<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 17, 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
--------------------------
MADE2MANAGE SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
INDIANA 7372 35-1665080
(State or other jurisdiction (Primary S.I.C. Code Number) (I.R.S. Employer
of incorporation or Identification
organization) No.)
</TABLE>
9002 PURDUE ROAD
INDIANAPOLIS, INDIANA 46268
(317) 875-9750
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
STEPHEN R. HEAD
VICE PRESIDENT, FINANCE AND ADMINISTRATION, CHIEF FINANCIAL OFFICER, SECRETARY
AND TREASURER
MADE2MANAGE SYSTEMS, INC.
9002 PURDUE ROAD
INDIANAPOLIS, INDIANA 46268
(317) 875-9750
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
--------------------------
COPIES TO:
STEVEN K. HUMKE, ESQ. RUBI FINKELSTEIN, ESQ.
Ice Miller Donadio & Ryan Orrick, Herrington & Sutcliffe LLP
One American Square, Box 82001 666 Fifth Avenue
Indianapolis, Indiana 46282-0002 New York, New York 10103
(317) 236-2394 (212) 506-5000
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock (no par value)................ 2,300,000 shares $11.00 $25,300,000 $7,667
</TABLE>
(1) Includes 300,000 shares of Common Stock that may be sold if the
over-allotment option granted to the Underwriters is exercised in full. See
"Underwriting."
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a).
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED OCTOBER , 1997
2,000,000 SHARES
[LOGO]
COMMON STOCK
------------------
Of the 2,000,000 shares of Common Stock offered hereby (the "Shares"),
1,800,000 Shares are being sold by Made2Manage Systems, Inc. (the "Company") and
200,000 Shares are being sold by certain shareholders of the Company. The
Company will not receive any of the proceeds from the sale of Shares by the
selling shareholders, including those referenced below (the "Selling
Shareholders"). See "Principal and Selling Shareholders." Prior to this offering
there has been no public market for the Common Stock. See "Underwriting" for a
discussion of the factors to be considered in determining the initial public
offering price. It is currently anticipated that the initial public offering
price will be between $9.00 and $11.00 per share. Application has been made to
list the Shares on The Nasdaq National Market under the symbol "MTMS."
------------------------
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. FOR A SUMMARY OF
CERTAIN FACTORS WHICH SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS, SEE "RISK
FACTORS," COMMENCING ON PAGE 6 OF THIS PROSPECTUS.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE
CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC(1) DISCOUNTS(1) COMPANY(2) SHAREHOLDERS
<S> <C> <C> <C> <C>
Per Share..................... $ $ $ $
Total(3)...................... $ $ $ $
</TABLE>
(1) The initial public offering price will be determined by agreement between
the Company and the Representatives of the several Underwriters in
accordance with the recommendation of a "qualified independent underwriter"
as required by the Rules of the National Association of Securities Dealers,
Inc. The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). See
"Underwriting."
(2) Before deducting expenses payable by the Company, estimated at $550,000.
(3) Certain Shareholders have granted the Underwriters a 45-day option to
purchase up to 300,000 additional shares of Common Stock solely for the
purpose of covering over-allotments, if any. If the Underwriters exercise
this option in full, the total Price to Public, Underwriting Discounts and
Proceeds to Selling Shareholders will be $ , $ and $ , respectively. See
"Underwriting."
------------------------
The Shares are offered by the several Underwriters, subject to prior sale,
when, as and if delivered to and accepted by them, subject to the right of the
Underwriters to reject any order in whole or in part and certain other
conditions. It is expected that delivery of the certificates representing such
shares will be made against payment therefor at the office of First Albany
Corporation, New York, New York on or about December , 1997.
FIRST ALBANY CORPORATION
VAN KASPER & COMPANY
RVR SECURITIES CORP.
December , 1997
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF ANY OFFER TO BUY NOR SHALL THERE BY ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
A COLOR LAYOUT OF COMPUTER SCREENS DEMONSTRATING
THE COMPANY'S PRODUCT WILL BE INSERTED HERE
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING STABILIZING BIDS, SYNDICATE COVERING TRANSACTIONS AND THE IMPOSITION
OFPENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
"MADE2MANAGE" IS A REGISTERED TRADEMARK OF THE COMPANY, AND "NOTIFIER" IS A
TRADEMARK OF THE COMPANY. THIS PROSPECTUS ALSO INCLUDES TRADE NAMES AND
TRADEMARKS OF OTHER COMPANIES.
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION, INCLUDING "RISK FACTORS," AND THE COMPANY'S FINANCIAL STATEMENTS
AND RELATED NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS.
THE COMPANY
Made2Manage Systems, Inc. (the "Company") develops, markets and supports
fully integrated, Windows-based business software for manufacturers designed to
run on the Microsoft Windows NT platform. The Company's principal product,
Made2Manage for Windows ("Made2Manage"), is an enterprise resource planning
("ERP") software application designed to meet the unique needs of small and
midsize manufacturers engaged in engineer-to-order, make-to-order, make-to-stock
and mixed mode operations. Made2Manage is designed to be the only business
software needed by these manufacturers to effectively manage their entire
organizations, including sales analysis, order entry, delivery cycle
responsiveness, quality assurance, accounts receivable and financial reporting.
Since its introduction in late 1995, Made2Manage has been licensed by more than
500 manufacturers in North America, primarily in the United States. In addition,
the Company continues to support more than 150 manufacturing sites using the
DOS-and UNIX-based predecessors of Made2Manage.
The Company's customers are small and midsize discrete manufacturers. The
Company strategically targets manufacturers with annual revenues of between $5
million and $50 million with a scalable product designed to support its
customers' growth. Advanced Manufacturing Research, Inc. ("AMR"), an independent
market research firm, has estimated that the ERP software market reached $7.3
billion in 1996 and projected that the market will grow at an average annual
rate of over 35% for the next five years. While the largest share of the ERP
software market in 1996 was attributable to applications aimed at large
manufacturers, the Company believes that the small and midsize segment of the
market is rapidly growing, fragmented and underserved. In addition, Windows NT
is emerging as the platform of choice among small and midsize manufacturers.
Unlike many competing ERP software applications, Made2Manage is a native,
32-bit, Windows-based product that takes full advantage of Microsoft Windows NT
capabilities. Furthermore, Made2Manage was designed specifically as an
integrated business solution for small and midsize manufacturers, providing
simplicity of operation, rapid implementation, ease of administration and low
total cost of ownership. It is a fully integrated solution providing easy access
to shared information from all functional areas of a manufacturing organization.
Made2Manage improves information flow throughout a company and across the supply
chain. This enables a manufacturer to better meet the needs of its customers and
realize numerous competitive advantages, including the ability to customize
production, shorten manufacturing cycles and improve customer service.
The Company's objective is to be a leading provider of fully-integrated ERP
software solutions for manufacturers in its target market. The Company's
strategy for achieving this objective includes (i) maintaining its focus on the
unique requirements of small and midsize manufacturers; (ii) focusing on the
scalable functionality and flexibility of its product to accommodate customer
growth; (iii) expanding its distribution channels by increasing its direct sales
and marketing force, strengthening its relationship with value added resellers
("VARS") and exploring international expansion opportunities; (iv) capitalizing
on Year 2000 replacement opportunities; and (v) continuing to achieve high
levels of customer satisfaction.
The Company was incorporated under the laws of Indiana as Teksyn, Inc. in
1986 and changed its name to Made2Manage Systems, Inc. in 1995. The Company's
principal executive offices are located at 9002 Purdue Road, Indianapolis, IN
46268, and its telephone number is (317) 875-9750.
3
<PAGE>
THE OFFERING
<TABLE>
<CAPTION>
Shares offered by the Company................... 1,800,000 shares
<S> <C>
Shares offered by the Selling Shareholders...... 200,000 Shares
Common Stock to be outstanding after the 3,686,451 shares of Common Stock(1)
offering......................................
Use of proceeds................................. For repayment of certain indebtedness,
certain expansion of marketing efforts,
product development, capital
expenditures, and other general corporate
purposes; See "Use of Proceeds."
Proposed Nasdaq National Market Symbol.......... MTMS
</TABLE>
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30,
YEAR ENDED DECEMBER 31,
------------------------------- --------------------
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenue.................................................. $ 4,452 $ 5,935 $ 9,379 $ 6,138 $ 11,041
Operating income............................................... 546 447 700 374 573
Income tax provision (benefit)(2).............................. 5 6 (1,028) 17 197
Net income..................................................... 443 392 1,606 299 323
Pro forma net income per share(3).............................. .60 .15
Pro forma average number of shares(3).......................... 2,846 2,886
Supplemental pro forma net income per share(3)(4).............. .63 .13
Supplemental pro forma average number of shares(3)(4).......... 2,561 2,575
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-------------------------
ACTUAL AS ADJUSTED(5)
--------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.............................................................. $ 1,856 $ 17,047
Working capital........................................................................ 1,222 16,679
Total assets........................................................................... 8,566 23,757
Long-term obligations, less current portion............................................ 733 --
Total shareholders' equity............................................................. 2,485 18,675
</TABLE>
- ------------------------
(1) Based on shares outstanding at September 30, 1997, including conversion of
1,479,824 shares of convertible preferred stock ("Convertible Preferred
Stock") convertible into the same number of shares of Common Stock, and
excluding (i) 1,060,785 shares of Common Stock issuable upon exercise of
stock options outstanding as of September 30, 1997, of which 399,867 were
exercisable as of that date, and (ii) 14,063 shares of Common Stock issuable
upon the exercise of warrants outstanding as of September 30, 1997. See
"Capitalization," "Management--Stock Option Plan" and Note 5 of Notes to
Financial Statements.
(2) Net income for the year ended December 31, 1996 includes an income tax
benefit of $1.2 million or $.44 per share resulting from the reversal of a
valuation allowance. The tax benefit reflects the recognition of net
operating loss and tax credit carryforwards and results from management's
assessment that the realization of these amounts was more likely than not
based on the Company's current earnings and future outlook. For subsequent
periods the Company has provided for income
4
<PAGE>
taxes utilizing federal and state statutory income tax rates. See Note 7 of
Notes to Financial Statements.
(3) Computed on the basis described in Note 1 of Notes to Financial Statements.
(4) Supplemental pro forma net income per share has been determined in
accordance with Statement of Financial Accounting Standards No. 128,
"Earnings per Share" ("SFAS No. 128").
(5) Adjusted to reflect the sale of 1,800,000 Shares offered by the Company
hereby (after deducting the estimated underwriting discounts and offering
expenses payable by the Company), assuming an initial public offering price
of $10.00 per share, and the receipt of net proceeds therefrom.
------------------------
EXCEPT AS OTHERWISE NOTED, ALL INFORMATION IN THIS PROSPECTUS, INCLUDING
FINANCIAL INFORMATION, SHARE AND PER SHARE DATA: (I) REFLECTS THE AUTOMATIC
CONVERSION OF ALL OF THE SHARES OF THE COMPANY'S OUTSTANDING CONVERTIBLE
PREFERRED STOCK INTO SHARES OF COMMON STOCK ON A ONE-FOR-ONE BASIS UPON THE
COMPLETION OF THIS OFFERING; AND (II) ASSUMES NO EXERCISE OF THE UNDERWRITERS'
OVER-ALLOTMENT OPTION TO BE ISSUED TO THE UNDERWRITERS TO PURCHASE UP TO 300,000
SHARES OF COMMON STOCK. SEE "UNDERWRITING."
5
<PAGE>
RISK FACTORS
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE SECURITIES EXCHANGE ACT
OF 1934, AS AMENDED. SUCH FORWARD-LOOKING STATEMENTS MAY BE DEEMED TO INCLUDE
STATEMENTS REGARDING THE INTENT, BELIEF OR CURRENT EXPECTATIONS OF THE COMPANY
AND ITS MANAGEMENT WITH RESPECT TO (I) THE COMPANY'S STRATEGIC PLANS, (II) THE
POLICIES OF THE COMPANY REGARDING CAPITAL EXPENDITURES, FINANCING OR OTHER
MATTERS AND (III) INDUSTRY TRENDS AFFECTING THE COMPANY'S FINANCIAL CONDITION
AND RESULTS OF OPERATIONS. ACTUAL RESULTS OR EVENTS COULD DIFFER MATERIALLY FROM
THOSE ANTICIPATED IN ANY FORWARD-LOOKING STATEMENTS FOR THE REASONS DISCUSSED IN
THIS SECTION AND THE SECTIONS ENTITLED "MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS" AS WELL AS THOSE
DISCUSSED ELSEWHERE IN THIS PROSPECTUS, OR FOR OTHER REASONS.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FACTORS SET FORTH BELOW,
IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, IN EVALUATING
AN INVESTMENT IN THE SHARES OFFERED HEREBY.
FLUCTUATIONS OF QUARTERLY OPERATING RESULTS; SEASONALITY
The Company has experienced in the past, and expects to experience in the
future, significant fluctuations in quarterly operating results. A substantial
portion of the Company's software license revenue in each quarter is from
product shipped in that quarter, and such revenues historically have been
recorded largely in the third month of a quarter, with a concentration of
revenues mostly in the last week of that third month. Accordingly, the Company's
quarterly results of operations are difficult to predict, and delays in product
delivery or in closings of sales near the end of a quarter could cause quarterly
revenues and, to a greater degree, net income to fall substantially short of
anticipated levels. In addition, the Company has experienced a seasonal pattern
in its operating results, with the fourth quarter typically having the highest
total revenues and operating income and the first quarter having historically
reported lower revenues and operating income compared to the fourth quarter of
the preceding year. Other factors, many of which are beyond the Company's
control, that may contribute to fluctuations in quarterly operating results
include the size of individual orders, the timing of product introductions or
enhancements by the Company and its competitors, competition and pricing in the
manufacturing software industry, market acceptance of new products, reduction in
demand for existing products, the shortening of product life cycles as a result
of new product introductions by the Company or its competitors, product quality
problems, personnel changes, conditions or events in the manufacturing industry,
and general economic conditions. The sales cycle for Made2Manage typically
ranges from three to nine months. However, license signing may be delayed for a
number of reasons outside the control of the Company. Since software is
generally shipped as orders are received, the Company historically has operated
without significant backlog. Because the Company's operating expenses are based
on anticipated revenue levels and a high percentage of the Company's expenses
are relatively fixed in the short term, small variations in the timing of
revenue recognition can cause a significant fluctuation in operating results
from quarter to quarter and may result in unanticipated quarterly earnings
shortfalls or losses. In addition, the Company currently intends to increase its
operating expenses in anticipation of continued growth and to fund expanded
product development efforts. To the extent such expenses precede, or are not
subsequently followed by, increased revenues, the Company's business, financial
condition and results of operations could be materially and adversely affected.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Quarterly Results."
PRODUCT AND MARKET CONCENTRATION
All of the Company's revenues are currently derived from licenses of
Made2Manage and related sales of support, services and hardware. In the near
term, Made2Manage and related enhancements and services are expected to continue
to account for substantially all of the Company's revenues. Accordingly, any
event that adversely affects the sale of Made2Manage, such as competition from
other products, significant quality problems, incompatibility with third party
hardware or software products, negative
6
<PAGE>
publicity or evaluation, reduced market acceptance of, or obsolescence of the
hardware platforms on, or software environments in, which Made2Manage operates,
could have a material adverse effect on the Company's business, financial
condition and results of operations.
The Company's business depends substantially upon the software expenditures
of small and midsize manufacturers, which in part depend upon the demand for
such manufacturers' products. A recession or other adverse event affecting
manufacturing industries in the United States could impact such demand, forcing
manufacturers in the Company's target market to curtail or postpone capital
expenditures on business information systems. While in the long term the Company
plans to distribute Made2Manage in international markets, the Company has no
significant experience in international markets and there can be no assurance
that such expansion can be successfully accomplished. Any adverse change in the
amount or timing of software expenditures by the Company's target customers
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "--Product Development",
"--Competition," "Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Business--The Product" and "Business--Competition."
DEPENDENCE ON THIRD PARTY TECHNOLOGIES
Made2Manage utilizes a variety of third party technologies, including
operating systems and other applications developed and supported by Microsoft
Corporation ("Microsoft"). There can be no assurance that Microsoft will
continue to support the operating systems utilized by Made2Manage or that such
operating systems will continue to be widely accepted in the Company's target
market. Made2Manage relies heavily on Microsoft's Visual Studio, and there can
be no assurance that Microsoft will not discontinue or otherwise support Visual
Studio or any of its components. In addition, the Company utilizes a number of
other programming tools and applications, including ActiveX, OLE, ODBC, OLEDB
and Internet Information Server. The Company also sub-licenses and resells
various third party products, including InstallShield, Microsoft Project and bar
code hardware and software. There can be no assurance that these third party
vendors will continue to support these technologies or that these technologies
will retain their level of acceptance among manufacturers in the Company's
target market. The occurrence of any of these events could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business--The Product."
