discussed above, and asset retirements of the Company's Advanced
Processor Division.
The phased closure of IEM was completed during the third quarter of 1994.
In the fourth quarter of 1994, the Company determined that it would utilize
a portion of this facility as a distribution center for Europe beginning
in early 1995. All manufacturing activity continues to be performed in the
U.S. In 1994, the Company reversed the remaining unincurred portion of the
1993 restructuring charge related to IEM ($4,826,000) as the result of lower
severance costs than originally anticipated.
Revaluation of Assets Due to New Product Strategy: The portion of the
restructuring charge related to revaluation of assets was comprised of
$35,300,000 to retire spares inventory and $20,800,000 to write-off
goodwill recognized on previous acquisitions and write-off investments in
less than 20%-owned companies, all as a result of the diminished value of
these assets due to the Company's new product strategy and transition.
Restructure of Electronics Business: The Company continued in 1993 to
restructure and position its electronics business in an effort to focus
activity on growth areas and further integrate its DAZIX unit, acquired in
December 1990, with the Company's existing electronics business. The
$6,121,000 restructuring charge in 1993 consisted of severance pay,
facilities consolidation expenses, and write-off of goodwill from related
acquisitions and investments in companies offering complementary products.
NOTE 3 -- FINANCIAL INSTRUMENTS.
Information related to the Company's financial instruments other than cash
equivalents and short-term investments is summarized below.
Short- and Long-Term Debt: The balance sheet carrying amounts of the
Company's floating rate debt (approximately $51,000,000 at December 31,
1995) consisting of loans under various short-term credit facilities, a
revolving credit agreement, mortgages, and a term loan (see Note 6),
approximate fair market values since interest rates on the debt adjust
periodically to reflect changes in market rates of interest. The Company
is exposed to market risk of future increases in interest rates on these
loans. The carrying amounts of fixed rate debt approximate fair market
values based on current interest rates for debt of the same remaining
maturities and character.
Forward exchange contracts: The Company has certain currency related asset
and liability exposures related to its international operations against
which certain measures, primarily hedging, are taken to reduce currency
risk. The Company conducts business in all major markets outside the U.S.,
but the most significant of these operations with respect to currency risk
are located in Europe, specifically Germany, U.K., The Netherlands, France,
and Spain. With respect to these exposures, the objective of the Company
is to protect against financial statement volatility arising from changes
in exchange rates with respect to amounts denominated for balance sheet
purposes in a currency other than the functional currency of the local
entity. The Company enters into forward exchange contracts primarily
related to these balance sheet items (intercompany receivables, payables,
and formalized intercompany debt). Periodic changes in the value of these
contracts offset exchange rate related changes in the financial statement
value of these balance sheet items. Forward exchange contracts are purchased
with maturities reflecting the expected settlement dates of these balance
sheet items, which are generally less than three months. The Company is
prohibited by policy from taking currency positions exceeding its known
balance sheet currency exposures and from otherwise trading in currencies.
The Company had outstanding net forward exchange contracts of $46,344,000
and $41,030,000 at December 31, 1995 and 1994, respectively. Such amounts
approximated the Company's currency related asset and liability exposures
at those dates. The table below summarizes in U.S. dollars the face amounts
of these contracts by major currency. For purposes of presentation, foreign
currency amounts are translated to dollars at the rates in effect at each
balance sheet date. "Sell" amounts represent the U.S. dollar equivalent
of commitments to sell currencies and "buy" amounts represent the U.S.
dollar equivalent of commitments to purchase currencies.
- ---------------------------------------------------------------------------
December 31, 1995 1994
- ---------------------------------------------------------------------------
Net Forward Net Forward
Contract Contract
Sell Buy Position Sell Buy Position
- ---------------------------------------------------------------------------
(In thousands)
German mark $19,919 $2,016 $17,903 $12,743 --- $12,743
U.S. dollar 451 --- 451 6,200 $5,200 1,000
Italian lira 8,055 302 7,753 4,859 --- 4,859
French franc 6,831 --- 6,831 3,824 1,120 2,704
Dutch guilder --- --- --- 3,600 --- 3,600
Belgian franc 3,550 345 3,205 2,944 --- 2,944
Other currencies 15,169 4,968 10,201 13,180 --- 13,180
- ---------------------------------------------------------------------------
Totals $53,975 $7,631 $46,344 $47,350 $6,320 $41,030
===========================================================================
Based on the terms of outstanding forward exchange contracts and the amount
of the Company's balance sheet exposure at December 31, 1995 and 1994, the
Company's results of operations would not be materially affected by a 10%
increase or decrease in exchange rates underlying the contracts and the
exposures hedged. Cash requirements of forward exchange contracts are
limited to receipt of an amount equal to the exchange gain or payment of an
amount equal to the exchange loss at the contract settlement date, and
payment of bank fees related to the contracts. Net negative cash flow from
forward contract activity, consisting of realized gains and losses from
settlement of exposed assets and liabilities at exchange rates in effect at
the settlement date rather than at the time of recording, settlement of the
forward contracts purchased to mitigate the exposures, and payment of bank
fees on the forward contracts, was $825,000 in 1995, $1,800,000 in 1994, and
$5,100,000 in 1993.
