Intergraph Settles Shareholder Class Action Lawsuit


Certain IP Litigation Matters

Intergraph owns and maintains a number of registered patents and registered and unregistered copyrights, trademarks, and service marks. The patents and copyrights held by Intergraph are the principal means by which Intergraph preserves and protects the intellectual property ("IP") rights embodied in Intergraph's products. Similarly, trademark rights held by Intergraph are used to preserve and protect the reputation of Intergraph's registered and unregistered trademarks. Intergraph continuously evaluates various strategies for the protection of its IP, including both licensing and litigation. Such strategies are subject to known and unknown risks and uncertainties. The following is a discussion of material recent developments related to Intergraph's pending IP enforcement activities.

Clipper System Patents: As previously disclosed, Intergraph has entered into numerous historical patent infringement litigation settlements regarding Intergraph's Clipper system patents. The Clipper system patents relate to memory management technology. The following is a discussion of material recent developments related to Intergraph's IP enforcement activities with respect to the Clipper system patents.

On March 31, 2006, Intergraph entered into a patent license agreement with Sony Corporation of Japan ("Sony"). The terms of the agreement require Sony to make a one-time, up-front royalty payment of $15.0 million for a paid-up worldwide license to Intergraph's patent portfolio. This payment was received on June 16, 2006. Intergraph recorded after-tax IP income from this agreement of approximately $8.6 million, net of all fees and expenses, in the first quarter of 2006.

On April 24, 2006, Intergraph announced a patent license agreement with Acer Incorporated ("Acer"). Under the terms of the agreement, Acer made a one-time, fully paid-up royalty payment of $7.5 million based on a 1% royalty on applicable product revenue. This payment was received on July 26, 2006. Intergraph recorded after-tax IP income from this agreement of approximately $4.3 million, net of all fees and expenses, in the second quarter of 2006.

On June 14, 2006, Intergraph filed a patent infringement action with the Division for Civil Matters in the Hamburg, Germany Regional Court against Fujitsu Siemens Computers ("FSC") alleging that certain FSC products infringe Intergraph's European Clipper system patent. Intergraph seeks monetary damages in the form of royalty payments for the sale of FSC products which infringe Intergraph's European Clipper patent. Thereafter, FSC filed a notice of its intent to defend, and requested an extension to file their legal response. FSC's legal response was served on Intergraph in November 2006, and on the same day FSC filed a nullity action in the German patent office to nullify Intergraph's European Clipper patent. Intergraph is currently evaluating FSC's response and the nullity action and has requested a trial schedule from the Regional Court. Intergraph is currently awaiting a response on its request for a trial schedule.

On June 28, 2006, Intergraph filed an infringement action against Toshiba Corporation ("Toshiba") and NEC Corporation ("NEC"), together with various subsidiaries and affiliates of each, in the Northern District of California. The action alleged that certain Toshiba and NEC products infringe Intergraph's Clipper system patents. Intergraph seeks monetary damages in the form of royalty payments for the sale of Toshiba and NEC products which infringe Intergraph's Clipper system patents. Additionally, Intergraph seeks injunctive relief to prohibit the future sale of infringing products by Toshiba and NEC. Toshiba and NEC's legal responses will likely be served on Intergraph in November 2006, with a case management conference scheduled thereafter in December 2006.

Real Estate Appraisals

In January of 2006, Intergraph had appraisals performed on certain of its owned properties. The Intergraph North Campus Business Park was appraised, subject to the underlying assumptions and conditions set forth in the appraisal report, at $65.0 million, and the Intergraph South Campus Business Park was appraised, subject to the underlying assumptions and conditions set forth in the appraisal report, at $32.0 million. Intergraph substantially utilizes the North Campus Business Park, but does not materially utilize the South Campus Business Park. Accordingly, management only considers the South Campus Business Park as excess real property capable of being liquidated. Intergraph had, within the past year, received offers to purchase all or a portion of the South Campus Business Park, but such offers were below the appraised values pursuant to the Real Estate Appraisals.

Opinion of Goldman Sachs & Co. (pages 25-33)

Sum of the Parts Analysis

In calculating the implied enterprise value of the non-core assets, Goldman Sachs undertook the following analyses with respect to Intergraph's interest in Bentley Systems, Inc. and the South Campus Business Park.

Bentley Systems, Inc. stake. In calculating implied equity value of Intergraph, Goldman Sachs valued Intergraph's approximate 25% diluted stake in Bentley Systems, Inc., or Bentley, by annualizing Bentley's first quarter 2006 EBITDA, and applying valuation multiples consistent with software companies with a significant service component and a 30% private company liquidity discount. The valuation assumed a 36.0% tax rate and a tax basis in such stake of approximately $9.2 million.