PRODUCT DEVELOPMENT
The Company's growth and future financial performance depend in part upon
its ability to enhance existing applications and to develop and introduce new
applications to incorporate technological advances and satisfy customer
requirements or expectations. As a result of the complexities inherent in
product development, there can be no assurance that either improvements to
Made2Manage or applications the Company develops in the future will be delivered
on a timely basis or ultimately accepted in the market. Any failure by the
Company to anticipate or respond adequately to technological development or
end-user requirements, or any significant delays in product development or
introduction, could damage the Company's competitive position and have a
material adverse effect on the Company's business, financial condition and
results of operations. See "--Dependence on Key Personnel," "--Product and
Market Concentration," "--Competition," "Business--The Product" and
"Business--Product Development."
DEPENDENCE ON KEY PERSONNEL
The Company's success depends to a significant extent upon a number of key
employees, including members of senior management. None of the Company's
employees is subject to an employment contract. The Company's ability to
implement its business strategy is substantially dependent on its ability to
attract, on a timely basis, and retain skilled personnel, especially sales,
service and support personnel. Competition for such personnel is intense, and
the Company competes for such personnel against numerous companies, including
larger, more established companies with significantly greater financial
resources than the
7
<PAGE>
Company. There can be no assurance that the Company will be successful in
attracting and retaining skilled personnel. The loss of the services of one or
more of the key employees or the failure to attract and retain qualified
employees could have a material adverse effect on the Company's business,
financial condition and results of operations. See "--Management of Growth,"
"Business--Employees" and "Management--Executive Officers and Directors."
Management of Growth The Company has experienced rapid growth in its business
and operations. While the Company has managed this growth to date, there can be
no assurance that it will be able to effectively do so in the future. The
ability of the Company to manage its growth successfully is contingent on a
number of factors including its ability to implement and improve its own
operational, financial and management information systems and to motivate and
effectively manage its employees. If the Company were unable to manage future
growth effectively, its business, financial condition and results of operations
would be materially and adversely affected. See "--Dependence on Key Personnel,"
"Business--Competition," "Business--Employees" and "Management--Executive
Officers and Directors."
INSUFFICIENT CUSTOMER COMMITMENT
To obtain the maximum rewards of Made2Manage, customers must commit
resources to implement and manage the product and to train their employees in
the use of the product. The failure of customers to commit sufficient resources
to those tasks or to carry them out effectively could result in customer
dissatisfaction with Made2Manage. If a significant number of customers became
dissatisfied, the Company's reputation could be tarnished and the Company's
business, financial condition and results of operations could be materially and
adversely affected.
COMPETITION
The business management applications software market is intensely
competitive, rapidly changing and significantly affected by new product
offerings and other market activities. The Company faces competition from a
variety of software vendors, including application software vendors, software
tool vendors and relational database management systems vendors. A number of
companies offer Windows compatible products that are directed at the market for
ERP systems. The technologies the Company used to develop Made2Manage are
generally available and widely known and include technologies developed by
Microsoft. There can be no assurance that the Company's competitors will not
develop products based on the same technology upon which Made2Manage is based.
The Company's competitors include a large number of software and system vendors,
including Dataworks Corporation, Effective Management Systems, Inc., Fourth
Shift Corporation, and Symix Computer Systems which are public companies, and
Lilly Software Associates, which is a private company. In addition, there are
numerous national and regional vendors that offer alternative systems. Several
software companies that have traditionally marketed ERP systems to larger
manufacturers, including Baan, J.D. Edwards, PeopleSoft, QAD and SAP, have
announced initiatives to market ERP systems to midsize manufacturers. Many of
the Company's existing competitors, as well as a number of potential
competitors, have significantly greater financial, technical and marketing
resources and a larger installed base of customers than the Company. There can
be no assurance that such competitors will not offer or develop products that
are superior to Made2Manage or that achieve greater market acceptance. If such
competition were to result in significant price declines or loss of market share
by Made2Manage, the Company's business, financial condition and results of
operation would be adversely affected. See "Business--Competition."
RELATIONSHIPS WITH VALUE ADDED RESELLERS
Historically, the Company has distributed its software products through a
direct sales force and a network of VARs. A significant portion of licenses of
Made2Manage sold to new customers is sold by VARs. If some or all of the VARs in
the Company's network reduce their efforts to sell Made2Manage, promote
competing products or terminate their relationships with the Company, the
Company's business,
8
<PAGE>
financial condition and results of operation would be materially and adversely
affected. Furthermore, VARs frequently develop strong relationships with their
customers, so if VARs in the Company's network criticize the Company or its
products to their customers, the Company's reputation could be damaged, which
could have a material adverse effect on the Company's business, financial
condition or results of operations. See "Business--Sales and Marketing."
PRODUCT LIABILITY AND LACK OF INSURANCE
The Company markets, sells and supports a software product used by
manufacturers to manage their business operations and to store substantially all
of their operational data. Software programs as complex as those offered by the
Company may contain undetected errors or "bugs," despite testing by the Company,
which are discovered only after the product has been installed and used by
customers. There can be no assurance that errors will not be found in existing
or future releases of the Company's software or that any such errors will not
impair the market acceptance of these products. See "--Product and Market
Concentration." A customer could be required to cease operations temporarily and
some or all of its key operational data could be lost or damaged if its
information systems fail as the result of human error, mechanical difficulties
or quality problems in Made2Manage or third party technologies utilized by
Made2Manage. The Company has insurance covering product liability or damages
arising from negligent acts, errors, mistakes or omissions; however there can be
no assurance that this insurance will be adequate. A claim against the Company,
if successful and of a sufficient magnitude, could have a material adverse
effect on the Company's business, financial condition and results of operations.
DEPENDENCE ON PROPRIETARY RIGHTS; RISK OF INFRINGEMENT
The Company relies primarily on a combination of trade secret, copyright and
trademark laws, nondisclosure agreements and other contractual provisions and
technical measures to protect its proprietary rights. There can be no assurance
that these protections will be adequate or that the Company's competitors will
not independently develop products incorporating technology that is
substantially equivalent or superior to the Company's technology. Furthermore,
other than a pending United States patent application for software related to
the Material Requirements Planning regeneration feature included in Made2Manage,
the Company has no patents or patent applications pending, and existing
copyright laws afford only limited protection. In the event that the Company is
unable to protect its proprietary rights, the Company's business, financial
condition and results of operations could be materially and adversely affected.
There can be no assurance that the Company will not be subject to claims
that its technology infringes on the intellectual property of third parties,
that the Company would prevail against any such claims or that a licensing
agreement will be available on reasonable terms in the event of an unfavorable
ruling on any such claim. Any such claim, with or without merit, would likely be
time consuming and expensive to defend and could have a material adverse effect
on the Company's business, financial condition and results of operations. See
"Business--Intellectual Property."
SUBSTANTIAL CONTROL BY SINGLE SHAREHOLDER
Following completion of the offering, Hambrecht & Quist ("H&Q") and its
affiliates, as a group, will beneficially own approximately 33.4% of the
Company's outstanding Common Stock. As a result, H&Q and its affiliates will be
able to exercise significant influence over all matters requiring shareholder
approval, including the election of directors and approval of significant
corporate transactions. Concentration of stock ownership could also have the
effect of delaying or preventing a change in control of the Company. See
"Principal and Selling Shareholders" and "Underwriting."
9
<PAGE>
EFFECT OF ANTITAKEOVER PROVISIONS
The Company's Second Restated Articles of Incorporation (the "Articles")
authorize the Board of Directors to issue, without shareholder approval, up to
two million shares of preferred stock with such rights and preferences as the
Board of Directors may determine in its sole discretion. The Made2Manage System,
Inc. Stock Option Plan (the "Stock Option Plan") provides that, unless a
committee of the Company's Board of Directors decides to the contrary, all
outstanding options vest and become immediately exercisable upon a merger or
similar transaction. See "Management--Stock Option Plan." In addition, certain
provisions of Indiana law could have the effect of making it more difficult for
a third party to acquire, or discouraging a third party from attempting to
acquire, control of the Company. Further, certain provisions of Indiana law
impose various procedural and other requirements that could make it more
difficult for shareholders to effect certain corporate actions. The foregoing
provisions could discourage an attempt by a third party to acquire a controlling
interest in the Company without the approval of the Company's management even if
such third party were willing to purchase shares of Common Stock at a premium
over its then market price. See "Description of Capital Stock--Anti-Takeover
Provisions" and "Description of Capital Stock--Other Restrictions on Acquisition
of Company."
NO PRIOR MARKET; POSSIBLE VOLATILITY OF STOCK PRICE; DILUTION
Prior to the offering contemplated by this Prospectus, there has been no
public market for the Shares, and there can be no assurance that an active
public market will develop or be sustained after the offering. The initial
public offering price will be determined by negotiations between the Company and
the Representatives, in accordance with the recommendation of a qualified
independent underwriter, based upon a number of factors. The trading price of
the Company's Common Stock could be subject to wide fluctuations in response to
quarterly variations in operating results, announcements of technological
innovations or new applications by the Company or its competitors, the failure
of the Company's earnings to meet the expectations of securities analysis and
investors, as well as other events or factors. In addition, the stock market has
from time to time experienced extreme price and volume fluctuations which have
particularly affected the market price of many high technology companies and
which often have been unrelated to the operating performance of these companies.
These broad market fluctuations may adversely affect the market price of the
Common Stock. Furthermore, purchasers of the Shares offered by this Prospectus
will suffer an immediate and substantial dilution in the net tangible book value
per share of the Common Stock from the initial public offering price. See
"--Fluctuations of Quarterly Operating Results; Seasonality," "Underwriting" and
"Dilution."
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
The sale of a substantial number of shares of Common Stock in the public
market following this offering could adversely affect the market price of the
Shares. Upon completion of this offering, the Company will have outstanding an
aggregate of 3,686,451 shares of Common Stock. The Shares sold in this offering
will be freely tradeable without restriction under the Securities Act.
The remaining 1,686,451 shares of Common Stock are "Restricted Shares,"
certain of which are subject to restrictions under the Securities Act. All of
the Restricted Shares are subject to lock-up agreements under which the holders
have agreed not to sell or otherwise dispose of any of their shares for a period
of six months after the date of this Prospectus without the prior written
consent of First Albany Corporation. In its sole discretion and at any time
without notice, First Albany Corporation may release all or any portion of the
shares of Common Stock subject to the lock-up agreements. Of the Restricted
Shares subject to lock-up agreements, 374,329 will become available for sale in
the public market immediately following expiration of the six month lock-up
period, pursuant to Rule 144(k), and 1,282,039 Restricted Shares subject to
lock-up agreements will become eligible for sale in the public market following
the expiration of the six month lock-up period, subject to the volume and other
limitations of Rule 144 and Rule 701.
10
<PAGE>
The Company also intends to file a registration statement covering the sale
of shares of Common Stock reserved for issuance under the Stock Option Plan
approximately 30 days following the date of this Prospectus. As of September 30,
1997, there were options outstanding to purchase 1,060,785 shares of Common
Stock at a weighted average price of $3.31 per share under the Company's Stock
Option Plan, of which 399,867 shares of Common Stock were then vested and
exercisable. All holders of options exercisable as of September 30, 1997 have
signed six month lock-up agreements. Shares of Common Stock issued upon the
exercise of options granted under the Stock Option Plan will become available
for sale in the public market upon the registration of the Stock Option Plan.
See "Management--Stock Option Plan," "Description of Capital Stock--Registration
Rights," "Shares Eligible for Future Sale" and "Underwriting."
Following this offering, holders of approximately 1,343,887 shares of Common
Stock, have certain rights with respect to the registration of those shares
under the Securities Act. See "Description of Capital Stock--Registration
Rights." If the holders of registration rights cause a large number of shares of
Common Stock to be registered and sold in the public market, such sales could
have a material adverse effect on the market price for the Shares. If the
Company were required to include shares in a Company-related registration under
the Securities Act pursuant to the exercise of piggyback registration rights,
such sales could have a material adverse effect on the Company's ability to
raise capital. See "Shares Eligible for Future Sale."
ABSENCE OF DIVIDENDS
The Company does not anticipate paying any cash dividends on its Common
Stock in the foreseeable future. The Company currently intends to retain its
earnings, if any, for the development of its business. The Company is currently
restricted from paying cash dividends under the terms of its lines of credit
without the prior written consent of the lender. See "Dividend Policy."
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,800,000 Shares being
offered by it are estimated to be $16,190,000, assuming an initial public
offering price of $10.00 per share and after deducting the estimated
underwriting discounts and offering expenses payable by the Company. The
remaining net proceeds will be used by the Company (i) to repay outstanding
indebtedness, in the amount of $999,000, (ii) to hire additional sales
representatives and expand its marketing efforts, (iii) for product development,
(iv) capital expenditures and (v) for working capital and general corporate
purposes. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources." A portion of the net
proceeds may also be used for strategic acquisitions of businesses, products or
technologies complementary to those of the Company. However, there are no
current negotiations, commitments or agreements with respect to any such
acquisitions. The Company has not yet determined the specific amount to be
allocated to each of the foregoing uses, hence the Company's management will
retain broad discretion in the allocation of the net proceeds. Pending such
uses, the Company will invest the net proceeds in short-term, investment-grade
securities. The Company will not receive any proceeds from the sale of Shares by
the Selling Shareholders.
DIVIDEND POLICY
The Company has never paid cash dividends on its Common Stock and does not
anticipate paying any cash dividends on its Common Stock in the foreseeable
future. The Company currently intends to retain any future earnings to develop
and expand its business. The Company is currently restricted from paying cash
dividends under the terms of its lines of credit without the prior written
consent of the lender. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."
11
<PAGE>
DILUTION
The pro forma net tangible book value of the Company as of September 30,
1997, after giving effect to the conversion of all outstanding shares of
Convertible Preferred Stock, was $2,485,000 or $1.32 per share. The net tangible
book value per share is equal to the Company's total tangible assets less total
liabilities, divided by the total number of shares of Common Stock outstanding.
After giving effect to the sale by the Company of 1,800,000 Shares offered
hereby (resulting in estimated net proceeds of $16,190,000 assuming an initial
public offering price of $10.00 per share and after deducting the estimated
underwriting discounts and offering expenses payable by the Company), the
adjusted pro forma net tangible book value of the Company as of September 30,
1997 would be approximately $18,675,000 or $5.07 per share. This represents an
immediate increase of $3.75 per share to existing shareholders and an immediate
dilution of $4.93 per share to new investors. The following table illustrates
this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.................. $ 10.00
Pro forma net tangible book value per share as of September 30,
1997......................................................... $ 1.32
Increase per share attributable to new investors............... 3.75
---------
Adjusted pro forma net tangible book value per share at September
30, 1997 after offering giving effect to the offering by the
Company........................................................ 5.07
---------
Dilution per share to new investors.............................. $ 4.93
---------
---------
</TABLE>
The following table summarizes, on a pro forma basis after giving effect to
the offering, the number of Shares purchased from the Company, the total
consideration paid and the average price per share paid by existing shareholders
and by the new investors purchasing the Shares offered hereby assuming an
initial public offering price of $10.00 per share:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION(1) AVERAGE
--------------------- ------------------------ PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- --------- ------------- --------- -----------
<S> <C> <C> <C> <C> <C>
Existing shareholders(1)............................. 1,886,451 51.2% $ 4,398,000 19.6% $ 2.33
New investors(1)..................................... 1,800,000 48.8% 18,000,000 80.4 10.00
---------- --------- ------------- ---------
Total................................................ 3,686,451 100.0% $ 22,398,000 100.0%
---------- --------- ------------- ---------
---------- --------- ------------- ---------
</TABLE>
- ------------------------
(1) The above computations assumes no exercise after September 30, 1997 of (i)
any options outstanding under the Stock Option Plan or (ii) any warrants
outstanding. As of September 30, 1997, there were options outstanding to
purchase a total of 1,060,785 shares of Common Stock at a weighted average
exercise price of $3.31 per share and warrants outstanding for 14,063 shares
at an exercise price of $4.00 per share. To the extent these options or
warrants are exercised, there will be further dilution to new investors. See
"Capitalization," "Management--Stock Option Plan" and Note 5 of Notes to
Financial Statements.
12
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 30, 1997, (i) on an actual basis and (ii) on an as adjusted basis
after giving effect to the conversion of all outstanding shares of Preferred
Stock into Common Stock upon the closing of this offering and to reflect the
receipt of the estimated net proceeds from the sale by the Company of 1,800,000
shares of Common Stock pursuant to this offering at the initial public offering
price of $10.00 per share:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
--------------------
AS
ACTUAL ADJUSTED
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Long-term obligations--including current portion............................................. $ 999 $ --
--------- ---------
Shareholders' equity:
Preferred Stock, no par value; 1,662,111 shares authorized and 1,479,824 shares outstanding
(actual); 2,000,000 shares authorized and none outstanding (as adjusted)................. 4,042 --
Common Stock, no par value; 10,000,000 shares authorized; 406,627 shares outstanding
(actual); 3,686,451 shares outstanding (as adjusted)(1).................................. 356 20,588
Accumulated deficit...................................................................... (1,913) (1,913)
--------- ---------
Total shareholder's equity............................................................... 2,485 18,675
--------- ---------
Total capitalization................................................................... $ 3,484 $ 18,675
--------- ---------
--------- ---------
</TABLE>
- ------------------------
(1) The above computations assumes no exercise after September 30, 1997 of (i)
any options outstanding under the Stock Option Plan or (ii) any warrants
outstanding. As of September 30, 1997, there were options outstanding to
purchase a total of 1,060,785 shares of Common Stock at a weighted average
exercise price of $3.31 per share and warrants outstanding for 14,063 shares
at an exercise price of $4.00 per share. To the extent these options or
warrants are exercised, there will be further dilution to new investors. See
"Management--Stock Option Plan" and Note 5 of Notes to Financial Statements.