Interest rate swap agreements: During 1994 and through March 1995, the
Company had interest rate swap agreements in the principal amounts of its
two European floating rate mortgages (approximately $20,000,000 for that
period). The agreements were for an original term of two years and expired
in March 1995. The Company paid a fixed rate of interest and received a
variable rate of interest based on the Amsterdam Interbank Offering Rate
(AIBOR), and was thus exposed to market risk of future decreases in AIBOR.
The weighted average pay and receive rates of the agreements at termination
in 1995 were 7.36% and 5.22%, respectively, (7.36% and 5.91%, respectively,
at December 31, 1994). The weighted average receive rate was based on the
rate in effect at the balance sheet date. Cash requirements of the
agreements, which were not significant, were limited to the differential
between the fixed rate paid and the variable rate received. The Company
does no trading in this form of derivative instrument.
The fair market values of the Company's forward exchange contracts and
interest rate swap agreements were determined by obtaining quotes from
banks, and are expressed in terms of amounts the Company would receive or
pay should the Company's obligations under the instruments be transferred
to a third party at the reporting date. The fair values of the Company's
forward exchange contracts and interest rate swap agreements approximate the
original contract amounts on that basis.
NOTE 4 -- SUPPLEMENTARY CASH FLOW INFORMATION.
Changes in current assets and liabilities, net of the effects of business
acquisitions and divestitures and restructuring charges, in reconciling
net loss to net cash provided by operations are as follows:
- --------------------------------------------------------------------------
Cash Provided By (Used For) Operations
Year Ended December 31, 1995 1994 1993
- --------------------------------------------------------------------------
(In thousands)
(Increase) decrease in:
Accounts receivable $27,440 $(20,738) $17,801
Inventories 7,474 8,331 36,805
Refundable income taxes ( 5,759) (19,596) (39,818)
Other current assets (16,172) ( 6,905) 9,459
Increase (decrease) in:
Trade accounts payable 2,720 8,013 9,460
Accrued compensation and other
accrued expenses 3,276 ( 836) ( 1,569)
Billings in excess of sales (16,670) 14,824 4,287
Income taxes payable ( 268) 3,297 ( 4,201)
- --------------------------------------------------------------------------
Net changes in current assets
and liabilities $ 2,041 $(13,610) $32,224
==========================================================================
Cash payments for income taxes totaled $4,837,000, $4,588,000, and
$4,201,000 in 1995, 1994, and 1993, respectively. Cash payments for
interest in those years totaled $4,149,000, $2,413,000, and $2,252,000,
respectively.
Investing and financing transactions in 1995 that did not require cash
included acquisition of a business for total consideration of $7,500,000
consisting of issuance of 797,931 shares of the Company's common stock and
the granting of stock options on 148,718 of the Company's shares to
employees of the acquired company (see Note 9). There were no significant
non-cash investing and financing transactions in 1994 or 1993.
NOTE 5 -- ACCOUNTS RECEIVABLE.
Concentrations of credit risk with respect to accounts receivable are
limited due to the diversity of the Company's customer base. The Company
performs periodic credit evaluations of its customers' financial condition
and generally does not require collateral. Historically, the Company has
not experienced significant losses related to trade receivables from
individual customers or from groups of customers in any geographic area,
with the exception of the 1994 write-off of a $5,500,000 receivable from a
Middle Eastern customer. The Company's total accounts receivable from
Middle Eastern customers at December 31, 1995 and 1994 was $21,500,000 and
$18,000,000, respectively.
Revenues from the U.S. government were $159,273,000 in 1995, $166,955,000
in 1994, and $165,655,000 in 1993, representing 15% of total revenues in
1995 and 16% of total revenues in 1994 and 1993. At December 31, 1995 and
1994, accounts receivable from the U.S. government was $54,000,000 and
$69,000,000, respectively. The Company sells to the U.S. government under
long-term contractual arrangements, primarily indefinite delivery,
indefinite quantity and cost-plus award fee contracts, and through
commercial sales of products not covered by long-term contracts.
Approximately 45% of total federal government revenues are earned under
long-term contracts. The Company believes its relationship with the federal
government to be good. While it is fully anticipated that these contracts
will remain in effect through their expiration, the contracts are subject to
termination (with damages paid to the Company) at the election of the
government. Any loss of a significant government contract would have an
adverse impact on the results of operations of the Company.
Included in accounts receivable are unbilled amounts of $75,800,000 and
$70,400,000 at December 31, 1995 and 1994, respectively.
The Company maintained reserves for uncollectible accounts, included in
Accounts Receivable in the consolidated balance sheets at December 31,
1995 and 1994, of $20,399,000 and $20,309,000, respectively.
NOTE 6 -- DEBT AND LEASES.
Short- and long-term debt is summarized as follows:
- -------------------------------------------------------------
December 31, 1995 1994
- -------------------------------------------------------------
(In thousands)
Short-term credit facilities $ 1,432 $18,617
Revolving credit agreement 15,000 15,003
Term loan 21,607 ---
Long-term mortgages 12,626 20,000
Other secured debt 13,946 ---
Other 4,930 7,494
- -------------------------------------------------------------
Total debt 69,541 61,114
Less amounts payable within one year 32,153 37,726
- -------------------------------------------------------------
Total long-term debt $37,388 $23,388
=============================================================
In October 1995, the Company entered into a three-year revolving credit
agreement with a group of lenders. Borrowings available under the agreement
are determined by the amounts of eligible assets of the Company, as defined
in the agreement, including cash, accounts receivable, inventory, and
property, plant, and equipment, with maximum borrowings of $100 million.