South Campus Business Park. Goldman Sachs utilized the valuation of the South Campus Business Park set forth in the Real Estate Appraisals and calculated after-tax proceeds of the South Campus Business Park of $24.3 million, assuming a 36.0% tax rate and a tax basis in such stake of approximately $10.5 million. Goldman Sachs used the Real Estate Appraisals in various analyses to account for the value of this excess real property.

Selected Transactions Analysis

For each of the selected transactions described on p. 30, Goldman Sachs analyzed the premia of the transaction price to the target's average trading price over the average one-week and four-week periods prior to announcement of the transaction.

The following table presents the results of this analysis:

----------------------------------------------------------------------
                                           One-Week       Four-Week
                                             Average        Average
----------------------------------------------------------------------
Software Industry Premium Range           1.4% - 25.7%   10.3% - 37.3%
----------------------------------------------------------------------
Software Industry Median Premium             13.0%           18.6%
----------------------------------------------------------------------
Defense and Government Information
 Technology Premium Range                 3.2% - 33.2%   11.0% - 43.1%
----------------------------------------------------------------------
Defense and Government Information
 Technology Median Premium                   28.0%           28.3%
----------------------------------------------------------------------


Goldman Sachs analyzed the multiples of enterprise value to EBITDA for the latest twelve months of financial information available for the transactions described on pp. 30-31. For the software industry transactions the median multiple was 13.8x and for the defense and government information technology industry transactions the median multiple was 14.4x.

Discounted Cash Flow Analysis

In conducting the discounted cash flow analyses, Goldman Sachs used discount rates ranging from 12.0% to 14.0% based upon its judgment of the estimated cost of capital of Intergraph, which included a weighted average cost of capital analysis of comparable companies. Goldman Sachs used perpetuity growth rates ranging from 3.50% to 5.50% based upon a premium to inflation across an assumed range of industry growth rates.

Fees for Prior Services by Goldman Sachs

As described on page 32, Goldman Sachs has provided certain investment banking services to Intergraph from time to time, including having acted as dealer manager of Intergraph's repurchase of 10,000,000 shares of Intergraph common stock in the fourth quarter of 2003 and as counterparty in connection with Intergraph's accelerated share repurchases of 3,797,949 shares and 5,407,000 shares of Intergraph common stock in July 2004 and March 2005, respectively. Goldman received fees of approximately $2.25 million, in the aggregate, in connection with these three matters.

Important Additional Information Concerning the Merger

In connection with the proposed merger, Intergraph has filed a definitive proxy statement with the Securities and Exchange Commission. INVESTORS AND SECURITY HOLDERS ARE ADVISED TO READ THE DEFINITIVE PROXY STATEMENT BECAUSE IT CONTAINS IMPORTANT INFORMATION ABOUT THE MERGER AND THE PARTIES THERETO. Investors and security holders may obtain a free copy of the definitive proxy statement and other documents filed by Intergraph at the Securities and Exchange Commission's Web site at http://www.sec.gov. The definitive proxy statement and such other documents may also be obtained for free from Intergraph by contacting Intergraph Investor Relations, telephone: (256) 730-2720 or email: investorrelations@intergraph.com.

« Previous Page 1 | 2 | 3 | 4  Next Page »



Review Article Be the first to review this article

Airbus

Featured Video
Jobs
Business Partner Manager for Cityworks - Azteca Systems, LLC at Sandy, UT
GIS Analyst II for Air Worldwide at Boston, MA
Senior Structural Engineer for Design Everest at San Francisco, CA
Mechanical Engineer for IDEX Corporation at West Jordan,, UT
Upcoming Events
RoboUniverse San Diego at San Diego CA - Dec 14 - 15, 2016
DGI 2017 at QEII Centre London United Kingdom - Jan 23 - 25, 2017
Geospatial World Forum 2017 Hyderabad at Hyderabad International Convention Center P.O Bag 1101, Cyberabad Post Office Hyderabad Telangana India - Jan 23 - 25, 2017
Trimble
Teledyne Optech
CADalog.com - Countless CAD add-ons, plug-ins and more.



Internet Business Systems © 2016 Internet Business Systems, Inc.
595 Millich Dr., Suite 216, Campbell, CA 95008
+1 (408)-337-6870 — Contact Us, or visit our other sites:
AECCafe - Architectural Design and Engineering EDACafe - Electronic Design Automation TechJobsCafe - Technical Jobs and Resumes  MCADCafe - Mechanical Design and Engineering ShareCG - Share Computer Graphic (CG) Animation, 3D Art and 3D Models
  Privacy Policy