13
<PAGE>
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following selected statement of operations data for the years ended
December 31, 1994, 1995 and 1996 and the balance sheet data as of December 31,
1995 and 1996 are derived from and should be read in conjunction with the
financial statements and notes thereto included elsewhere herein, audited by
Coopers & Lybrand L.L.P. The selected statement of operations data for the years
ended December 31, 1992 and 1993 and selected balance sheet data as of December
31, 1992, 1993 and 1994 are also derived from audited financial statements which
are not included herein. The selected statement of operations data for the nine
months ended September 30, 1996 and 1997 and the selected balance sheet data as
of September 30, 1997 are derived from and should be read in conjunction with
the unaudited financial statements and notes thereto included elsewhere herein.
In the opinion of the Company, such unaudited financial statements include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the results for such period. The financial results for the
nine months ended September 30, 1997, are not necessarily indicative of the
results to be expected for any other interim period or the full year.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------- --------------------
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Software............................ $ 2,793 $ 2,414 $ 2,494 $ 3,572 $ 6,140 $ 3,733 $ 6,916
Services............................ 723 1,068 1,748 2,160 2,998 2,238 3,728
Hardware............................ 974 456 210 203 241 167 397
--------- --------- --------- --------- --------- --------- ---------
Total revenues.................... 4,490 3,938 4,452 5,935 9,379 6,138 11,041
--------- --------- --------- --------- --------- --------- ---------
Cost of revenues:
Software............................ 545 470 382 417 599 318 430
Services............................ 542 836 977 1,175 1,762 1,214 2,409
Hardware............................ 731 406 171 163 164 121 262
--------- --------- --------- --------- --------- --------- ---------
Total costs of revenues........... 1,818 1,712 1,530 1,755 2,525 1,653 3,101
--------- --------- --------- --------- --------- --------- ---------
Gross profit...................... 2,672 2,226 2,922 4,180 6,854 4,485 7,940
--------- --------- --------- --------- --------- --------- ---------
OPERATING EXPENSES:
Sales and marketing................. 1,355 1,054 1,122 1,717 3,282 2,093 4,324
Product development................. 191 318 530 1,189 1,718 1,210 1,663
General and administrative.......... 1,540 830 724 827 1,154 808 1,380
--------- --------- --------- --------- --------- --------- ---------
Total operating expenses.......... 3,086 2,202 2,376 3,733 6,154 4,111 7,367
--------- --------- --------- --------- --------- --------- ---------
Operating income (loss)............... (414) 24 546 447 700 374 573
Other expense, net.................... 108 114 98 49 122 58 53
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before income taxes..... (522) (90) 448 398 578 316 520
Income tax provision (benefit)(1)..... -- -- 5 6 (1,028) 17 197
--------- --------- --------- --------- --------- --------- ---------
Net income (loss)..................... $ (522) $ (90) $ 443 $ 392 $ 1,606 $ 299 $ 323
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Pro forma net income per share(2)..... $ .60 $ .15
--------- ---------
--------- ---------
Pro forma average number of
shares(2)........................... 2,846 2,886
--------- ---------
--------- ---------
Supplemental pro forma net income per
shares(2)(3)........................ $ .63 $ .13
--------- ---------
--------- ---------
Supplemental pro forma average number
of shares(2)(3)..................... 2,561 2,575
--------- ---------
--------- ---------
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------- SEPTEMBER 30,
1992 1993 1994 1995 1996 1997
--------- --------- --------- --------- --------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents......................... $ 399 $ 158 $ 893 $ 1,033 $ 1,139 $ 1,856
Working capital................................... (728) (585) 180 461 1,173 1,222
Total assets...................................... 1,567 1,496 2,270 3,576 6,666 8,566
Long-term obligations, less current portion....... 390 651 349 452 436 733
Total shareholders' equity (deficit).............. (787) (877) 80 509 2,116 2,485
</TABLE>
- ------------------------
(1) Net income for the year ended December 31, 1996 includes an income tax
benefit of $1.2 million or $.44 per share resulting from the reversal of a
valuation allowance. The tax benefit reflects the recognition of net
operating loss and credit carryforwards and results from management's
assessment that the realization of these amounts was more likely than not
based on the Company's current earnings and future outlook. For subsequent
periods the Company has provided for income taxes utilizing federal and
state statutory income tax rates. See Note 7 of Notes to Financial
Statements.
(2) Computed on the basis described in Note 1 of Notes to Financial Statements.
(3) Supplemental pro forma net income per share has been determined in
accordance with Statement of Financial Accounting Standards No. 128,
"Earnings per Share" ("SFAS No. 128").
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH
"SELECTED FINANCIAL DATA" AND THE COMPANY'S FINANCIAL STATEMENTS AND NOTES
THERETO INCLUDED ELSEWHERE IN THIS PROSPECTUS. EXCEPT FOR THE HISTORICAL
INFORMATION CONTAINED HEREIN, THE DISCUSSIONS IN THIS PROSPECTUS CONTAIN
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED HEREIN. FACTORS THAT
COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO,
THOSE DISCUSSED BELOW AND IN THE SECTION ENTITLED "RISK FACTORS" AS WELL AS
THOSE DISCUSSED ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
The Company develops, markets, licenses and supports Made2Manage, an open
architecture, standards-based client/server ERP software solution for small and
midsize manufacturers engaged in engineer-to-order, make-to-order, make-to-stock
and mixed mode operations. The Company has developed manufacturing software
applications for this market since its inception in 1986. The Company's first
generation of Made2Manage, designed for PC networks running the DOS operating
system on Novell networks, was introduced in 1988, and the Company introduced a
UNIX version of Made2Manage in 1990. The Company continues to support its
existing DOS and UNIX customers, but ceased offering the DOS and UNIX versions
to new customers in 1995 and 1994, respectively.
Beginning in mid-1994, the Company made a significant investment in the
development of the Windows version of Made2Manage. The Company further increased
its expenditures for developing its Windows product in 1995 and introduced this
product late in that year. Development expenses continued to increase during
1996 and 1997 but have represented a smaller percentage of total revenues. As of
December 31, 1995, the Company had fully amortized the capitalized development
costs incurred in connection with the DOS and UNIX versions of Made2Manage and
the Company currently expenses software development costs as they are incurred.
In 1995, 1996 and 1997, sales and marketing expenses increased in conjunction
with the introduction of the Company's new Windows product. Substantially all
license revenues after 1995 were derived from Made2Manage for Windows, including
licenses sold to a significant number of licensees of prior versions of
Made2Manage.
The Company's revenues are derived from software licenses, services and
hardware. Software revenues are generated from licensing software to new
customers, from the conversion of existing DOS or UNIX customers to the Windows
version, from current customers increasing the number of licensed users and from
licensing new modules. The Company recognizes revenue from software license fees
and hardware revenues upon shipment of software to the customer following
execution of a sales agreement. Service revenues are generated primarily from
annual fees paid by customers to receive the Company's customer support services
and Made2Manage software upgrades. Support contracts are typically purchased
with the initial software license and are renewable annually. Support contract
renewal fees are due in advance of the support period and are recognized ratably
over the term of the contract. Service revenues are also derived from
implementation, education and consulting services, the majority of which are
purchased as part of the initial contract. The Company recognizes revenue from
these services as they are performed. Hardware revenues are generated primarily
from the sale of bar-coding and data collection equipment used in connection
with Made2Manage and constitute a relatively small component of total revenues.
The sales cycle for the Company's products is typically three to nine months
and software revenues for a particular quarter depend substantially on orders
received and products shipped in that quarter. Furthermore, large orders may be
significant to operating income in the quarter in which the corresponding
revenue is recognized. Accordingly, the Company believes that quarter-to-quarter
comparisons of its results of operations are not necessarily indicative of the
results to be expected for any future periods. See "Risk Factors--Fluctuations
of Quarterly Operating Results; Seasonality" and "--Quarterly Results."
16
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth the percentage of total revenues represented
by certain items included in the Company's statements of operations for the
periods indicated.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Revenues:
Software............................................................. 56.0% 60.2% 65.4% 60.8% 62.6%
Services............................................................. 39.3 36.4 32.0 36.5 33.8
Hardware............................................................. 4.7 3.4 2.6 2.7 3.6
--------- --------- --------- --------- ---------
Total revenue...................................................... 100.0 100.0 100.0 100.0 100.0
--------- --------- --------- --------- ---------
Cost of revenues:
Software............................................................. 8.6 7.0 6.4 5.2 3.9
Services............................................................. 21.9 19.8 18.7 19.7 21.8
Hardware............................................................. 3.9 2.8 1.8 2.0 2.4
--------- --------- --------- --------- ---------
Total cost of revenues............................................. 34.4 29.6 26.9 26.9 28.1
--------- --------- --------- --------- ---------
Gross profit....................................................... 65.6 70.4 73.1 73.1 71.9
--------- --------- --------- --------- ---------
Operating expenses:
Sales and marketing.................................................. 25.2 28.9 35.0 34.1 39.1
Product development.................................................. 11.9 20.0 18.3 19.7 15.1
General and administrative........................................... 16.2 14.0 12.3 13.2 12.5
--------- --------- --------- --------- ---------
Total operating expenses........................................... 53.3 62.9 65.6 67.0 66.7
--------- --------- --------- --------- ---------
Operating income....................................................... 12.3 7.5 7.5 6.1 5.2
Other expense, net..................................................... 2.2 .8 1.3 1.0 .5
--------- --------- --------- --------- ---------
Income before taxes.................................................... 10.1 6.7 6.2 5.1 4.7
Income tax provision (benefit)......................................... .1 0.1 (10.9) .2 1.8
--------- --------- --------- --------- ---------
Net income............................................................. 10.0% 6.6% 17.1% 4.9% 2.9%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996
REVENUES
Revenues are derived from software license fees, service and support fees
and hardware sales. Total revenues increased by $4.9 million, or 79.9%, to $11.0
million in the first nine months of 1997 from $6.1 million in the same period in
1996. This increase was primarily due to a greater volume of license
transactions, an increase in average contract size and sales of new software
modules. The Company does not expect revenues to continue to grow at this rate.
The Company has not historically recognized significant quarterly revenues from
any single customer.
SOFTWARE REVENUES. Software revenues increased by $3.2 million, or 85.3%,
to $6.9 million in the first nine months of 1997 from $3.7 million in the same
period in 1996. Software license revenues constituted 62.6% and 60.8% of total
revenues in the first nine months of 1997 and 1996, respectively. The increase
in revenues in the first nine months of 1997 compared to the same period in 1996
was primarily due to a greater volume of license transactions and an increase in
average transaction size.
SERVICES REVENUES. Services revenues increased by $1.5 million, or 66.6%,
to $3.7 million in the first nine months of 1997 from $2.2 million in the same
period in 1996. These revenues constituted 33.8% and
17
<PAGE>
36.5% of total revenues in the first nine months of 1997 and 1996, respectively.
The increase in the dollar amount recognized was primarily due to increased
support fees from a larger installed base of customers and increased revenues
from implementation, education and consulting services. Although services
revenues as a percentage of total revenues has decreased in recent years as the
result of the Company's significant software license revenue growth, management
anticipates that services revenues as a percentage of total revenues will
increase in the future due to a larger installed base of customers.
HARDWARE REVENUES. Hardware revenues as a percent of total revenues were
3.6% in the first nine months of 1997 and 2.7% in the same period of 1996.
Management of the Company anticipates that hardware revenues will continue to
represent a relatively small percentage of the Company's total revenues.
COSTS OF REVENUES
COST OF SOFTWARE REVENUES. Costs of software revenues consist primarily of
costs of third-party software, product media, documentation, duplication and
shipping. Costs of software revenues totaled $430,000 and $318,000 in the first
nine months of 1997 and 1996, respectively, resulting in gross profits of 93.8 %
and 91.5 % of software revenues, respectively.
COST OF SERVICE REVENUES. Costs of services revenues consist primarily of
the costs of providing customer technical support, implementation and consulting
services and education. Costs of services totaled $2.4 million and $1.2 million
in the first nine months of 1997 and 1996, respectively, resulting in gross
profits of 35.4% and 46.8% of service revenues, respectively. The dollar
increase was primarily due to increased costs of providing implementation and
consulting services.
COST OF HARDWARE. Costs of hardware are directly related to the hardware
revenues. Costs of hardware totaled $262,000 and $121,000 during the first nine
months of 1997 and 1996, respectively. The gross profit from hardware was 34.0%
and 27.5% of hardware revenues in the first nine months of 1997 and 1996,
respectively. Gross profit from hardware revenue has not been a significant part
of the Company's gross profit and the Company expects this to continue.
OPERATING EXPENSES
SALES AND MARKETING EXPENSES. Sales and marketing expenses include
personnel costs, commissions, travel, advertising, public relations programs and
promotional events such as trade shows and seminars. Sales and marketing
expenses were $4.3 million and $2.1 million in the first nine months of 1997 and
1996, respectively, representing 39.1% and 34.1% of total revenues in the first
nine months of 1997 and 1996, respectively. The increase in sales and marketing
expenses was primarily due to increased personnel related expenses and travel
costs.
PRODUCT DEVELOPMENT EXPENSES. Product development expenses include salaries
and related benefits, occupancy and other overhead costs. Product development
expenses were $1.7 million and $1.2 million in the first nine months of 1997 and
1996, respectively, representing 15.1% and 19.7% of total revenues in the first
nine months of 1997 and 1996, respectively. The dollar increase was primarily
due to increased staffing required to complete new versions of Made2Manage. The
Company did not capitalize any software costs in either of these periods.
Management anticipates that the dollar amount of product development expenses
will continue to increase.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
include the costs of the Company's finance, human resources, information systems
and administrative departments. General and administrative expenses were $1.4
million and $808,000 in the first nine months of 1997 and 1996, respectively,
representing 12.5% and 13.2% of total revenues in the nine months of 1997 and
1996, respectively. The dollar increase resulted primarily from increased number
of personnel. Management anticipates that the dollar amount of general and
administrative expenses will continue to increase.
18
<PAGE>
OTHER EXPENSE, NET
Other expense, net primarily consists of interest expense on bank term loans
to fund equipment additions and subordinated financing of the development and
commercialization of Made2Manage offset in part by interest earned on invested
cash balances. Other expense, net was $53,000 and $58,000 in the first nine
months of 1997 and 1996, respectively, representing 0.5% and 0.9% of total
revenues in the first quarter of 1997 and 1996, respectively. On March 31, 1997,
the Company repaid the outstanding balance of the commercialization funding
obligation which was incurred to fund the development and commercialization of
the Company's products. The obligation carried a 20% interest rate.
COMPARISON OF YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
REVENUES
Total revenues increased by $3.4 million, or 58.0%, to $9.4 million in 1996
from $5.9 million in 1995. Total revenues increased by $1.5 million, or 33.3%,
in 1995 from $4.5 million in 1994. The increase was primarily due to a greater
volume of license transactions, an increase in average contract size and sales
of new software modules. The Company has not historically recognized significant
annual revenues from any single customer.
SOFTWARE REVENUES. Software revenues increased by $2.6 million, or 71.9%,
to $6.1 million in 1996 from $3.6 million in 1995. Software license revenues
constituted 65.4% and 60.2% of total revenues in 1996 and 1995, respectively.
The increase in software license revenues in 1996 compared to 1995 was primarily
due to a greater volume of license transactions and an increase in average
contract size.
Software revenues increased by $1.1 million, or 43.2%, to $3.6 million in
1995 from $2.5 million in 1994. Software license revenues constituted 56.0% of
total revenues in 1994. The increase in software license revenue in 1995
compared to 1994 was due to a greater volume of license transactions and an
increase in average contract size.
SERVICES REVENUES. Services revenues increased by $838,000, or 38.8%, to
$3.0 million in 1996 from $2.2 million in 1995. These revenues increased by
$412,000, or 24.0%, in 1995 from $1.7 million in 1994. These revenues
constituted 32.0%, 36.4% and 39.3% of total revenues in 1996, 1995 and 1994,
respectively. The increases in the dollar amount recognized were due to (i)
increased support fees from an expanded user base as a result of product
installations, (ii) revenues from expanded implementation and consulting
services offerings and (iii) revenues from expanded educational offerings.
HARDWARE REVENUES. Hardware revenues have remained relatively constant in
dollar amounts for the three years ended December 31, 1996 and have decreased as
a percent of revenue to 2.6% in 1996 from 3.4% and 4.7% in 1995 and 1994,
respectively. During this period, the Company limited the type of hardware
equipment it sold to certain bar-coding and data collection equipment necessary
to utilize certain features of Made2Manage.
COSTS OF REVENUES
COSTS OF SOFTWARE REVENUES. Costs of software revenues totaled $599,000,
$417,000 and $382,000 in 1996, 1995 and 1994, respectively, resulting in gross
profits of 90.2%, 88.3% and 84.7% of software revenues, respectively. Costs of
software in 1995 and 1994 also included the amortization of the remaining
software development costs capitalized in connection with the DOS and UNIX
versions of Made2Manage and certain royalty payments related to the DOS version
of Made2Manage. No development costs have been capitalized for the Windows
version of Made2Manage.