Borrowings are secured by a pledge of substantially all of the Company's
assets in the U.S. and Canada and, under certain circumstances, the accounts
receivable of some European subsidiaries of the Company. At December 31,
1995, the Company had outstanding borrowings of $15,000,000, and
approximately $20 million of the available credit line was allocated to
support letters of credit issued by the Company. The rate of interest on
all borrowings under the agreement is, at the Company's option, the Citibank
base rate of interest plus 1.75% or the Eurodollar rate plus 2.75%. The
weighted average interest rate on combined debt outstanding under short-term
credit arrangements and revolving credit agreements for 1995 and 1994 was
10.4% and 6.8%, respectively. The agreement requires the Company to pay a
commitment fee of .5% annually on the average unused daily portion of the
revolving credit commitment.
The revolving credit agreement contains certain financial covenants of the
Company, including minimum net worth, minimum fixed charge coverage, minimum
interest coverage, and maximum levels of capital expenditures and
capitalized software development costs. In addition, the agreement includes
restrictive covenants that limit various business transactions (including
repurchases of the Company's stock, dividend payments, mergers, acquisitions
of or investments in other businesses, and disposal of assets including
individual businesses, subsidiaries, and divisions) and limit or prevent
certain other business changes.
The Company's previous $50 million revolving credit agreement with a bank
enabled the Company to borrow funds on a revolving basis until May 31, 1995.
All amounts due under the agreement were paid in full at that time.
In August 1995, the Company entered into a term loan agreement with an
Australian bank totaling 35 million Australian dollars (approximately $26
million). The loan is payable in varying installments through August 2002
and bears interest at the bank's variable short-term lending rate, which
ranged from 7.5% to 8.2% in 1995. Certain assets and approximately
$7,500,000 in letters of credit are pledged as security under the loan
agreement. The loan agreement contains certain financial covenants of the
Company and its Australian subsidiary, including minimum net worth and
minimum interest coverage.
The Company has two long-term mortgages on certain of its European
facilities. Prior to refinancing in December 1995 and January 1996, the
mortgages were payable in varying installments through the year 2017 and
bore interest at the floating Amsterdam Interbank Offering Rate (AIBOR),
which ranged from 3.9% to 5.7% in 1995 and from 5.2% to 6.5% in 1994.
The refinanced mortgages are payable in varying installments through the
year 2010 and bear interest at the floating AIBOR rate plus 1%. During
1993, the Company entered into two-year interest rate swap agreements in the
amounts of the mortgages to reduce the risk of increases in interest rates,
effectively converting the interest rates on these mortgages to a fixed
rate of 7.4%. The agreements expired in first quarter 1995.
Other secured debt consists of debt to various financial institutions
payable in varying installments through 1999 and secured by certain
internally used computer equipment. The weighted average interest rate on
this debt for 1995 was 11.3%.
See Note 3 for discussion of fair values of the Company's debt and interest
rate swap agreements.
The Company leases various property, plant, and equipment under operating
leases as lessee. Rental expense for operating leases was $38,175,000 in
1995, $38,628,000 in 1994, and $41,668,000 in 1993. Subleases and
contingent rentals are not significant. Future minimum lease payments, by
year and in the aggregate, under non-cancelable operating leases with
initial or remaining terms of one year or more are as follows:
- ------------------------------------------------------------------
Operating
Lease Commitments
- ------------------------------------------------------------------
(In thousands)
1996 $28,144
1997 20,527
1998 13,009
1999 7,698
2000 5,527
Thereafter 24,817
- ------------------------------------------------------------------
Total future minimum lease payments $99,722
==================================================================
NOTE 7 -- INCOME TAXES.
The components of loss before income taxes are as follows:
- --------------------------------------------------------------------------
Year Ended December 31, 1995 1994 1993
- --------------------------------------------------------------------------
(In thousands)
U.S. $(17,779) $(26,330) $(115,025)
International (27,569) (47,861) ( 57,525)
- --------------------------------------------------------------------------
Total loss before income taxes $(45,348) $(74,191) $(172,550)
==========================================================================
Income tax benefit consists of the following:
- --------------------------------------------------------------------------
Year Ended December 31, 1995 1994 1993
- --------------------------------------------------------------------------
(In thousands)
Current benefit (expense):
Federal $ 5,257 $19,931 $32,460
State ( 6) ( 132) 900
International ( 2,076) ( 203) 300
- ---------------------------------------------------------------------------
3,175 19,596 33,660
- ---------------------------------------------------------------------------
Deferred benefit (expense):
Federal ( 2,685) (14,775) 16,429
State --- --- 200
International ( 490) ( 850) 3,719
- ---------------------------------------------------------------------------
( 3,175) (15,625) 20,348
- ---------------------------------------------------------------------------
Total income tax benefit --- $ 3,971 $54,008
===========================================================================
"Refundable income taxes" included in the consolidated balance sheets
consist primarily of the benefit of losses carried back to prior years for
U.S. federal income tax return purposes.