COSTS OF SERVICE REVENUES. Costs of service revenues totaled $1.8 million,
$1.2 million and $977,000 in 1996, 1995 and 1994, respectively, resulting in
gross profits of 41.2%, 45.6% and 44.1% of service revenues, respectively. The
dollar increases were due primarily to the growth in the Company's installed
customer
19
<PAGE>
base and related support services revenue, which resulted in an increase in the
staffing levels for technical support, implementation, consulting and education
services.
COSTS OF HARDWARE. Costs of hardware totaled $164,000, $163,000 and
$171,000 in 1996, 1995 and 1994, respectively. The gross profit from hardware
was 32.0%, 19.7% and 18.6% of hardware revenues in 1996, 1995 and 1994,
respectively.
OPERATING EXPENSES
SALES AND MARKETING EXPENSES. Sales and marketing expenses were $3.3
million, $1.7 million and $1.1 million in 1996, 1995 and 1994, respectively,
representing 35.0%, 28.9% and 25.2% of total revenues, respectively. The
increase in sales and marketing expenses was primarily due to increased (i)
staffing as the Company expanded its field sales force and marketing staff, (ii)
commissions as a result of increased software license revenues, (iii) marketing
activities, including promotional activities and (iv) travel expenses related to
sales and marketing efforts.
PRODUCT DEVELOPMENT EXPENSES. Product development expenses were $1.7
million, $1.2 million and $530,000 in 1996, 1995 and 1994, respectively,
representing 18.3%, 20.0% and 11.9% of total revenues, respectively. The Company
did not capitalize any software development costs in 1996 or 1995. The increase
in product development expenses in 1995 from 1994 reflects the increase in
staffing to develop the Windows version of Made2Manage. The Windows version was
initially released in late 1995. Product development expenses increased during
1996 in relation to 1995, but decreased as a percentage of revenue over the same
period as the Company spread development expenses across a broader revenue base.
GENERAL ADMINISTRATIVE EXPENSES. General and administrative expenses were
$1.2 million, $827,000 and $724,000 in 1996, 1995 and 1994, respectively,
representing 12.3%, 14.0% and 16.2% of total revenues, respectively. The dollar
increases resulted primarily from additional costs incurred to support the
growth of the Company's operations and, to a lesser extent, as a result of the
addition of personnel.
OTHER EXPENSE, NET
Other expense, net was $122,000, $49,000 and $98,000 in 1996, 1995 and 1994,
respectively, representing 1.3%, 0.8% and 2.2% of total revenues, respectively.
The interest on the BMT obligation accounted for $66,000 of the 1996 other
expense, net of $122,000. The increase in 1996 compared to 1995 was due
primarily to increased borrowings. The decrease in 1995 from 1994 was due to a
restructuring of debt resulting in reduced borrowing costs.
INCOME TAX PROVISION (BENEFIT)
In 1994 and 1995, the Company's income tax provision was significantly
reduced as a result of the utilization of net operating loss carryforwards. Net
income for the year ended December 31, 1996 includes an income tax benefit of
$1.2 million resulting from the reversal of a valuation allowance. The tax
benefit reflects the recognition of net operating loss and tax credit
carryforwards and results from management's assessment that the realization of
these amounts was more likely than not based on the Company's current earnings
and future outlook. For subsequent periods the Company provided for income taxes
utilizing federal and state statutory income tax rates. See Note 7 of Notes to
Financial Statements.
20
<PAGE>
QUARTERLY RESULTS
The following table sets forth the unaudited quarterly results of operations
for each of the quarters in 1996 and for the first three quarters of 1997. In
management's opinion, this unaudited quarterly information has been prepared on
the same basis as the annual financial statements and includes all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of the information for the quarters presented when read in
conjunction with the financial statements and notes thereto included elsewhere
in this Prospectus. The operating results in any quarter are not necessarily
indicative of future fiscal period results.
<TABLE>
<CAPTION>
1996 1997
-------------------------------------------------- ------------------------
FIRST SECOND THIRD FOURTH FIRST SECOND
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
----------- ----------- ----------- ----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Software................................... $ 1,013 $ 1,174 $ 1,546 $ 2,407 $ 1,986 $ 2,545
Services................................... 672 783 783 760 1,097 1,188
Hardware................................... 30 55 82 74 140 104
----------- ----------- ----------- ----------- ----------- -----------
Total revenues........................... 1,715 2,012 2,411 3,241 3,223 3,837
----------- ----------- ----------- ----------- ----------- -----------
Cost of Revenues:
Software................................... 45 92 181 281 157 156
Services................................... 357 432 425 548 628 885
Hardware................................... 24 39 58 43 97 74
----------- ----------- ----------- ----------- ----------- -----------
Total costs of revenues.................. 426 563 664 872 882 1,115
----------- ----------- ----------- ----------- ----------- -----------
Gross profit............................. 1,289 1,449 1,747 2,369 2,341 2,722
----------- ----------- ----------- ----------- ----------- -----------
Operating Expenses:
Sales and marketing........................ 527 688 878 1,189 1,221 1,509
Product development........................ 362 408 440 508 521 550
General and administrative................. 287 233 288 346 434 470
----------- ----------- ----------- ----------- ----------- -----------
Total operating expenses................. 1,176 1,329 1,606 2,043 2,176 2,529
----------- ----------- ----------- ----------- ----------- -----------
Operating income............................. 113 120 141 326 165 193
Other expense, net........................... 19 19 20 64 22 19
----------- ----------- ----------- ----------- ----------- -----------
Income before income taxes................... 94 101 121 262 143 174
Income tax provision (benefit)............... 6 11 -- (1,045) 55 66
----------- ----------- ----------- ----------- ----------- -----------
Net income................................... $ 88 $ 90 $ 121 $ 1,307 $ 88 $ 108
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
(AS A PERCENT OF TOTAL REVENUES)
Revenues:
Software................................... 59.1% 58.4% 64.1% 74.3% 61.6% 66.3%
Services................................... 39.2 38.9 32.5 23.4 34.0 31.0
Hardware................................... 1.7 2.7 3.4 2.3 4.4 2.7
----------- ----------- ----------- ----------- ----------- -----------
Total revenues........................... 100.0 100.0 100.0 100.0 100.0 100.0
----------- ----------- ----------- ----------- ----------- -----------
Cost of Revenues:
Software................................... 2.6 4.6 7.5 8.7 4.9 4.1
Services................................... 20.8 21.5 17.7 16.9 19.5 23.1
Hardware................................... 1.4 1.9 2.4 1.3 3.0 1.9
----------- ----------- ----------- ----------- ----------- -----------
Total costs of revenues.................. 24.8 28.0 27.6 26.9 27.4 29.1
----------- ----------- ----------- ----------- ----------- -----------
Gross profit................................. 75.2 72.0 72.4 73.1 72.6 70.9
----------- ----------- ----------- ----------- ----------- -----------
Operating Expenses:
Sales and marketing........................ 30.7 34.2 36.4 36.7 37.8 39.3
Product development........................ 21.1 20.3 18.3 15.6 16.2 14.3
General and administrative................. 16.8 11.6 11.9 10.7 13.5 12.3
----------- ----------- ----------- ----------- ----------- -----------
Total operating expenses................. 68.6 66.1 66.6 63.0 67.5 65.9
----------- ----------- ----------- ----------- ----------- -----------
Operating income............................. 6.6 5.9 5.8 10.1 5.1 5.0
Other expense, net........................... 1.1 .9 .8 2.0 .7 .5
----------- ----------- ----------- ----------- ----------- -----------
Income before income taxes................... 5.5 5.0 5.0 8.1 4.4 4.5
Income tax provision (benefit)............... .4 .5 -- (32.2) 1.7 1.7
----------- ----------- ----------- ----------- ----------- -----------
Net income................................... 5.1% 4.5% 5.0% 40.3% 2.7% 2.8%
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
<CAPTION>
THIRD
QUARTER
-----------
<S> <C>
Revenues:
Software................................... $ 2,385
Services................................... 1,443
Hardware................................... 153
-----------
Total revenues........................... 3,981
-----------
Cost of Revenues:
Software................................... 117
Services................................... 896
Hardware................................... 91
-----------
Total costs of revenues.................. 1,104
-----------
Gross profit............................. 2,877
-----------
Operating Expenses:
Sales and marketing........................ 1,594
Product development........................ 592
General and administrative................. 476
-----------
Total operating expenses................. 2,662
-----------
Operating income............................. 215
Other expense, net........................... 12
-----------
Income before income taxes................... 203
Income tax provision (benefit)............... 76
-----------
Net income................................... $ 127
-----------
-----------
Revenues:
Software................................... 59.9%
Services................................... 36.2
Hardware................................... 3.9
-----------
Total revenues........................... 100.0
-----------
Cost of Revenues:
Software................................... 2.9
Services................................... 22.5
Hardware................................... 2.3
-----------
Total costs of revenues.................. 27.7
-----------
Gross profit................................. 72.3
-----------
Operating Expenses:
Sales and marketing........................ 40.0
Product development........................ 14.9
General and administrative................. 12.0
-----------
Total operating expenses................. 66.9
-----------
Operating income............................. 5.4
Other expense, net........................... .3
-----------
Income before income taxes................... 5.1
Income tax provision (benefit)............... 1.9
-----------
Net income................................... 3.2%
-----------
-----------
</TABLE>
21
<PAGE>
The Company has experienced in the past, and expects to experience in the
future, significant fluctuations in quarterly operating results. A substantial
portion of the Company's software license revenue in each quarter is from
product shipped in that quarter, and such revenues historically have been
recorded largely in the third month of a quarter, with a concentration of
revenues mostly in the last week of that third month. Accordingly, the Company's
quarterly results of operations are difficult to predict, and delays in product
delivery or in closings of sales near the end of a quarter could cause quarterly
revenues and, to a greater degree, net income to fall substantially short of
anticipated levels. In addition, the Company has experienced a seasonal pattern
in its operating results, with the fourth quarter typically having the highest
total revenues and operating income and the first quarter having historically
reported lower revenues and operating income compared to the fourth quarter of
the preceding year. Other factors, many of which are beyond the Company's
control, that may contribute to fluctuations in quarterly operating results
include the size of individual orders, the timing of product introductions or
enhancements by the Company and its competitors, competition and pricing in the
manufacturing software industry, market acceptance of new products, reduction in
demand for existing products, the shortening of product life cycles as a result
of new product introductions by the Company or its competitors, product quality
problems, personnel changes, conditions or events in the manufacturing industry,
and general economic conditions. The sales cycle for Made2Manage typically
ranges from three to nine months. However, license signing may be delayed for a
number of reasons outside the control of the Company. Since software is
generally shipped as orders are received, the Company historically has operated
without significant backlog. Because the Company's operating expenses are based
on anticipated revenue levels and a high percentage of the Company's expenses
are relatively fixed in the short term, small variations in the timing of
revenue recognition can cause a significant fluctuation in operating results
from quarter to quarter and may result in unanticipated quarterly earnings
shortfalls or losses. In addition, the Company currently intends to increase its
operating expenses in anticipation of continued growth and to fund expanded
research and development efforts. To the extent such expenses precede, or are
not subsequently followed by, increased revenues, the Company's business,
financial condition and results of operations could be materially and adversely
affected. See "Risk Factors--Fluctuations of Quarterly Operating Results;
Seasonality."
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its operations to date primarily through equity
capital, debt and cash generated from operations. At September 30, 1997, the
Company had $1.9 million of cash and cash equivalents.
Cash flows from operations were $1.5 million for the nine months ended
September 30, 1997 and $560,000, $506,000 and $732,000 in 1996, 1995 and 1994,
respectively. Cash used in investing activities was primarily related to the
purchase of computer equipment and office furniture and aggregated $1,091,000
for the nine months ended September 30, 1997 and $584,000, $517,000 and $20,000
in 1996, 1995 and 1994, respectively. Net borrowings increased $206,000 during
the nine months ended September 30, 1997, including the repayment of the
outstanding balance of $167,000 for the commercialization funding obligation on
March 31, 1997. Net borrowings increased by $129,000 and by $111,000 in 1996 and
1995, respectively, and decreased by $232,000 in 1994.
At September 30, 1997, the Company had working capital of $1.2 million.
Accounts receivable, net of allowance for doubtful accounts, was $3.9 million at
September 30, 1997 and $3.4 million and $1.9 million at December 31, 1996 and
1995, respectively. The average accounts receivable days' outstanding was 89
days as of September 30, 1997. The current portion of deferred revenue increased
to $3.3 million at September 30, 1997 from $2.3 million and $1.3 million at
December 31, 1996 and 1995, respectively. Deferred revenue is related to support
agreements or contracted services, and the current portion of deferred revenue
is expected to be realized during the next twelve months.
The Company has an equipment lines of credit available which provides for
borrowings of up to $1 million, of which $424,000 was used as of September 30,
1997. These lines of credit expire on June 1, 1998, and borrowings thereunder
bear interest at the prime rate plus .75% (9.25% at September 30, 1997).
22
<PAGE>
Amounts borrowed are expected to be converted at the expiration date to a loan
repayable over three years in equal monthly installments. The Company has a
working capital facility with a commercial bank which expires on July 1, 1998,
and borrowings thereunder bear interest at the rate of prime plus 0.75% (9.25%
at September 30, 1997). Loans under the working capital facility are limited, in
the aggregate, to the lesser of $1 million and a "borrowing base" amount. As of
September 30, 1997, the Company satisfied the borrowing base requirements and
was eligible to borrow up to $1 million under this facility. The Company has not
borrowed under the working capital facility. The covenants in the credit
agreements restrict, among other things, the Company's ability to pay dividends.
Management believes that the net proceeds from the Company's portion of the
offering, combined with existing cash and cash equivalents, cash flow from
operations and credit commitments, will be sufficient to meet the Company's
currently anticipated working capital and capital expenditure requirements at
least through 1998.
INFLATION
The Company believes that inflation has not had a material impact on its
operations.
ACCOUNTING PRONOUNCEMENTS
In February 1997, Statement of Financial Accounting Standards ("SFAS") No.
128, Earnings per Share, was issued which establishes new standards for
computing and presenting earnings per share ("EPS"). Specifically, SFAS No. 128:
(a) eliminates the presentation of primary EPS and replace it with basic EPS,
(b) eliminates the modified treasury stock method and the three percent
materiality provision and (c) revised the contingent share provision and the
supplemental EPS data requirements. SFAS No. 128, also makes a number of changes
to existing disclosure requirements. SFAS No. 128 is effective for financial
statements issued for periods ending after December 15, 1997; early
implementation is not permitted. As the Company is currently required to
calculate EPS under the modified treasury stock method, adoption of SFAS No. 128
will result in the Company retroactively restating pro forma EPS for the nine
months ended September 30, 1997 and year ended December 31, 1996 from $.60 and
$.15, respectively, to $.63 and $.13, respectively.
In February 1997, the Financial Accounting Standards Board issued SFAS 129,
Disclosure of Information about Capital Structure. SFAS 129 requires companies
to disclose descriptive information about securities that is not necessarily
related to the computation of earnings per share. It also requires disclosure of
information about the liquidation preference of preferred stock and redeemable
stock. SFAS 129 is effective for financial statements for periods ending after
December 15, 1997. The Company does not expect that SFAS 129 will require
significant revision of prior disclosures.
In June 1997, SFAS No. 130, Comprehensive Income, was issued which becomes
effective in 1998 and requires reclassification of earlier financial statements
for comparative purposes. SFAS No. 130 requires that changes in the amounts of
certain items, including foreign currency translation adjustments and gains and
losses on certain securities, be shown in the financial statements. SFAS No. 130
does not require a specific format for the financial statement in which
comprehensive income is reported, but does require that an amount representing
total comprehensive income be reported in that statement. The Company does not
expect that SFAS No. 130 will have a material effect upon the Company's
financial statements.
Also in June 1997, SFAS No. 131, Disclosures about Segments of an Enterprise
and Related Information, was issued. This Statement will change the way public
companies report information about segments of their business in their annual
financial statements and requires them to report selected segment information in
their quarterly reports issued to shareholders. It also requires entity-wide
disclosures about the products and services an entity provides, the material
countries in which it holds assets and reports revenues, and its major
customers. SFAS No. 131 is effective for fiscal years beginning after December
15, 1997. The Company does not expect that SFAS No. 131 will have a material
effect upon the Company's financial statements.
23
<PAGE>
BUSINESS
The Company develops, markets and supports fully integrated, Windows-based
business software for manufacturers designed to run on the Microsoft Windows NT
platform. The Company's principal product, Made2Manage, is an ERP software
application designed to meet the unique needs of small and midsize manufacturers
engaged in engineer-to-order, make-to-order, make-to-stock and mixed mode
operations. Made2Manage is designed to be the only business software needed by
these manufacturers to effectively manage their entire organizations, including
sales analysis, order entry, delivery cycle responsiveness, quality assurance,
accounts receivable and financial reporting. Since its introduction in late
1995, Made2Manage has been licensed by more than 500 manufacturers in North
America, primarily in the United States. In addition, the Company continues to
support more than 150 manufacturing sites using the DOS and UNIX-based
predecessors of Made2Manage.
INDUSTRY BACKGROUND
Over the past decade, manufacturers have been re-engineering their
businesses in response to increasing competitive pressures, more demanding
vendor-customer relationships and rapidly changing market requirements. Through
this re-engineering, manufacturers are striving to increase the efficiency of
their operations by reducing manufacturing time, developing greater flexibility
to respond to changes in market demand, lowering costs, providing superior
customer service and managing assets more productively across their operations.
In order to achieve these goals, manufacturers require information systems
("IS") that effectively collect, organize and distribute enterprise-wide
information from disparate business functions.
In the 1960s and 1970s, manufacturers addressed their IS needs through
highly customized mainframe-based material requirements planning ("MRP") systems
which allowed manufacturers to manage the flow of materials at various stages of
the production process. MRP systems were superseded in the 1980s by
manufacturing resource planning ("MRP II") systems, also predominantly
mainframe-based, which allowed manufacturers to manage the labor and equipment
components of the production process as part of materials planning. More
recently, there has been a significant shift away from the traditional MRP II
systems to ERP systems that leverage the advantages of open client/server
architectures and allow easier access to information from all areas of the
enterprise. Today's ERP systems integrate many business applications, including
sales forecasts, procurement and inventory management, manufacturing control,
project management, distribution and finance.
According to AMR, the ERP software market reached $7.3 billion in 1996, an
increase of 31% over 1995. AMR projected the market will reach $9.6 billion in
1997 and grow at a compound annual growth rate of 36%, to over $20 billion in
2001. The Company believes that small and midsize manufacturers are a rapidly
growing segment of the ERP market because they are particularly impacted by the
following factors: (i) mass migration of small and midsize manufacturers to
Windows NT platforms; (ii) replacement of existing systems that no longer meet
current needs; (iii) implementation of ERP software to improve business
processes and reduce costs; (iv) improvement required in customer service,
including time-to-market and quality of service; and (v) need for a solution of
the Year 2000 problem.
MARKET OPPORTUNITY
While sales of large-scale ERP systems have grown dramatically in recent
years, these systems have achieved only limited acceptance by small and midsize
manufacturers, which the Company attributes to several factors. Small and
midsize manufacturers are often risk averse and resource constrained. These
manufacturers seek information systems that provide functional, scalable
solutions and that are easy to use, cost-effective, quick to deploy and require
limited IS infrastructure. These manufacturers have also found that ERP
solutions designed for large scale manufacturing operations lack the
flexibility, rapid deployment and ease of use that they require. Furthermore,
these ERP systems are designed for users
24
<PAGE>
whose roles are highly specialized, whereas the roles of users of ERP systems at
small and midsize manufacturers are broader and less clearly defined. Large
scale ERP systems are designed for a broad set of manufacturing processes,
including repetitive or continuous flow manufacturing, and do not effectively
address the needs of the flexible engineer-to-order, make-to-order,
make-to-stock and mixed mode manufacturing typically performed by small and
midsize manufacturers. These manufacturers lack the economies of scale that
distinguish large competitors and compete on the basis of customizable, high
quality manufacturing with rapid response times and superior customer service.
Windows NT is rapidly emerging as the platform of choice among small and
midsize manufacturers. According to International Data Corporation estimates,
Windows NT is the fastest growing server operating system for new client/server
applications. Systems that are 32-bit and native to Windows currently offer the
optimal Microsoft-standard solution. Several ERP vendors are targeting the small
and midsize manufacturer market segments with legacy applications that were
originally designed for use by larger scale manufacturers and are not true
Windows-based products. The Company believes that such legacy systems which have
been modified to run Windows do not fully exploit the benefits of Windows NT.
The Company consequently believes that manufacturing software vendors are
becoming increasingly segmented into two groups, one that has made the
technological migration to Windows NT and the other that continues to focus on
offering legacy systems based on platforms such as UNIX and AS/400 and that of
the two groups the former is growing more quickly than the latter.
The Company believes that while the largest share of the software market in
1996 was attributable to applications aimed at large scale manufacturers, the
small and midsize segment of the market is rapidly growing, fragmented and
underserved by products focused on the needs of larger manufacturers. Currently
this market is being served by more than 50 ERP vendors, many of whom are niche
players.
THE MADE2MANAGE SOLUTION
Unlike many competing ERP software applications, Made2Manage is a native,
32-bit, Windows-based product designed specifically as an integrated business
solution for small and midsize manufacturers. Made2Manage is designed for
simplicity of operation, rapid implementation, ease of administration and low
total cost of ownership. It is a fully integrated solution providing easy access
to shared information from all functional areas of a manufacturing organization.
Made2Manage improves information flow throughout a company and across the supply
chain. This enables a manufacturer to better meet the needs of its customers and
realize numerous competitive advantages, including the ability to customize
production, shorten manufacturing cycles and improve customer service.
The Company believes it is uniquely positioned to meet the ERP needs of
manufacturers in its target market as a result of the following principal
elements of the Company's solution:
DESIGNED FOR SMALL AND MIDSIZE MANUFACTURERS
From overall business processes to individual user functions, Made2Manage is
designed to be the only business software required to manage and operate a small
or midsize manufacturing business. The Company employs a people and process
centered approach to product design which focuses on the role of the individual
within these organizations. Made2Manage is designed to enable users to do their
jobs more effectively on a consistent basis. It provides a fully integrated set
of modules specific to the demands of its target market in the areas of sales,
production, financial management and executive information systems all
integrated through system-wide capabilities and Internet applications linking a
manufacturers' employees, customers and vendors.
STANDARD MICROSOFT TECHNOLOGY PLATFORM
The Company designed and built Made2Manage for Windows from the ground up as
a 32-bit native Windows application, rather than piecing together a solution by
adding a GUI to its existing DOS-based
25
<PAGE>
solution. Made2Manage was the first ERP software application to receive Windows
95 certification and the Company was one of the earliest vendors to offer a full
ERP solution based on Windows NT. The Company intends to continue its
integration with Microsoft Office, BackOffice and other major Microsoft
initiatives. The Company believes its focus on Microsoft technologies, rather
than offering products that function on every platform, is particularly suited
to the needs of small and midsize manufacturers and increases the Company's
ability to leverage its product development efforts.
RAPID IMPLEMENTATION
To minimize the effects of business interruption and inconvenience from the
introduction of a new software system, the Company has developed an effective
implementation process supported by extensive consulting and training services.
As a result of this process, Made2Manage can be fully implemented in as little
as three months to six months.
LOWER TOTAL COST OF OWNERSHIP
The Company's ERP solution is designed to minimize the overall cost of
ownership, a key requirement of resource-constrained small and midsize
manufacturers. The ease of implementation and maintenance, as well as the cost
effectiveness of its open architecture, standards-based platform makes
Made2Manage a complete ERP software solution for its target market. In addition,
by providing extensive customer training and superior customer service and
support, Made2Manage minimizes the customer's need for IS personnel.
OBJECT-ORIENTED SCALABLE ARCHITECTURE
Made2Manage uses object-oriented techniques, facilitating the reuse of
internally written components, embedding third party components and remote
automation through OLE. Object-oriented architecture, along with standards based
technologies, shortens the development and implementation cycle, facilitates the
integration of acquired components, reduces the cost of product enhancements and
provides more efficient environments for customer support. Made2Manage scales
effectively across the range of requirements of customers within its target
market.
STRATEGY
The Company's objective is to be a leading provider of complete, integrated
ERP software solutions for small and midsize manufacturers. The Company's
strategy for achieving this objective incorporates the following elements:
MAINTAIN FOCUSED MARKET APPROACH
The Company targets small and midsize discrete manufacturers, focusing
primarily on manufacturers with annual revenues of between $5 and $50 million.
The Company has principally concentrated on four primary manufacturing sectors:
fabricated metal products; industrial machinery and equipment; computer and
office equipment; and transportation products. This approach has enabled the
Company to better understand the needs of its customers and use that knowledge
to tailor its product and services to meet those needs.
GROW WITH CUSTOMERS
Made2Manage's scalability allows small and midsize manufacturers to change
levels of operation, increase the number of concurrent users and expand
application functionality to accommodate growth. The Company provides tools and
services to support the conversion of the Company's DOS-based customers to its
Windows-based product. In the last 21 months, nearly 60% of the Company's DOS
customers have licensed its Windows-based product. Also, Made2Manage is able to
add additional product enhancements and modules developed by the Company or
third-party software developers. The Company believes this focus on scalable
functionality and flexibility contributes to long-term customer relationships.
26
<PAGE>
EXPAND DISTRIBUTION CHANNELS
The Company continues to add direct sales and marketing personnel and
strengthen its relationship with VARs in order to continue its growth in the
United States and Canada. The Company intends to explore international expansion
strategies and, in the longer term, plans to enter into relationships with
overseas distributors in order to expand into the international market. In
anticipation of international marketing, Made2Manage is double byte enabled and
includes features that permit foreign currency translations and the use of
different date formats and languages.
CAPITALIZE ON YEAR 2000 REPLACEMENT OPPORTUNITIES
Many companies are facing significant business problems due to the failure
of their existing ERP systems to appropriately recognize years that follow 1999.
The Company believes that this problem will accelerate the migration to open
architecture, client/server-based ERP solutions that are configured to handle
this transition. The Company's Windows-based product has been fully Year 2000
compliant since inception. The Company believes that its Microsoft standardized
application is well positioned to meet customers' needs for Year 2000 compliant
solutions.
ACHIEVE HIGH LEVELS OF CUSTOMER SATISFACTION
The Company is committed to maintaining high levels of customer satisfaction
with Made2Manage. To achieve this objective, the Company focuses its efforts on
delivering a high quality product that addresses specific application needs, is
easy to implement, incorporates an intuitive, user-friendly interface and
enables increased productivity. The Company offers extensive implementation
services, education programs, on-line and telephone support and user
documentation to facilitate the successful adoption and use of Made2Manage. The
Company believes that a continued commitment in this area is critical to its
long-term success.
EVALUATE POTENTIAL STRATEGIC ACQUISITIONS
The Company intends to evaluate, on a case by case basis, potential
strategic acquisitions that could enhance its current products and strengthen
its competitive position. However, there are no current negotiations,
commitments or agreements with respect to any such acquisitions.
THE PRODUCT
Made2Manage is an enterprise-wide, open architecture, standards-based,
client/server software solution designed for use on PCs running Windows NT
Workstation or Windows 95 over LANs that utilize Windows NT or Novell Netware
servers. It is a 32-bit application with an object-oriented structure developed
using Microsoft's Visual Studio. The object-oriented architecture shortens
development cycles, reduces costs of product enhancements and provides a more
efficient environment for customer support. Made2Manage utilizes open
architecture standards including OLE, OCX and ActiveX. Made2Manage can import
data from or export data to 14 different file formats, including most industry
standard formats. Made2Manage is ODBC compliant and its data dictionary and
table structure are available on-line, facilitating the use of third party tools
for the retrieval and manipulation of Made2Manage data.
The Company believes that Made2Manage compares favorably with other products
because (i) it is a fully integrated software product that provides easy access
to shared information from all functional areas of a manufacturing organization;
(ii) its user interface and architecture are consistent with Microsoft
standards, are familiar to the user and may be used with popular business
applications; and (iii) it contains unique messaging features which are designed
to enhance collaboration within the manufacturer's organization and across the
supply chain.
A BLACK AND WHITE PICTURE OF A COMPUTER SCREEN DEMONSTRATING THE NOTIFIER
FEATURE OF MADE2MANAGE WILL BE INSERTED HERE ABOVE A CAPTION
27
<PAGE>
WHICH WILL STATE: THE NOTIFIER ENHANCES COLLABORATION WITHIN THE MANUFACTURER'S
ORGANIZATION AND ACROSS THE SUPPLY CHAIN.
The Company began offering the Windows version of Made2Manage in late 1995
when it discontinued sales of the DOS version. The Company licensed Made2Manage
(DOS as well as Windows) to 91 new customers in 1995, 140 in 1996 and 149 for
the first nine months of 1997. The cost of a Made2Manage license varies based
upon the number of concurrent users and the optional modules licensed. See
"--Sales and Marketing."
Made2Manage's features are fully integrated, allowing the user to navigate
through the system quickly and easily. Made2Manage minimizes the complexity of
purchasing decisions by selling its enterprise-wide application as a single
unit. However, the Company separately licenses certain optional features that
support requirements that are not common to all manufacturers. The product
features are organized into five basic categories as follows:
<TABLE>
<S> <C> <C> <C>
EXECUTIVE INFORMATION SYSTEMS
<CAPTION>
REPORTS AND GRAPHS SYSTEMS OVERVIEW
<S> <C> <C> <C>
SALES PERFORMANCE PRODUCTION PERFORMANCE FINANCIAL PERFORMANCE
SALES MANAGEMENT PRODUCTION MANAGEMENT FINANCIAL MANAGEMENT
- - Quotations - Job Order Entry and - Job Splitting - Accounts Receivable
- - Sales Orders Processing Release - Cycle Counting and - Accounts Payable
- - Features and Options - Labor Entry Physical Inventory - General Ledger
- - Rules-Based Product - Purchasing and Inventory - Bill of Materials and - Cash Flow Projections
Configuration - Material Requirements Routings - Order Costing
- - Customer Service Planning - Production Scheduling - Payroll and Human
- - Sales Reports and Graphs - Shipping and Receiving - Quality Control Resources
- - Sales Overviews - Lot Control - Production Reports, - Financial Overviews
- Bar Code Data Collection Statements and Graphs - Financial Reports,
Statements and Graphs
</TABLE>
<TABLE>
<S> <C> <C>
SYSTEM-WIDE CAPABILITIES
<CAPTION>
Notifier SmartLink User Permissions and Preferences
Locator User-Defined Reports Internet applications
Navigator
<S> <C> <C>
</TABLE>
EXECUTIVE INFORMATION SYSTEM
The Executive Information System ("EIS") provides management with a tool to
promote high level planning, and enables line item "drill-downs" for thorough
and rapid analysis of enterprise-wide business activities. Executives are able
to obtain an overview of their entire business, with automatic data retrieval
from sales, production and finance. Performance and exception results are
generated in report or graphical format, and can be easily customized or
exported to spreadsheets, word processors and other business tools.
SALES MANAGEMENT
Sales Management provides the ability to track sales, quotes and order
activity. Sales Order Processing manages the activities from the time the
customer confirms the order, into production and through shipment, including
acknowledging the order, receiving stock materials and handling multiple
releases and partial shipments. The Rules-Based Product Configurator allows the
sales person to guide customers through specific product choices to precisely
meet their product needs while assuring that quotes meet profitability and
manufacturability guidelines.
28
<PAGE>
PRODUCTION MANAGEMENT
Production Management facilitates the planning, execution and monitoring of
the manufacturing process. Job orders are created to drive material and
production requirements and to track jobs through the production process. Job
orders identify the part number, the bill of material, the routing, the status
and the job packet (i.e., the set of instructions, diagrams and photographs
required to manufacture the part). Actual material and labor costs are tracked
to jobs during the production process. Made2Manage's manufacturing planning
functions include materials requirements planning for controlling inventory
procurement and job creation, as well as infinite and finite Production
Scheduling. Execution level support is provided through functions which include
cycle counting functionality, physical inventory capabilities and on-hand
availability. Lot Control enables companies to track raw materials,
sub-assemblies and final assemblies to their origin.
FINANCIAL MANAGEMENT
Financial Management is fully integrated with Sales Management and
Production Management. Up-to-date records of income, expenses and financial
commitments flow through the product's extensive library of financial reports.
Standard features include Accounts Receivable, Accounts Payable, Cash Flow
Forecasting and Job Order Costing. The General Ledger integrates the monetary
flow from all aspects of Made2Manage. "Drill-down" features, available
throughout the product, finely detail many areas, such as cost attributes of
work in process, inventory and product shipped.
SYSTEM-WIDE CAPABILITIES
As a result of the Company's focus on the user, Made2Manage contains
features which the Company believes are unique in the industry. Advanced
features like Notifier provide a solid foundation for workflow management.
Notifier monitors the manufacturer's system, detects the occurrence of specified
events and automatically sends a message via e-mail, fax or pop-up message to
customers, employees or vendors. This messaging feature promotes collaboration
within the manufacturer's organization and across the supply chain. Locator is
used to find information with very little effort and a minimum of information.
By knowing only a portion of a customer name, part number or customer purchase
order number, a Made2Manage user can use the locator function to find a quote,
sales order status, job order status or purchase order. Additional "drill down"
to underlying data is supported. Navigator provides a visual representation of
the entire Made2Manage system and the relationship of the system components.
Navigator is designed to assist novice or infrequent users. The Company recently
released its first Internet applications designed to enhance information flow,
including a report agent, a customer service component and an application for
improving communication with vendors.
A BLACK AND WHITE PICTURE OF A COMPUTER SCREEN DEMONSTRATING THE NAVIGATOR
FEATURE OF MADE2MANAGE WILL BE INSERTED HERE ABOVE A CAPTION WHICH WILL STATE:
NAVIGATOR PROVIDES A VISUAL REPRESENTATION OF THE ENTIRE MADE2MANAGE SYSTEM AND
THE RELATIONSHIP OF SYSTEM COMPONENTS.