Deferred income taxes included in the Company's balance sheet reflect the
net tax effects of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the carrying
amounts for income tax return purposes. Significant components of the
Company's deferred tax assets and liabilities are as follows:
- ---------------------------------------------------------------------------
December 31, 1995 1994
- ---------------------------------------------------------------------------
(In thousands)
Current Deferred Tax Assets (Liabilities):
Inventory reserves $13,901 $12,194
Vacation pay and other employee benefit accruals 6,413 7,005
Other financial statement reserves, primarily
allowance for doubtful accounts 9,078 6,875
Profit on uncompleted sales contracts
deferred for tax return purposes ( 8,686) (13,826)
Other current tax assets and liabilities, net 4,331 3,876
- ----------------------------------------------------------------------------
25,037 16,124
Less asset valuation allowance (21,209) (14,911)
- ----------------------------------------------------------------------------
Total net current asset (1) 3,828 1,213
- ----------------------------------------------------------------------------
Noncurrent Deferred Tax Assets (Liabilities):
Net operating loss and tax credit carryforwards:
U.S. federal and state 29,577 15,377
International operations 28,964 24,874
Depreciation ( 8,632) (10,047)
Other noncurrent tax assets and liabilities, net (10,487) ( 2,033)
- ----------------------------------------------------------------------------
39,422 28,171
Less asset valuation allowance (43,303) (30,259)
- ----------------------------------------------------------------------------
Total net noncurrent liability ( 3,881) ( 2,088)
- ----------------------------------------------------------------------------
Net deferred tax liability $( 53) $( 875)
============================================================================
(1) Included in "Other current assets" in the consolidated balance sheets.
The valuation allowance for deferred tax assets, which consists primarily of
reserves against the tax benefit of net operating loss carryforwards,
increased by $19,342,000 in 1995 due to the incurrence of additional losses
that may be carried forward, the future tax benefits of which cannot be
assured. If realized, these tax benefits will be applied to reduce income
tax expense in the year realized.
Net operating loss carryforwards are available to offset future earnings
within the time periods specified by law. At December 31, 1995, the
Company had a U.S. federal net operating loss carryforward of approximately
$48,000,000 expiring in 2009 and 2010. International net operating loss
carryforwards total approximately $85,000,000 and expire as follows:
- --------------------------------------------------------
International
Net Operating Loss
December 31, 1995 Carryforwards
- --------------------------------------------------------
(In thousands)
Expiration:
3 years or less $11,000
4 to 5 years 12,000
6 to 10 years 10,000
Unlimited carryforward 52,000
- --------------------------------------------------------
Total $85,000
========================================================
Additionally, the Company has $3,500,000 of U.S. alternative minimum tax
credit carryforwards which have no expiration date. U.S. research and
development tax credit carryforwards of $5,300,000 are available to offset
regular tax liability through 2010.
A reconciliation from income tax benefit at the U.S. federal statutory tax
rate of 35% to the Company's income tax benefit is as follows:
- ----------------------------------------------------------------------------
Year Ended December 31, 1995 1994 1993
- ----------------------------------------------------------------------------
(In thousands)
Income tax benefit at federal statutory rate $15,872 $25,967 $60,393
Research and development tax credit --- --- 3,400
Benefit from Foreign Sales Corp. (FSC) 905 1,689 1,415
Tax effects of international operations, net ( 8,629) ( 9,836) (13,933)
Tax effects of reorganization of certain
international subsidiaries --- --- 6,200
State income taxes, net of federal tax benefit --- ( 86) 754
Non-deductible goodwill amortization --- --- ( 3,290)
Tax effect of U.S. tax loss carried forward (10,967) ( 3,804) ---
Tax effect of U.S. tax credits carried forward --- ( 7,900) ---
Other - net 2,819 ( 2,059) ( 931)
- -----------------------------------------------------------------------------
Income tax benefit --- $ 3,971 $54,008
=============================================================================
The Company does not provide for federal income taxes or tax benefits on
the undistributed earnings or losses of its international subsidiaries
because earnings are reinvested and, in the opinion of management, will
continue to be reinvested indefinitely. At December 31, 1995, the Company
had not provided federal income taxes on earnings of individual international
subsidiaries of approximately $46,000,000. Should these earnings be
distributed in the form of dividends or otherwise, the Company would be
subject to both U.S. income taxes and withholding taxes in the various
international jurisdictions. Determination of the related amount of
unrecognized deferred U.S. income tax liability is not practicable because
of the complexities associated with its hypothetical calculation.
Withholding taxes of approximately $2,600,000 would be payable if all
previously unremitted earnings as of December 31, 1995, were remitted to
the U.S. company.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". Under this
Statement, tax liabilities are provided in the financial statements at tax
rates known to be in effect in the future years in which items of income
and expense currently deferred for tax return purposes become includable in
the tax return, rather than at rates in effect in the year of deferral.
Since the Company had historically provided taxes at rates higher than the
reduced tax rates now in effect, it was required to reduce deferred tax
liabilities to reflect current tax rates, which resulted in an increase in
1993 income (shown as the cumulative effect of a change in accounting
principle in the consolidated statement of operations) of $2,500,000 or
$.05 per share. The change in method did not significantly affect the
Company's effective rate of tax for 1993.