SERVICE AND SUPPORT
The Company offers a full complement of services that allows its customers
to maximize the benefits of Made2Manage and facilitates a successful
installation, including implementation assistance using the Company's Keystone
Implementation Methodology, customer support and education programs.
29
<PAGE>
THE KEYSTONE IMPLEMENTATION METHODOLOGY
The Company's Keystone Implementation Methodology consists of the following
steps:
PLANNING: The Company assists the customer in assigning tasks to the
customer's project team members and creating a Made2Manage implementation
and education plan.
EDUCATION: The Company conducts classes either at its offices or the
customer's facility to instruct the project team and key users in
fundamentals of Made2Manage as well as provide in-depth knowledge of
individual features.
CONFERENCE ROOM MODELING: The Company assists the customer in building a
pilot implementation allowing its customers to simulate live operation.
The Company uses this technique to reinforce and validate decisions and
processes adopted during the implementation.
OPERATIONAL DEVELOPMENT: The Company assists the customer in developing
policies and procedures for a smooth conversion to Made2Manage, including
the development of a final conversion plan.
USER TRAINING AND LIVE OPERATION: The Company employs a
"train-the-trainer" approach with the customer and provides direction for
detailed training so users become more proficient with Made2Manage. The
Company and the customer use feedback from these training sessions to
make final adjustments to the implementation prior to live operation.
FOLLOW-UP: After implementation, the Company reviews the status of the
customer's system and recommends any adjustments and additional training.
CUSTOMER SUPPORT
The Company provides ongoing product support services under its support
agreements. Support agreements are typically sold to customers for a one year
term at the time of the initial product license and may be renewed for
additional annual periods. Telephone and electronic support and periodic
software updates are included as part of the support agreement.
The Company utilizes tools and procedures for incident tracking, call
escalation, customer profiling, knowledge building and automated incident
resolution. Many of these functions are also provided to customers via
SmartLink, a feature of Made2Manage that allows customers to log inquiries,
search knowledge bases and retrieve responses electronically. The Company also
uses electronic communications and the Internet to provide technical bulletins,
new product features, product changes and education course catalogs to its
customer base. Customers can also check the status of their change requests and
software problems, submit new requests and examine the content of existing and
future releases via the Internet. Users are required to have a valid support
agreement to access this information.
EDUCATION PROGRAMS
The Company offers classroom education courses for each of the major user
roles present in a small and midsize manufacturing business. These courses are
offered at the Company's headquarters, in regional locations, and on-site at the
customer's facility. Each course includes hands-on exercises using the software
in the context of the user's typical workflow.
PRODUCT DEVELOPMENT
The Company seeks to enhance its competitive position by incorporating
additional functionality in Made2Manage to meet the evolving needs of
manufacturers in its target market. Product enhancement ideas originate from
existing customers, prospective customers and industry trend analysis. Input is
collected through surveys, interviews, user groups and customer service and
support activities. The
30
<PAGE>
Company's sophisticated tracking system captures feedback regarding requested
enhancements or software problems, categorizing the feedback by urgency, product
functional area and applicable screen or report. The Company analyzes this input
and identifies changes for future product releases. The Company's product
development personnel have experience in software development, quality assurance
and documentation and are familiar with the specific manufacturing or financial
area to be addressed by the change.
The Company intends to continue to incorporate the latest technology
standards into Made2Manage. Internet modules scheduled for future release
include field sales support, executive information and order status
applications. The Company plans to release an enhanced version of Made2Manage
including screen customization, improved EDI support, OLE server support and
internationalization. The Company also intends to offer a choice of database
technology by adding support for Microsoft's SQL server database product.
The Company's development methodology incorporates comprehensive quality
assurance procedures. A substantial component of its development budget is
allocated to quality assurance. Its testing processes include component level
tests, unit tests, posting tests, validation tests, regression tests,
installation tests, CD tests and production tests. Risk assessment documents are
prepared and maintained throughout the development process to identify potential
roadblocks to a timely and quality release early enough to allow corrective
action. Criterion-based (as opposed to date-based) release guidelines insure
consistent release quality.
The Company's product development expenditures were $636,000, $1.2 million,
$1.7 million and $1.7 million for the years ended December 31, 1994, 1995 and
1996 and the nine months ended September 30, 1997, respectively. The Company
capitalized certain of the development costs it incurred in developing the
predessor DOS and UNIX versions of Made2Manage. Remaining unamortized
development costs were expensed in 1995. The Company has expensed all the
development costs associated with the development of the Windows version of
Made2Manage. At September 30, 1997, the Company's development staff consisted of
approximately 35 individuals involved in design, development, documentation and
quality assurance.
As a result of the complexities inherent in software design and development,
there can be no assurance that the Company will be able to complete features and
products currently under development in a timely manner or to develop features
and products that find market acceptance in the future. See "Risk
Factors--Product Concentration" and "Risk Factors--Product Development and
Technological Change."
SALES AND MARKETING
The Company markets its products and services in markets throughout the
United States and Canada. The Company has 16 United States sales
representatives, supported by two regional managers and six manufacturing
applications consultants. The Company also distributes Made2Manage through
approximately 20 VARs. The Company has implemented procedures to reduce conflict
between its direct and indirect sales channels and between individual VARs.
The Company manages its sales efforts through a structured, multi-stage
sales process. The first stage, lead qualification, is often performed at the
Company's headquarters. The direct sales representative is then provided with
detailed information about the prospective customer, its operations, its system
requirements and its decision making process. This enables the field
representative to manage a greater number of accounts and to focus on the later
states of the sales cycle. The Company believes its sales process provides it
with a competitive advantage.
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<PAGE>
MARKETS AND CUSTOMERS
The Company's customers are small and midsize discrete manufacturers engaged
in engineer-to-order, make-to-order, make-to-stock or mixed mode production.
Discrete manufacturers fabricate and assemble parts into a finished product as
distinguished from process manufacturers, which combine raw materials to create
finished products. Engineer-to-order manufacturing is a subset of make-to-order
where the product is expressly designed and manufactured to meet a customer's
unique requirements, often as a "one-time" item. Make-to-order manufacturing
involves fabricating and assembling products that are either standardized or
that meet a customer's unique specifications. Make-to-stock refers to
manufacturing in which standard products are fabricated, assembled and placed in
finished goods inventory based on projected customer demand. Mixed mode
manufacturing involves a combination of some or all of these production
techniques.
The Company's target market consists primarily of discrete small and midsize
manufacturers with an emphasis on manufacturers with annual revenues of between
$5 million and $50 million. Based on data provided by Dun & Bradstreet
Corporation, the Company believes there are approximately 26,000 manufacturing
operations in the United States that meet the Company's target market
parameters.
COMPETITION
The business management applications software market is fragmented,
intensely competitive and rapidly changing. The Company faces competition from a
variety of software vendors, including application software vendors, software
tool vendors and relational database management systems vendors. The Company's
competitors include a large number of independent software and systems vendors,
including Dataworks Corporation, Effective Management Systems, Fourth Shift
Corporation and Symix Computer Systems, all of which are public companies, and
Lilly Software Associates, which is a private company. In addition, there are
numerous small and regional vendors that offer alternative systems. Several
software companies that have traditionally marketed ERP systems to larger
manufacturers, including Baan, J.D. Edwards, PeopleSoft, QAD and SAP, have
announced initiatives to market ERP systems to midsize manufacturers. Many of
the Company's existing competitors, as well as a number of potential
competitors, have significantly greater financial, technical and marketing
resources and a larger base of customers than the Company.
A number of companies offer products similar to Made2Manage that are
directed at the market for ERP systems. The technologies utilized by the Company
to develop Made2Manage are generally available and widely known, including
technology developed by Microsoft. As a result, competition is likely to
increase substantially. Made2Manage competes with other products, principally on
the basis that it is specifically designed for small and midsize manufacturers,
is relatively easy to implement and use and is supported by a well-developed
system of service and support. In addition, the Company believes that advanced
features for messaging and Internet access largely differentiate Made2Manage
from its peers. The Company believes that Made2Manage competes favorably with
the products offered by its competitors, but there can be no assurance that it
will continue to compete favorably against such products or that it will be able
to compete successfully against potential competitors.
INTELLECTUAL PROPERTY
The Company regards its software products as proprietary in that title to
and ownership of the software it develops resides exclusively with the Company.
The Company relies largely upon its license agreements with customers, dealer
agreements with suppliers, its own software protection schemes, confidentiality
procedures and employee agreements to maintain the trade secret aspects of its
products. The Company seeks to protect its programs, documentation and other
written materials under copyright law. There can be no assurance that these
means of protection will be effective against unauthorized
32
<PAGE>
reproduction or "pirating." Policing unauthorized use of computer software is
difficult, and software "piracy" is and can be expected to remain a persistent
problem within the software industry.
The Company has a U.S. patent application pending for software related to
the Material Requirements Planning feature included in Made2Manage. The Company
has no other patents or patent applications. The Company believes that, due to
the rapid pace of innovation within the computer industry, factors such as
technological and creative skill of personnel, knowledge and experience of
management, name recognition, maintenance and support of software products, the
ability to develop, enhance, market and acquire software products and services
and the establishment of strategic relationships in the industry are generally
more important than patent, copyright and other legal protections for its
technology.
The Company believes that it has all necessary rights to market its
products, although there can be no assurance that third parties will not assert
infringement claims in the future. See "Risk Factors-- Intellectual Property."
EMPLOYEES
As of September 30, 1997, the Company employed 137 people, consisting of 44
in sales and marketing, 35 in product development, 41 in services and 17 in
administration. Competition for qualified management and technical employees is
intense in the software industry and the Company has from time to time
experienced difficulty in locating candidates with appropriate qualifications.
The Company's success will depend in large part upon its ability to continue to
attract and retain qualified employees. Each employee signs a confidentiality
and nondisclosure agreement upon joining the Company. The Company believes that
its relations with its employees are satisfactory.
FACILITIES
The Company is headquartered in Indianapolis, Indiana, where it leases an
aggregate of approximately 32,607 square feet of space housing administrative,
sales and marketing, customer service and product development activities. The
Company's lease expires in June 2004. In addition, the Company leases office
space under leases that are for one year or less in one other location in the
United States. The Company believes that its facilities are adequate for the
present, but anticipates expanding its facilities, as necessary, in the future.
33
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company and their ages as of
September 30, 1997, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------- --- ----------------------------------------------------------------------
<S> <C> <C>
Ira Coron(1)(2).................... 68 Chairman of the Board of Directors
David B. Wortman................... 46 President, Chief Executive Officer and Director
Christopher D. Clapp............... 37 Vice President, Marketing
Oliver C. Fowler................... 44 Vice President, Sales
Stephen R. Head.................... 44 Vice President, Finance and Administration, Chief Financial Officer,
Secretary, and Treasurer
Gary W. Rush....................... 39 Vice President, Development
Joseph S. Swern.................... 44 Vice President, Services and Support
Gregory F. Ehlinger(1)(2).......... 35 Director
Standish H. O'Grady(1)............. 37 Director
</TABLE>
- ------------------------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
DAVID B. WORTMAN joined the Company in September 1993 as Senior Vice
President and has served as President and Chief Executive Officer and a director
since January 1994. Prior to joining the Company, Mr. Wortman held a succession
of senior executive positions, with Pritsker Corporation, a computer software
company he co-founded in 1973. Mr. Wortman is a past President of the Institute
of Industrial Engineers and a recipient of its Outstanding Young Industrial
Engineer award. He is President and a Director of the Indiana Software
Association. Mr. Wortman holds B.S. and M.S. degrees in industrial engineering
from Purdue University.
CHRISTOPHER D. CLAPP joined the Company as Vice President, Marketing in
April 1996. From November 1993 to February 1996, Mr. Clapp was employed by
Centillion Data Systems, Inc., a company which develops and markets software and
services for the telecommunications industry, last serving as Vice President and
General Manager of that company's communications division. From January 1989 to
November 1993, Mr. Clapp was employed at Pritsker Corporation, holding various
positions, including Product Manager and Manager, Sales Operations. As Product
Manager at Pritsker Corporation, Mr. Clapp designed and implemented the
worldwide marketing strategy for that company's manufacturing planning and
scheduling software system. Mr. Clapp holds a B.S. degree in industrial
engineering from Purdue University.
OLIVER C. FOWLER joined the Company as Vice President, Sales in April 1995.
Mr. Fowler has been involved in the sales of computer hardware and software
products since 1975. From 1989 to 1995, Mr. Fowler held a succession of sales
management positions, including Director of Strategic Accounts, with Symix
Computer Systems, Inc. a computer software company specializing in the ERP
systems market for discrete, midsize manufacturers. Mr. Fowler holds a B.A. from
Marietta College in Management Economics and has a Certification in Production
and Inventory Management from the American Production and Inventory Control
Society.
STEPHEN R. HEAD joined the Company as Vice President, Finance and
Administration, Chief Financial Officer, Secretary and Treasurer in December
1996. From January 1994 through November 1996, Mr. Head served as Vice
President, Finance and Chief Financial Officer of Software Artistry, Inc., a
software company which became a public company in March 1995. From 1991 through
December 1993, he served as a part-time Chief Financial Officer and Controller
for Software Artistry, Inc. and rendered
34
<PAGE>
similar services to other small and growing companies, including four other
software companies. He is a founding member and former Treasurer of the Indiana
Software Association. Mr. Head is a Certified Public Accountant and holds B.S.
and M.B.A. degrees from Indiana University.
GARY W. RUSH joined the Company as Vice President, Development in May 1994.
Prior to joining the Company, Mr. Rush was President of Micro Data Base Systems,
Inc., a provider of relational and network database management software. During
his 14 year tenure at Micro Data Base Systems, Mr. Rush held various other
positions, including Chief Operating Officer, Vice President of Development, and
Vice President of Consulting. Mr. Rush holds a B.S.E.E. and a M.S.E. with a
focus on management information systems from Purdue University.
JOSEPH S. SWERN joined the Company in September 1995 as Vice President,
Service and Support. Prior to joining the Company, Mr. Swern was Vice President
of Professional Services at Symix Computer Systems, Inc. During his seven year
tenure at Symix, Mr. Swern also served as Director of Consulting Services,
Manager of Implementation Consulting and Senior Implementation Consultant.
Preceding his employment with Symix Computer Systems, Inc., Mr. Swern spent ten
years working in both discrete and process manufacturing, holding various
management positions. Mr. Swern holds a B.S. degree in industrial management
from Franklin University and a M.B.A. from Capital University. He has a
Certification in Production and Inventory Management from the American
Production and Inventory Control Society.
IRA CORON has been the Chairman of the Board of Directors of the Company
since 1993. Mr. Coron has served as Chairman of California Amplifier, Inc. since
March 1994 and served also as that Company's Chief Executive Officer until
August 1997. From 1989 to 1994, he was an independent management consultant to
several companies and venture capital firms. He retired from TRW, Inc. in 1989,
after serving in numerous senior management positions since 1967, including Vice
President and General Manager of TRW's Electronic Components Group. He is also a
director of the Wireless Cable Association, and a director of CMC Industries. He
is a graduate of The U.S. Military Academy with a B.S. engineering.
GREGORY F. EHLINGER has been a director of the Company since 1991. He has
been a Vice President and Treasurer of Irwin Financial Corporation since 1992.
From 1988 through 1992, Mr. Ehlinger was an associate of Miller Venture
Partners. Mr. Ehlinger has a B.A. in economics and psychology and a M.B.A. from
the University of Virginia.
STANDISH H. O'GRADY has been a director of the Company since 1987. Mr.
O'Grady is a Managing Director in the venture capital department of Hambrecht &
Quist California, a subsidiary of Hambrecht & Quist Group, a venture capital,
investment banking and securities brokerage firm specializing in emerging growth
companies. Mr. O'Grady has served in various positions with Hambrecht & Quist
California's venture capital department since 1986. Mr. O'Grady previously
worked at Intel Corporation. He is currently a director of numerous private
companies. He holds a B.S.E. degree in chemical engineering from Princeton
University and a M.B.A. from the Amos Tuck School of Business Administration at
Dartmouth College.
Each Director holds office until the next annual meeting of stockholders and
until his successor is duly elected and qualified. Officers are elected by the
Board of Directors at each annual meeting and serve at the pleasure of the
Board.
The board has established an Audit Committee consisting of Messrs. Coron and
Ehlinger and a Compensation Committee consisting of Messrs. Coron, Ehlinger and
O'Grady. The Audit Committee reviews with the Company's independent auditors the
scope and timing of their audit services and any other services they are asked
to perform, the auditor's report on the Company's financial statements following
completion of their audit, and the Company's policies and procedures with
respect to internal accounting and financial controls. In addition, the Audit
Committee makes annual recommendations to the Board of Directors for the
appointment of independent auditors for the ensuing year. The Compensation
Committee reviews and recommends to the Board of Directors the compensation and
benefits of all
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<PAGE>
officers of the Company, reviews general policy matters relating to compensation
and benefits of employees of the Company and administers the Stock Option Plan.
See "--Stock Option Plan."