NOTE 8 -- EMPLOYEE STOCK OPTION AND BENEFIT PLANS.
The Company has reserved a total of 3,000,000 shares of common stock to
grant as options to key employees under the 1992 stock option plan. Options
may be granted at fair market value or at a price less than fair market
value on the date of grant. Options are not exercisable prior to twenty-
four months from the date of grant or later than ten years after the date of
grant.
At December 31, 1995, 1,258,927 shares were available for future grants. A
summary of activity in the Company's stock option plan is presented below.
- -----------------------------------------------------------------------------
Year Ended December 31, 1995 1994 1993
- -----------------------------------------------------------------------------
Options outstanding at beginning of year 1,260,637 1,408,925 1,574,087
Granted 1,392,718 70,000 345,004
Exercised ( 836,469) --- (107,082)
Cancelled ( 38,582) (218,288) (403,084)
- -----------------------------------------------------------------------------
Options outstanding at end of year 1,778,304 1,260,637 1,408,925
=============================================================================
Options exercisable at end of year 160,171 598,814 538,602
=============================================================================
Option prices per share:
Granted $ .90-11.13 $ 9.50 $9.00-12.25
Exercised .90-12.00 --- 7.56-11.00
Cancelled .90-11.00 9.25-15.13 7.56-27.25
Options outstanding at end of year .90-16.00 7.88-16.00 7.88-16.00
Options exercisable at end of year .90-16.00 7.88-16.00 11.00-15.13
=============================================================================
Options granted during 1995 at a price of $.90 per share were the result of
a business acquisition (see Note 9) in which the Company assumed the
acquired company's total shares and price obligations under existing stock
option plans. All other option grants by the Company during 1995 were at
the fair market value of the Company's stock at date of grant.
Under the 1995 Employee Stock Purchase Plan, 3,200,000 shares of common
stock were made available for purchase through a series of five consecutive
annual offerings each June beginning June 1, 1995. In order to purchase
stock, each participant may have up to 10% of his or her pay, not to exceed
$25,000 in any offering period, withheld through payroll deductions. All
full-time employees, except members of the Administrative Committee of the
Plan, are eligible to participate. The purchase price of each share is 85%
of the closing market price of the Company's common stock on the last pay
date of each calendar month. Employees purchased 358,687, 510,625, and
494,462 shares of stock in 1995, 1994, and 1993, respectively, under the
1995 and predecessor Plans.
In 1975, the Intergraph Corporation Stock Bonus Plan was established to
provide retirement benefits to substantially all U.S. employees. Effective
January 1, 1987, the Company amended the Plan to qualify it as an employee
stock ownership plan (ESOP). The Company makes contributions to the Plan in
amounts determined at the discretion of the Board of Directors, and the
contributions are funded with Company stock. Amounts are allocated to the
accounts of participants based on compensation. Benefits are payable to
participants subject to the vesting provisions of the Plan. The Company
did not make a contribution to the Plan in 1995, 1994, or 1993.
In 1990, the Company established the Intergraph Corporation SavingsPlus
Plan, an employee savings plan qualified under Section 401(k) of the
Internal Revenue Code, covering substantially all U.S. employees.
Employees can elect to contribute up to 15% of their compensation to the
Plan. The Company matches 50% of employee contributions up to 6% of each
employee's compensation. Company contributions to the Plan were $5,886,000,
$6,169,000, and $5,993,000 in 1995, 1994, and 1993, respectively.
The Company also maintains various retirement benefit plans for employees of
its international subsidiaries, primarily defined contribution plans that
cover substantially all employees. Contributions to the plans are made in
cash and are allocated to the accounts of participants based on
compensation. Benefits are payable based on vesting provisions contained
in each plan. Contributions to the plans were $3,856,000, $3,331,000, and
$2,928,000, in 1995, 1994, and 1993, respectively.
NOTE 9 -- ACQUISITIONS AND DIVESTITURES.
In January 1995, the Company acquired all of the outstanding stock of
InterCAP Graphics Systems, Inc. for total consideration of $7,500,000
consisting of issuance of 797,931 shares of the Company's common stock and
assumption of InterCAP's obligations under employee stock option plans.
InterCAP is engaged in the business of designing and producing computer
software systems that assist in creating, editing, converting and presenting
technical illustrations used by large manufacturing firms. The accounts and
results of operations of InterCAP have been combined with those of the
Company since the date of acquisition using the purchase method of
accounting. Had the combination occurred January 1, 1994, the Company's
revenues, net loss, and net loss per share would not have been materially
affected for either the year ended December 31, 1994 or 1995.
In May 1995, the Company sold one of its subsidiaries at a gain of
$5,024,000 ($.11 per share). The subsidiary was not significant to the
Company's results of operations. The gain is included in "Other income
(expense) - net" in the consolidated statement of operations.
In February 1993, the Company acquired Bestinfo, Inc. for $9,500,000 in cash
and other consideration. Bestinfo is a producer of merchandise advertising
technology for the retail/catalog markets. The accounts and results of
operations of Bestinfo have been combined with those of the Company since
the date of acquisition using the purchase method of accounting.
NOTE 10-- OPERATIONS BY GEOGRAPHIC AREA.
International markets, particularly Europe, continue in importance to the
industry and to the Company. The Company's operations are subject to and
may be adversely affected by a variety of risks inherent in doing business
internationally, such as government policies or restrictions, currency
exchange fluctuations, and other factors.
The following summary of operations by geographic area includes both sales
to unaffiliated customers and intercompany transfers between geographic
areas. Transfers between geographic areas are accounted for under a
transfer pricing policy. Loss from operations by geographic areas reflects
these transfers.
- -------------------------------------------------------------------------
Year Ended December 31, 1995 1994 1993
- -------------------------------------------------------------------------
(In thousands)
Revenues
United States:
Unaffiliated customers - U.S. $ 500,295 $ 526,082 $ 514,399
Unaffiliated customers - export 49,035 38,908 36,017
Consolidated subsidiaries 217,171 199,663 185,673
- --------------------------------------------------------------------------
766,501 764,653 736,089
- --------------------------------------------------------------------------
Europe:
Unaffiliated customers 390,715 344,579 371,313
- --------------------------------------------------------------------------
Other International:
Unaffiliated customers 157,933 131,834 128,548
U.S. parent 3,022 2,620 2,994
- --------------------------------------------------------------------------
160,955 134,454 131,542
- --------------------------------------------------------------------------
Eliminations -- net ( 220,193) ( 202,283) ( 188,667)
- --------------------------------------------------------------------------
Total revenues $1,097,978 $1,041,403 $1,050,277
==========================================================================
Loss From Operations
United States $( 12,261) $( 27,640) $( 116,500)
Europe ( 27,663) ( 33,147) ( 43,262)
Other International ( 20,905) ( 17,403) ( 16,782)
Eliminations -- net 6,684 5,548 11,922
- --------------------------------------------------------------------------
Total loss from operations $( 54,145) $( 72,642) $( 164,622)
==========================================================================
Identifiable Assets
United States $ 558,446 $ 586,041 $ 612,370
Europe 248,459 239,649 224,011
Other International 131,439 109,459 103,168
Eliminations -- net ( 112,299) ( 95,531) ( 84,220)
- --------------------------------------------------------------------------
Total identifiable assets $ 826,045 $ 839,618 $ 855,329
==========================================================================
Loss from operations in 1993 includes restructuring charges of $55,500,000
in the U.S., $30,900,000 in Europe, and $8,300,000 in Other International.
Loss from operations in 1994 includes a restructuring credit (reversal of
the unincurred portion of the 1993 restructuring charge) of $4,800,000 in
Europe. Loss from operations in 1995 includes restructuring charges of
$4,778,000 in the U.S., $978,000 in Europe, and $284,000 in Other
International.
NOTE 11 -- RELATED PARTY TRANSACTIONS.
Bentley Systems, Inc.: Through December 31, 1994, the Company had an
exclusive license agreement with Bentley Systems, Inc. (BSI), a 50%-owned
affiliate of the Company, under which the Company distributed MicroStation,
a software product developed and maintained by BSI and utilized in many of
the Company's software applications. Under this agreement, the Company paid
royalties to BSI based on its sales of MicroStation. Royalties expense
totaled $21,820,000 in 1994 and $18,085,000 in 1993. At December 31, 1994,
amounts due to BSI totaled $5,821,000.
Effective January 1, 1995, the Company's license agreement became
nonexclusive. Under the new agreement, the Company has the right to sell
MicroStation via its direct sales force, and to sell MicroStation via its
indirect sales channels if MicroStation is sold with other Intergraph
products. In addition, effective January 1, 1995, the per copy fee payable
by the Company to BSI was increased and, for 1995 only, BSI paid the Company
a per copy distribution fee based on BSI's MicroStation sales to resellers.
See Management's Discussion and Analysis of Financial Condition and Results
of Operations for further discussion of the settlement with BSI and its
effects on the Company.
The Company's purchases from BSI totaled $39,329,000, and the per copy
distribution fees payable by BSI to the Company totaled $7,414,000 in 1995.
At December 31, 1995, amounts due from BSI or for which the Company holds
the right to delivery of BSI products totaled $13,000,000.
Loan Program for Executive Officers: In order to encourage retention of
Company stock by executive officers, the Company adopted a loan program
effective January 1993, under which executive officers may borrow from the
Company, on an unsecured basis, an amount not exceeding (1) the current
market value of the common stock of the Company owned by any such executive
officer, and/or (2) the net value (current market price less exercise price)
of currently exercisable stock options owned by any such executive officer.
Interest on the loans is charged monthly at the prevailing prime rate.
Amounts must be repaid by the earliest to occur of termination of
employment, the attainment of a designated market price for the Company's
stock or the sale of a certain number of shares by loan recipients, or May
1, 1996. At December 31, 1995 and 1994, James W. Meadlock, Chief Executive
Officer and Chairman of the Board of the Company, was indebted to the
Company in the amounts of $5,165,000 and $4,778,000, respectively, under
the program.
NOTE 12 -- RISKS AND UNCERTAINTIES.
In addition to those described in Notes 1, 3, 5, 6, and 10, the Company has
risks related to its business and economic environment as described below.
The Company has ceased design and production of its microprocessor.