DIRECTORS COMPENSATION
Mr. Coron is paid $4,000 per quarter plus expenses for each meeting of the
Board of Directors he attends. Messrs. Coron, Ehlinger and O'Grady each annually
receive an option for 5,000 shares of Common Stock, pursuant to the Stock Option
Plan, at the fair market value of the stock on the date of grant, 25% of which
is exercisable on the first anniversary of the date of the grant and 75% of
which is exercisable at the rate of 1/48th of the amount granted each month
thereafter. See "--Stock Option Plan."
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the total annual compensation paid to, or for
the account of, the Chief Executive Officer of the Company and the Company's
other most highly compensated executive officers whose total annual salary and
bonus exceeded $100,000 during the year ended December 31, 1996 (collectively,
the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------- OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS (# OF SHARES) COMPENSATION(1)
- ---------------------------------------------------------- ---------- --------- ------------- -----------------
<S> <C> <C> <C> <C>
David B. Wortman
President and Chief Executive Officer................... $ 140,000 $ 48,151 75,000 $ 2,531
Oliver C. Fowler
Vice President, Sales................................... 100,000 44,287 25,000 2,262
Gary W. Rush
Vice President, Development............................. 90,000 27,244 62,000 2,136
Joseph S. Swern
Vice President, Services and Support.................... 92,000 30,150 20,000 1,246
</TABLE>
- ------------------------
(1) Consists of Company matching contributions to the 401(k) plan and life
insurance premiums.
36
<PAGE>
OPTIONS
The following table sets forth certain information concerning grants of
stock options to each of the Named Executive Officers during 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(4)
OPTIONS EMPLOYEES PRICE EXPIRATION ----------------------
GRANTED(1)(2) IN YEAR ($/SHARE)(3) DATE 5% 10%
------------- ------------- ------------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
David B. Wortman.................... 75,000 14.2% $ 3.50 1/26/06 $ 165,085 $ 418,357
Oliver C. Fowler.................... 25,000 4.7 3.50 1/26/06 55,028 139,457
Gary W. Rush........................ 62,000 11.7 3.50 1/26/06 136,470 345,842
Joseph S. Swern..................... 20,000 3.8 3.50 1/26/06 44,023 111,562
</TABLE>
- ------------------------
(1) Options granted under the Stock Option Plan become exercisable over a
four-year period, 25% on the first anniversary of the date of grant and
1/48 of the total each month thereafter, with vesting subject to the
employee's continued employment. Stock options are issued at the estimated
fair market value at the date of grant. The exercise of the options may be
accelerated in the event of certain occurrences including the sale of the
Company.
(2) Subsequent to December 31, 1996, the Company granted options to purchase
shares of Common Stock to the Named Executive Officers at $5.75 per share as
follows: Mr. Wortman, 30,000 shares; Mr. Fowler, 15,000 shares; Mr. Rush,
20,000 shares; and Mr. Swern, 20,000 shares.
(3) All options were granted at fair market value as determined by the Board of
Directors of the Company on the date of grant based upon a third-party
valuation. The exercise price may in some cases be paid by delivery of other
shares or by offset of the shares subject to the options.
(4) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission. There can
be no assurance provided to any Named Executive Officer or any other holder
of the Company's securities that the actual stock price appreciation over
the ten year option term will be at the assumed 5% and 10% levels or at any
other defined level. Unless the market price of the Common Stock appreciates
over the option term, no value will be realized from the option grants made
to the Named Executive Officers.
37
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST YEAR AND
YEAR-END OPTION VALUES
The following table sets forth certain information concerning exercisable
and unexercisable stock options held by the Named Executive Officers at December
31, 1996.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED AT DECEMBER 31, 1996 AT DECEMBER 31, 1996(1)
ON VALUE -------------------------- --------------------------
EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David B. Wortman................ -- $ -- 33,957 96,043 $ 188,461 $ 285,539
Oliver C. Fowler................ -- -- 20,833 54,167 115,623 218,127
Gary W. Rush.................... -- -- 14,322 75,668 79,543 215,357
Joseph S. Swern................. -- -- 9,375 40,625 50,156 155,344
</TABLE>
- ------------------------
(1) Calculated on the basis of the fair market value of the underlying shares of
Common Stock at December 31, 1996 of $5.75 per share, as determined by the
Company's Board of Directors based upon a third-party valuation, minus the
per share exercise price.
STOCK OPTION PLAN
A total of 1,600,000 shares of Common Stock are reserved for issuance upon
exercise of options granted under the Stock Option Plan, as adopted on August
16,1990 and amended on July 8, 1996. As of September 30, 1997, options to
purchase an aggregate of 1,060,785 shares of Common Stock were outstanding at a
weighted average exercise price of $3.31 per share. No stock options may be
granted under the Stock Option Plan after August 16, 2000.
The Stock Option Plan is administered by the Compensation Committee, which
is composed solely of non-employee directors of the Company. Participants in the
Stock Option Plan are employees, including officers of the Company, as may be
selected from time to time by the Compensation Committee. The Stock Option Plan
also authorizes the Compensation Committee to grant options to non-employee
directors and consultants, vendors or suppliers to the Company. Subject to the
terms of the Stock Option Plan, the Compensation Committee is authorized to
determine the number of shares of Common Stock subject to each option granted
thereunder, the exercise price of such option, the time and conditions of
exercise of such option and all other terms and conditions of such option.
Options granted under the Stock Option Plan may be incentive stock options
("ISOs"), as defined by Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code") or nonqualified stock options that do not meet the
requirements of Section 422 of the Code ("NQSOs"). ISOs may be granted only to
employees of the Company. The per share exercise price of a NQSO will not be
less than 85% of the fair market value of the Common Stock at the date of grant,
and the per share exercise price of an ISO will be not less than 100% of the
fair market value of the Common Stock on the date of the grant, except that the
per share exercise price for ISOs granted to holders of 10% or more of the total
combined voting power of all outstanding classes of stock of the Company ("10%
Shareholders") will be not less than 110% of such fair market value. In
addition, for each participant, the maximum aggregate fair market value on the
date of grant of all shares subject to ISOs first exercisable in any one year
may not exceed $100,000.
Options will expire on a date determined by the Compensation Committee,
provided that in the case of ISOs, the options will expire not more than ten
years from the date of grant (five years in the case of ISOs issued to 10%
Shareholders). If an option holder's service with the Company is terminated,
whether by retirement or otherwise, options granted under the Stock Option Plan
generally will expire 30 days after the termination of employment or of service
as a director, as the case may be, unless termination occurs as
38
<PAGE>
a result of death or permanent disability, in which case such options will
expire one year after such event. In addition, the Compensation Committee has
the discretion to extend the expiration date to a date within three months
following the date of termination of employment or termination of services as a
director, as the case may be. Options are not transferable other than by will or
the laws of descent and distribution.
The Stock Option Plan provides for an acceleration of the exercisability of
option grants at the discretion of the Compensation Committee. In the event of a
merger of the Company with or into another corporation in which the Company does
not survive or a sale of substantially all of the Company's assets, all
outstanding options vest immediately and become fully exercisable, provided that
if the Compensation Committee determines that such immediate vesting is not in
the best interests of the Company, then all outstanding options shall be assumed
or an equivalent option substituted by the successor corporation. If any options
become exercisable immediately, the Compensation Committee must notify each
holder that the option is exercisable for a period of not less than 10 or more
60 days from the date of the notice and that all options not exercised by such
date will terminate.
401(K) SAVINGS PLAN
The Company has a defined contribution retirement plan (the "401(k) Plan"),
qualified under Sections 401(a) and 401(k) of the Code. All employees of the
Company are eligible to participate in the 401(k) Plan on the first day of the
calendar quarter concurrent with or following 90 days of employment. The 401(k)
Plan provides that each participant may contribute from 1% to 15% of
compensation, subject to statutory limitations. The Company may also make
discretionary contributions based on a certain percentage of a participant's
contributions under the 401(k) Plan, as determined by the Company, or such other
additional amounts as the Company may deem appropriate. The Board of Directors
approved a matching contribution of 25% of the first 6% of employee
contributions beginning January 1996. The Company contributions under the 401(k)
Plan totaled $39,000 for the year ended December 31, 1996.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
As permitted by the Indiana Business Corporation Law, Articles of the
Company require the Company to indemnify its officers and directors from certain
liabilities, if the officer or director acted in good faith and in a manner he
reasonably believed, in the case of conduct in his official capacity, was in the
best interests of the Company, and in all other cases, was not opposed to the
best interests of the Company, and, with respect to any criminal proceeding, the
officer or director had reasonable cause to believe his conduct was lawful or
had no reasonable cause to believe his conduct was unlawful. The Articles
further provide that the Company may advance to its officers and directors
expenses incurred in connection with proceedings against them for which they may
be indemnified, if the Company receives a written affirmation from such officer
or director of his good faith belief that he met the standard of conduct
described above and that he will repay all advanced expenses if it is ultimately
determined that he did not meet such standard of conduct. Pursuant to the
Articles, the Company anticipates obtaining directors' and officers' insurance.
At present, the Company is not aware of any pending or threatened litigation or
proceeding involving an officer, director, employee or agent of the Company in
which indemnification would be required or permitted.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Ira Coron, Standish O'Grady and Greg Ehlinger served on the Compensation
Committee during 1996. None of the members of the Compensation Committee is now
serving or has previously served as an employee or officer of the Company and
none of the Company's executive officers serves as a director of, or in any
compensation related capacity for, companies with which members of the
Compensation Committee are affiliated.
39
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of October 17, 1997 and immediately
following the completion of this offering, by (i) each person who is known by
the Company to beneficially own more than 5% of the outstanding shares of Common
Stock, (ii) each director of the Company, (iii) each Named Executive Officer,
(iv) all directors and executive officers of the Company as a group and (v) each
Selling Shareholder. This table assumes no exercise of the Underwriters'
overallotment option. See "Underwriting." Unless otherwise noted, all addresses
are in care of the Company at 9002 Purdue Road, Indianapolis, Indiana 46268
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING(1)(2) SHARES TO OFFERING(1)(2)
----------------------- BE SOLD IN -----------------------
NAME NUMBER PERCENT OFFERING NUMBER PERCENT
- --------------------------------------------------------- ---------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Entities affiliated with Hambrecht & Quist Group(3)...... 1,210,601 64.2% -- 1,210,601 32.8
J. Irwin Miller(4)....................................... 249,259 13.2 150,000 99,259 2.7
Gerald V. Roch(5)........................................ 91,982 4.9 25,000 66,982 1.8
Norma Roch(6)............................................ 86,982 4.6 25,000 61,982 1.7
Ira Coron(7)............................................. 105,041 5.3 -- 105,041 2.8
Gregory F. Ehlinger(8)................................... 16,541 * -- 16,541 *
Standish H. O'Grady(9)................................... 1,233,142 65.3 -- 1,233,142 33.4
David B. Wortman(10)..................................... 130,937 6.7 -- 130,937 3.5
Oliver C. Fowler(11)..................................... 44,791 2.3 -- 44,791 1.2
Gary W. Rush(12)......................................... 49,332 2.6 -- 49,332 1.3
Joseph S. Swern(13)...................................... 26,041 1.4 -- 26,041 *
Joseph A. Bielawski(14).................................. 30,881 1.6 -- 30,881 *
Robert J. Johnson(15).................................... 16,946 * -- 16,946 *
Alan R. McLean(16)....................................... 6,000 * -- 6,000 *
William I. Miller(17).................................... 25,941 1.3 -- 25,941 *
Mark A. Patterson(18).................................... 7,145 * -- 7,145 *
David O. Thomas(19)...................................... 30,000 1.6 -- 30,000 *
All executive officers and directors as a group
(9 persons)(20)........................................ 1,644,181 73.8 -- 1,644,181 40.8
</TABLE>
- ------------------------
* Less than 1% of outstanding Common Stock.
(1) Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, the Company believes that the persons
named in the table have sole voting and investment power with respect to all
shares of Common Stock.
(2) Applicable percentage of ownership as of October 17, 1997 is based upon
1,886,451 shares of Common Stock outstanding, including 1,479,824 shares of
Common Stock issuable upon the conversion of the Convertible Preferred
Stock. Applicable percentage ownership after the offering is based upon
3,686,451 shares of Common Stock outstanding. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission.
(3) Consists of: 33,355 shares of Common Stock owned by Hamco Capital
Corporation; 623,406 shares of Common Stock owned by H&Q London Ventures;
202,614 shares of Common Stock owned by Ivory & Sime Enterprise Capital,
plc; 287,044 shares of Common Stock owned by Hambrecht & Quist California;
1,730 shares of Common Stock owned by Hambrecht & Quist Venture Partners;
and 62,452 shares of Common Stock owned by Hambrecht 1980 Revocable Trust.
All of the aforementioned entities (the "H&Q Entities") are controlled,
directly or indirectly, by Hambrecht & Quist Group. The address for each of
he H&Q Entities is One Bush Street, San Francisco, California, 94104.
40
<PAGE>
(4) The address from Mr. Miller is 301 Washington Street, Columbus, Indiana
47201. If the Underwriters' overallotment option is exercised in full, Mr.
Miller will sell an additional 99,259 shares of Common Stock, and thereafter
will not beneficially own any shares of Common Stock.
(5) If the Underwriters' overallotment option is exercised in full, Mr. Roch
will sell 27,355 shares of Common Stock and thereafter beneficially own
39,627 shares of Common Stock, representing 1.1% of the outstanding Common
Stock.
(6) If the Underwriters' overallotment option is exercised in full, Mrs. Roch
will sell 27,354 shares of Common Stock and thereafter beneficially own
34,628 shares of Common Stock, representing less than 1% of the outstanding
Common Stock.
(7) Includes 105,041 shares of Common Stock issuable upon the exercise of
options within 60 days of October 17, 1997. If the Underwriters'
overallotment option is exercised in full, Mr. Coron will sell 50,000 shares
of Common Stock and thereafter beneficially own 55,041 shares of Common
Stock, representing 1.5% of the outstanding Common Stock.
(8) Includes 1,416 shares of Common Stock issuable upon the exercise of options
within 60 days of October 17, 1997.
(9) Includes 1,210,601 shares of Common Stock owned by the H&Q Entities. Mr.
O'Grady, a director of the Company, is an affiliate of the H&Q Entities, and
accordingly may be attributed beneficial ownership of the shares of Common
Stock owned by the H&Q Entities. Mr. O'Grady disclaims beneficial ownership
of the shares of Common Stock held by the H&Q Entities, except to the extent
of his pecuniary interest therein. Also includes 2,583 shares of Common
Stock issuable upon the exercise of options within 60 days of October 17,
1997.
(10) Includes 80,937 shares of Common Stock issuable upon the exercise of
options within 60 days of October 17, 1997.
(11) Includes 44,791 shares of Common Stock issuable upon the exercise of
options within 60 days of October 17, 1997.
(12) Includes 45,332 shares of Common Stock issuable upon the exercise of
options within 60 days of October 17, 1997.
(13) Includes 26,041 shares of Common Stock issuable upon the exercise of
options within 60 days of October 17, 1997.
(14) If the Underwriters' overallotment option is exercised in full, Mr.
Bielawski will sell 20,000 shares of Common Stock and thereafter
beneficially own 10,881 shares of Common Stock, representing less than 1% of
the outstanding Common Stock.
(15) If the Underwriters' overallotment option is exercised in full, Mr. Johnson
will sell 16,946 shares of Common Stock and thereafter will not beneficially
own any shares of Common Stock.
(16) If the Underwriters' overallotment option is exercised in full, Mr. McLean
will sell 6,000 shares of Common Stock and thereafter will not beneficially
own any shares of Common Stock.
(17) If the Underwriters' overallotment option is exercised in full, Mr. Miller
will sell 25,941 shares of Common Stock and thereafter will not beneficially
own any shares of Common Stock.
(18) If the Underwriters' overallotment option is exercised in full, Mr.
Patterson will sell 7,145 shares of Common Stock and thereafter will not
beneficially own any shares of Common Stock.
(19) If the Underwriters' overallotment option is exercised in full, Mr. Thomas
will sell 20,000 shares of Common Stock and thereafter beneficially own
10,000 shares of Common Stock, representing less than 1% of the outstanding
Common Stock.
(20) Includes 340,474 shares of Common Stock issuable upon the exercise of
options within 60 days of October 17, 1997.
41
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon the closing of this offering, the authorized capital stock of the
Company will consist of ten million shares of Common Stock and two million
shares of preferred stock (the "Preferred Stock"). As of September 30, 1997,
there were 406,627 shares of Common Stock issued and outstanding held of record
by 27 shareholders.
COMMON STOCK
Each holder of Common Stock is entitled to one vote for each share held on
matters voted upon by shareholders, subject to limitations discussed under the
caption "Other Restrictions on Acquisition of the Company," below. Under Indiana
law and pursuant to the Articles, the holders of the Common Stock possess
exclusive voting power in the Company and will continue to possess exclusive
voting power, unless a new class of Preferred Stock is issued and voting rights
are granted to the holders thereof or unless the Articles are amended as
provided therein and pursuant to Indiana law. Subject to preferences that may be
applicable to shares of Preferred Stock issued in the future, holders of Common
Stock are entitled to receive ratably such dividends as may be declared by the
Board out of funds legally available therefor and, in the event of liquidation
or dissolution of the Company, all assets of the Company (after payment or
provision for payment of all debts and liabilities of the Company) available for
distribution, in cash or in kind. See "Dividend Policy." Shareholders of the
Company have no pre-emptive rights to acquire additional shares of Common Stock
which may be subsequently issued. There are no redemption or sinking fund
provisions applicable to the Common Stock. All outstanding shares of Common
Stock are, and all shares of Common Stock to be outstanding upon completion of
this offering will be, fully paid and nonassessable.