Substantially all of the Company's microprocessor needs are currently
supplied by Intel Corporation. The Company does not have a fixed quantity
commitment for microprocessors in its agreements with Intel, but believes
it has a good relationship with Intel and is unaware of any reason that
Intel might encounter difficulties in meeting the Company's microprocessor
needs. Other microprocessors are available in the market, but a change by
the Company from Intel to another microprocessor would significantly
disrupt the Company's development and manufacturing activities and result
in delayed or lost sales, which could have a significant adverse effect on
the Company's results of operations and financial position.
The Company develops its own graphics, data management, and applications
software as part of its continuing product development activities. The
Company has standard license agreements with Microsoft Corporation for use
and distribution of the Windows NT operating system and with UNIX Systems
Laboratories for use and distribution of the UNIX operating system. The
license agreements are perpetual and allow the Company to sublicense the
operating systems software upon payment of required sublicensing fees. The
Company also has an extensive program for the licensing of third-party
application and general utility software for use on systems and workstations.
The Company owns and maintains a number of registered patents and registered
and unregistered copyrights, trademarks, and service marks. The patents
and copyrights held by the Company are the principal means by which the
Company preserves and protects the intellectual property rights embodied in
the Company's hardware and software products. Similarly, trademark rights
held by the Company are used to preserve and protect the goodwill represented
by the Company's registered and unregistered trademarks.
As industry standards proliferate, there is a possibility that the patents
of others may become a significant factor in the Company's business.
Personal computer technology is widely available, and many companies are
attempting to develop patent positions concerning technological improvements
related to personal computers and workstations. At present, it does not
appear that the Company will be prevented from using the technology
necessary to compete successfully, since patented technology is typically
available in the industry under royalty-bearing licenses or patent cross-
licenses, or the technology can be purchased on the open market. Any
increase in royalty payments or purchase costs would increase the Company's
costs of manufacture, however, and it is possible that some key improvement
necessary to compete successfully in markets served by the Company may not
be available.
An inability to retain significant third party license rights in particular
the Microsoft license, to protect the Company's copyrights, trademarks, and
patents, or to obtain any required patent rights of others through licensing
or purchase could significantly reduce the Company's revenues and adversely
affect its results of operations.
NOTE 13 -- SHAREHOLDER RIGHTS PLAN.
On August 25, 1993, the Company's Board of Directors adopted a Shareholder
Rights Plan. As part of this plan, the Board of Directors declared a
distribution of one common stock purchase right (a "Right") for each share
of the Company's common stock outstanding on September 7, 1993. Each Right
entitles the holder to purchase from the Company one common share at a price
of $50, subject to adjustment. The Rights are not exercisable until the
occurrence of certain events related to a person or a group of affiliated
or associated persons acquiring, obtaining the right to acquire, or
commencing a tender offer or exchange offer, the consummation of which would
result in beneficial ownership by such a person or group of 15% or more of
the outstanding common shares of the Company. Rights will also become
exercisable in the event of certain mergers or an asset sale involving more
than 50% of the Company's assets or earnings power. Upon becoming
exercisable, each Right will allow the holder, except the person or group
whose action has triggered the exercisability of the Rights, to either buy
securities of Intergraph or securities of the acquiring company, depending
on the form of the transaction, having a value of twice the exercise price
of the Rights. The Rights trade with the Company's common stock. The
Rights are subject to redemption at the option of the Board of Directors at
a price of $.01 per Right until the occurrence of certain events, and are
exchangeable for the Company's common stock at the discretion of the Board
of Directors under certain circumstances. The Rights expire on September 7,
2003.
NOTE 14 -- SUMMARY OF QUARTERLY INFORMATION -- UNAUDITED.
- -----------------------------------------------------------------------------
Quarter Ended March 31 June 30 Sept. 30 Dec. 31
- -----------------------------------------------------------------------------
(In thousands except per share amounts)
Year ended December 31, 1995:
Revenues $257,329 $260,167 $279,231 $301,251
Gross profit 98,148 101,387 105,972 124,184
Net income (loss) (22,472) (21,958) ( 8,049) 7,131
Net income (loss) per share ( .49) ( .48) ( .17) .15
Weighted average shares
outstanding 45,601 45,929 46,146 46,616
Year ended December 31, 1994:
Revenues $240,073 $242,395 $262,225 $296,710
Gross profit 97,369 103,544 104,013 117,206
Net loss (14,047) (20,164) (17,496) (18,513)
Net loss per share ( .31) ( .45) ( .39) ( .41)
Weighted average shares
outstanding 45,353 44,842 44,559 44,695
=============================================================================
Second quarter 1995 losses were increased by a restructuring charge of $.16
per share and reduced by an $.11 per share gain on the sale of a subsidiary.
Fourth quarter 1995 earnings were increased by a $.03 per share reversal of
a portion of the restructuring charge recognized in second quarter 1995.
First quarter 1994 losses were increased by a net $.01 per share by the
write-down of two equity investments totaling $.05 per share and a $.04 per
share gain from the sale of a portion of the Company's stock investment in
another company. Third quarter 1994 losses were reduced by a $.07 per share
gain from the sale of the Company's stock investment in another company.
Fourth quarter 1994 losses were increased by a $.12 per share write-off of a
Middle Eastern account receivable and reduced by an $.11 per share reversal
of the remaining unincurred portion of the restructuring charge recognized
in 1993.
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders
Intergraph Corporation
We have audited the accompanying consolidated balance sheets of Intergraph
Corporation and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of operations, shareholders' equity, and
cash flows for each of the three years in the period ended December 31, 1995.
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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Intergraph
Corporation and subsidiaries at December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Birmingham, Alabama
January 31, 1996
DIVIDEND POLICY
The Company has never declared or paid a cash dividend on its common stock.
It is the present policy of the Company's Board of Directors to retain all
earnings to finance the Company's operations. In addition, payment of
dividends is restricted by the Company's revolving credit agreement.
PRICE RANGE OF COMMON STOCK
Since April 1981, Intergraph common stock has traded on The NASDAQ Stock
Market under the symbol INGR. As of January 31, 1996, there were 46,889,138
shares of common stock outstanding, held by 6,229 shareholders of record.
The following table sets forth, for the periods indicated, the high and low
sale prices of the Company's common stock as reported on The NASDAQ Stock
Market.
- -------------------------------------------------------------------------
1995 1994
Period High Low High Low
- -------------------------------------------------------------------------
First Quarter $14 3/8 $ 8 1/8 $11 1/4 $ 8 7/8
Second Quarter 14 10 10 1/4 8 3/4
Third Quarter 13 10 7/8 11 8 5/8
Fourth Quarter 18 1/2 11 5/8 9 1/8 7 3/8
=========================================================================
TRANSFER AGENT AND REGISTRAR
Harris Trust and Savings Bank
Shareholder Services Division
P. O. Box 755
Chicago, IL 60690-0755
CORPORATE COUNSEL
Lanier Ford Shaver & Payne P.C.
200 West Court Square, Suite 5000
Huntsville, AL 35801
INDEPENDENT AUDITORS
Ernst & Young LLP
AmSouth/Harbert Plaza, Suite 1900
Birmingham, AL 35203
FORM 10-K
A copy of the Company's Form 10-K filed with the Securities and Exchange
Commission is available without charge upon written request to Shareholder
Relations, Intergraph Corporation, Huntsville, AL 35894-0001.
ANNUAL MEETING
The annual meeting of Intergraph Corporation will be held May 16, 1996, at
the Corporate offices in Huntsville, Alabama.
BOARD MEMBERS AND OFFICERS
BOARD OF DIRECTORS VICE PRESIDENTS
James W. Meadlock Thomas G. Baybrook
Chief Executive Officer and
Chairman of the Board Edward J. Blaum
Roland E. Brown Klaas Borgers
Director
Edward F. Boyle
Larry J. Laster
Executive Vice President Coleman P. Callaway
and Director
Roger O. Coupland
Nancy B. Meadlock
Executive Vice President Anthony B. Crawford
and Director
Jeffrey H. Edson
Keith H. Schonrock Jr.
Director Graeme J. Farrell
James F. Taylor Jr. Milford B. French
Executive Vice President,
President, Intergraph Public Jeffrey P. Heath
Safety, and Director
Fred D. Heddens
Robert E. Thurber
Executive Vice President Rune Kahlbom
and Director
William H. McClure
EXECUTIVE VICE PRESIDENTS Winston P. Newton
Wade C. Patterson John R. Owens
President, Intergraph Computer
Systems
Robert Patience
William E. Salter
President, Intergraph Federal John W. Wilhoite
Systems
Tommy D. Steele
President, Intergraph Software TREASURER
Solutions
James H. Dorton
Lawrence F. Ayers Jr.
SECRETARY
Richard S. Buchheim
John R. Wynn
Penman R. Gilliam
Neil E. Keith
Stephen J. Phillips
Kenneth C. Sullivan
Edward A. Wilkinson
Allan B. Wilson
Manfred Wittler
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Annual Report on Form 10-K for the year ended December 31, 1995,
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 56,407
<SECURITIES> 0
<RECEIVABLES> 344,450<F1>
<ALLOWANCES> 20,399
<INVENTORY> 111,813
<CURRENT-ASSETS> 541,852
<PP&E> 522,669
<DEPRECIATION> 304,621
<TOTAL-ASSETS> 826,045
<CURRENT-LIABILITIES> 280,712
<BONDS> 37,388
0
0
<COMMON> 5,736
<OTHER-SE> 498,328
<TOTAL-LIABILITY-AND-EQUITY> 826,045
<SALES> 710,168
<TOTAL-REVENUES> 1,097,978
<CGS> 439,502
<TOTAL-COSTS> 668,287
<OTHER-EXPENSES> 483,836<F2>
<LOSS-PROVISION> 4,945<F3>
<INTEREST-EXPENSE> 4,198
<INCOME-PRETAX> (45,348)
<INCOME-TAX> 0
<INCOME-CONTINUING> (45,348)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (45,348)
<EPS-PRIMARY> (.98)
<EPS-DILUTED> (.98)
<FN>
<F1>Accounts receivable in the Consolidated Balance Sheet is shown net of
allowances for doubtful accounts.
<F2>Other expenses include Product development expenses, Sales and marketing
expenses, General and administrative expenses, and the Restructuring charge.
<F3>The provision for doubtful accounts is included in Other expenses above.
</FN>
</TABLE>