PREFERRED STOCK
The Board is authorized, without further action by the shareholders, to
issue up to two million shares of Preferred Stock in one or more series. The
Board is authorized to fix and state the relative rights, preferences,
privileges and restrictions thereof, including voting rights, dividend rights,
conversion rights, terms of redemption, liquidation preferences, the number of
shares constituting any series and the designation of such series. Preferred
Stock may rank prior to the Common Stock as to dividend rights and/ or
liquidation preferences and may have full or limited voting rights. The holders
of Preferred Stock will be entitled to vote as a separate class or series under
certain circumstances (principally in cases directly affecting the rights of the
then existing holders of Preferred Stock, such as a merger, share exchange or
modification of terms of the Preferred Stock), regardless of any other voting
rights which such holders may have. Accordingly, the Board can, without
shareholder approval, issue Preferred Stock with voting and conversion rights
that would materially adversely affect the voting power of the holders of the
Common Stock.
REGISTRATION RIGHTS
The holders of 1,329,824 shares of Common Stock and the holders of warrants
to purchase 14,063 shares of Common Stock (the "Registrable Securities") are
entitled to certain rights with respect to the registration of such shares under
the Securities Act. See "Shares Eligible for Future Sale." Under the terms of an
agreement between the Company and the holders of the Registrable Securities, if
the Company proposes to register any of its securities under the Securities Act,
either for its own account or the account of other security holders exercising
registration rights, those holders are entitled to notice of registration and
are entitled to include shares of Registrable Securities therein. The holders of
Registrable Securities may also require the Company to file a registration
statement under the Securities Act at its expense with respect to their
Registrable Securities, and the Company is required to use its best efforts to
effect the registration of at least 20% of the Registrable Securities of each
holder making the request and of each holder joining such request, subject to,
among other things, the right of the Company not to effect
42
<PAGE>
any registration within 180 days following the offering made hereby. Further,
certain holders of the Registrable Securities may require the Company to file
additional registration statements on Form S-3. These registration rights are
subject to certain conditions and limitations, among them the reasonably
anticipated aggregate price of the shares offered to the public must exceed one
million dollars. See "Risk Factors--Shares Eligible for Future Sale;
Registration Rights."
ANTI-TAKEOVER PROVISIONS
The following discussion is a general summary of the material provisions of
the Articles and the Bylaws (the "Bylaws") of the Company and certain other
provisions which may be deemed to have an effect of delaying, deferring or
preventing a change in control of the Company. The following description is
general and not necessarily complete and is qualified by reference to the
Articles and the Bylaws.
PROCEDURES FOR CERTAIN BUSINESS COMBINATIONS
The Articles require that certain business combinations between the Company
(or any majority-owned subsidiary thereof) and a 10% Shareholder either: (i) be
approved by at least 80% of the total number of outstanding voting shares of the
Company, (ii) be approved by a majority of certain directors unaffiliated with
such 10% Shareholder or (iii) involve consideration per share generally equal to
the higher of (a) the highest amount paid by such 10% Shareholder or its
affiliates in acquiring any shares of the Common Stock or (b) the fair market
value of the Common Stock (generally, the highest closing sale price of the
Common Stock during the 30 days preceding the date of the announcement of the
proposed business combination or on the date the 10% Shareholder became such,
whichever is higher).
AUTHORIZATION OF PREFERRED STOCK.
As discussed above, the Board is authorized to fix and state the relative
rights, preferences, privileges, and restrictions of the shares of Preferred
Stock, including voting rights and conversion rights. In the event of a proposed
merger, tender offer or other attempt to gain control of the Company without
board approval, it would be possible for the Board to authorize the issuance of
a series of Preferred Stock with rights and preferences which might impede the
completion of such a transaction. If the Company issues any Preferred Stock that
would disproportionately reduce the voting rights of the Common Stock, the
Common Stock could be required to delist from The Nasdaq National Market.
OTHER RESTRICTIONS ON ACQUISITION OF THE COMPANY
Several provisions of the Indiana Business Corporation Law (the "IBCL")
could affect the acquisition of Common Stock or control of the Company. Chapter
43 of the IBCL prohibits, without advance approval by the Board, business
combinations between corporations such as the Company and any 10% Shareholder
for five years following the date on which the person became a 10% Shareholder.
If such prior approval is not obtained, several price and procedural
requirements must be satisfied before a business combination can be completed.
In addition, the IBCL contains provisions designed to assure that minority
shareholders have a voice in determining their future relationship with an
acquirer in the event that an acquiror makes a tender offer for, or otherwise
acquires, shares giving the acquiror more than 20%, 33 1/3% and 50% of the
outstanding voting securities of the corporation (the "Control Share
Acquisitions Statute"). Under certain circumstances, if the Control Share
Acquisitions Statute applies, an acquiror may vote those shares which exceed the
aforementioned thresholds ("Control Shares") only to the extent that voting
rights are approved by the holders of a majority of each class or series of
shares entitled to vote separately on the proposal (excluding shares held by
officers of the corporation, by employees of the corporation who are directors
thereof and by the acquiror). A corporation may redeem Control Shares at their
fair market value, if such authority is
43
<PAGE>
contained in the articles of incorporation or by-laws of the corporation. The
Company has adopted such a provision as part of its Bylaws.
The IBCL specifically authorizes directors in considering a proposed
business transaction to consider both the long and short-term interests of the
corporation, as well as the effects of such transaction on shareholders,
employees, suppliers and customers of the corporation, the communities in which
offices or other facilities of the corporation are located and any other factors
the directors consider pertinent. The IBCL expressly states that limitations on
Board discretion in response to a potential takeover, such as those adopted by
Delaware courts, do not apply to directors of Indiana companies.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is American Stock
Transfer & Trust Company, 40 Wall Street, New York, New York 10005.
INFORMATION PROVIDED TO SHAREHOLDERS
The Company intends to furnish its shareholders with annual reports
containing audited financial statements and with quarterly reports for the first
three quarters of each fiscal year containing unaudited summary financial
information.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the closing of this offering, the Company will have outstanding an
aggregate of 3,686,451 shares of Common Stock. Of these shares, all the Shares
sold in this offering will be freely tradeable without restrictions or further
registration under the Securities Act and the remaining 1,686,451 shares of
Common Stock held by existing shareholders will be "restricted securities" as
that term is defined in Rule 144 under the Securities Act (the "Restricted
Shares"). Restricted Shares may be sold in the public market only if registered
or if they qualify for an exemption from registration under Rules 144, 144(k) or
701 promulgated under the Securities Act.
The officers, directors, certain shareholders, and holders of outstanding
stock options of the Company have agreed not to, directly or indirectly, issue,
offer to sell, sell, grant an option for the purchase or sale of, transfer,
pledge, assign, hypothecate, or otherwise encumber or dispose of any securities
issued by the Company, including shares of Common Stock or securities
convertible into or exchangeable or exercisable for or evidencing any right to
purchase or subscribe for any share of Common Stock for a period of six months
from the effective date of the Registration Statement, without the prior written
consent of the First Albany Corporation and the Company. An appropriate legend
shall be marked on the face of certificates representing all such securities.
The Company also has agreed not to offer, sell, contract to sell or otherwise
dispose of any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock, or any options or warrants to
purchase Common Stock other than shares or options issued under the Company's
stock option plans, for a period of six months after the date of this
Prospectus, except with the prior written consent of First Albany Corporation
All Restricted Shares are subject to the Lock-Up Agreements (the "Lock-up
Restricted Shares"). Approximately 374,329 Lock-Up Restricted Shares will be
available for sale in the public market immediately following the expiration of
the six month lock-up period, pursuant to Rule 144(k), and 1,282,039 Lock-Up
Restricted Shares will become eligible for sale in the public market immediately
following the expiration of the six month lock-up period, subject to the volume
and other limitations of Rule 144 and Rule 701, as discussed below. The
remaining Lock-up Restricted Shares will begin to be eligible for sale at
various times thereafter pursuant to Rule 144.
In general, under Rule 144 beginning 90 days after the date of this
Prospectus, any holder of Restricted Shares, including an affiliate of the
Company, as to which at least one year has elapsed since the
44
<PAGE>
later of the date of acquisition of the shares from the Company or an affiliate,
would be entitled within any three-month period to sell a number of shares of
Common Stock that does not exceed the greater of 1% of the then outstanding
shares of Common Stock (approximately 37,000 shares upon the completion of this
offering) or the average weekly trading volume of the Common Stock on the Nasdaq
National Market during the four calendar weeks preceding the date on which
notice of the sale is filed with the Commission. Sales under Rule 144 are
subject to certain requirements relating to manner of sale, notice and
availability of current public information about the Company. However, a person
(or persons whose shares are aggregated) who is not deemed to have been an
affiliate of the Company at any time during the 90 days immediately preceding
the sale and who beneficially owns Restricted Shares is entitled to sell such
shares under Rule 144(k) without regard to the limitations described above,
provided that at least two years have elapsed since the later of the date the
shares were acquired from the Company or from an affiliate of the Company. The
foregoing is a summary of Rule 144 and is not intended to be a complete
description of it.
As of September 30, 1997, there were 1,060,785 shares of Common Stock
subject to outstanding options issued pursuant to the Stock Option Plan, of
which 399,867 were vested as of that date. The Company intends to file a
registration statement under the Securities Act to register shares of Common
Stock reserved for issuance under the Stock Option Plan, thus permitting the
sale of such shares by non-affiliates in the public market without restriction
under the Securities Act. Such registration statement will become effective
immediately upon filing.
Subject to certain limitations on the aggregate offering price of a
transaction and other conditions, Rule 701 may be relied upon with respect to
the resale of securities originally purchased from the Company by its employees,
directors, officers, consultants or advisers prior to the closing of this
offering pursuant to written compensatory benefit plans or written contracts
relating to the compensation of such persons. In addition, the Commission has
indicated that Rule 701 will apply to stock options granted by the Company
before this offering, along with the shares acquired upon exercise of such
options. Securities issued in reliance on Rule 701 are deemed to be Restricted
Shares and, subject to the contractual limitations described above, beginning 90
days after the date of this Prospectus, may be sold by persons other than
affiliates subject only to the manner of sale provisions of Rule 144 and by
affiliates under Rule 144 without compliance with its one-year minimum holding
period requirements. See "Risk Factors--Shares Eligible for Future Sale;
Registration Rights."
45
<PAGE>
UNDERWRITING
The underwriters of this offering of Common Stock (the "Underwriters"), for
whom First Albany Corporation, Van Kasper & Company, and RvR Securities Corp.
are serving as representatives (the "Representatives"), have agreed, subject to
the terms and conditions of the Underwriting Agreement (the form of which is
filed as an exhibit to the Registration Statement of which this Prospectus is a
part) to purchase, and the Company and the Selling Shareholder have agreed to
sell them severally, the number of shares of Common Stock set forth opposite
their respective names below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
- --------------------------------------------------------------------------------- ----------
<S> <C>
First Albany Corporation.........................................................
Van Kasper & Company.............................................................
RvR Securities Corp..............................................................
----------
Total........................................................................ 2,000,000
----------
----------
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
to purchase shares of Common Stock are subject to certain conditions, and that
if any of the shares of Common Stock are purchased by the Underwriters pursuant
to the Underwriting Agreement, all shares of Common Stock agreed to be purchased
by the Underwriters pursuant to the Underwriting Agreement must be so purchased
(other than those subject to the Underwriters' overallotment option described
below).
The Company has been advised that the Underwriters propose to offer the
shares of Common Stock directly to the public initially at the public offering
price set forth on the cover page of this Prospectus, and to certain selected
dealers (who may include the Underwriters) at such public offering price less a
concession not in excess of $ per share. The Underwriters may allow, and the
selected dealers may reallow, a concession not in excess of $ per share to
certain other brokers and dealers. After the public offering, the public
offering price, the concession to selected dealers and the reallowance to other
dealers may be changed by the Underwriters.
Certain of the Shareholders of the Company have granted to the Underwriters
an option, exercisable no later than 45 days after the date of this Prospectus,
to purchase up to 300,000 additional shares of Common Stock at the price to
public set forth on the cover page of this Prospectus, less the underwriting
discounts set forth on the cover page of this Prospectus, solely to cover
over-allotments. To the extent that the Underwriters exercise this option, each
of the Underwriters will have a firm commitment to purchase approximately the
same percentage thereof as the number of shares of Common Stock to be purchased
by it shown in the above table bears to the total shares offered, and such
Shareholders will be obligated, pursuant to the option, to sell such shares of
Common Stock to the Underwriters.
The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments that the Underwriters may be
required to make in respect thereof.
The officers, directors, certain shareholders, and holders of outstanding
stock options of the Company have agreed not to, directly or indirectly, issue,
offer to sell, sell, grant an option for the purchase or sale of, transfer,
pledge, assign, hypothecate, or otherwise encumber or dispose of any securities
issued by the Company, including shares of Common Stock or securities
convertible into or exchangeable or exercisable for or evidencing any right to
purchase or subscribe for any share of Common Stock for a period of six months
from the effective date of the Registration Statement, without the prior written
consent of the First Albany Corporation and the Company. An appropriate legend
shall be marked on the face of certificates representing all such securities.
The Company also has agreed not to offer, sell, contract to sell or otherwise
dispose of any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock, or any options or warrants to
purchase Common Stock other than shares
46
<PAGE>
or options issued under the Company's stock option plans, for a period of six
months after the date of this Prospectus, except with the prior written consent
of First Albany Corporation. First Albany Corporation may release all or a
portion of the shares of Common Stock from the terms of the lock-up agreements
at its discretion.
The Underwriters do not intend to confirm sales to accounts over which they
exercise discretionary authority.
The Representatives have advised the Company that, pursuant to Regulation M
under the Securities Act, certain persons participating in this offering may
engage in transactions, including stabilizing bids, syndicate covering
transactions or the imposition of penalty bids, which may have the effect of
stabilizing or maintaining the market price of the Common Stock at a level above
that which might otherwise prevail in the open market. A "stabilizing bid" is a
bid for or the purchase of the Common Stock on behalf of the Underwriters for
the purpose of fixing or maintaining the price of the Common Stock. A "syndicate
covering transaction" is the bid for or the purchase of the Common Stock on
behalf of the Underwriters to reduce a short position incurred by the
Underwriters in connection with this offering. A "penalty bid" is an arrangement
permitting the Representatives to reclaim the selling concession otherwise
accruing to an Underwriter or syndicate member in connection with this offering
if the Common Stock originally sold by such Underwriter or syndicate member is
purchased by the Representatives in a syndicate covering transaction and has
therefore not been effectively placed by such Underwriter or syndicate member.
The Representatives have advised the Company that such transactions may be
effected on the Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.
At the request of the Company, the Underwriters have reserved up to
of the Shares offered by the Company hereby for sale at the initial public
offering price to certain employees of the Company and other persons, none of
whom is expected to be a director or executive officer of the Company. The
number of Shares available for sale to the general public will be reduced to the
extent that such persons purchase such reserved shares. Any reserved shares not
so purchased will be offered by the Underwriters to the general public on the
same basis as the other Shares offered hereby.
Prior to the offering, there has been no public market for the Company's
Common Stock. The initial public offering price for the Common Stock will be
determined by negotiation among the Company and the Representatives of the
Underwriters and does not necessarily bear any direct relationship to the
Company's assets, current earnings or book value or to any other established
criteria of value, although these factors considered in establishing the initial
public offering price. Among the other factors to be considered in determining
the initial public offering price will be prevailing market conditions, the
industry in which the Company operates, as assessment of the Company's
management, its operating results, its capital structure, the business potential
of the Company and the demand for similar securities of comparable companies.
Persons affiliated and associated with RvR Securities Corp. beneficially own
an aggregate of approximately 1,233,142 shares of the Company's Common Stock.
See "Principal and Selling Shareholders." Consequently, this offering will be
conducted in accordance with the applicable provisions of Rule 2720 of the Rules
of the National Association of Securities Dealers, Inc. In accordance with those
provisions, First Albany Corporation (the "Independent Underwriter") has served
as a "qualified independent underwriter." The Independent Underwriter has
performed due diligence with respect to the information contained herein and has
participated in the preparation of the Registration Statement of which this
Prospectus is a part. The price of the shares of Common Stock to be offered
hereby will not be higher than the maximum public offering price recommended by
the Independent Underwriter.
47
<PAGE>
LEGAL MATTERS
The validity of Shares offered hereby will be passed upon for the Company
and for the Selling Shareholders by Ice Miller Donadio & Ryan, Indianapolis,
Indiana. Orrick, Herrington & Sutcliffe LLP, New York, New York has acted as
counsel for the Underwriters in connection with this offering.
EXPERTS
The financial statements of the Company as of December 31, 1995 and 1996,
and for each of the three years in the period ended December 31, 1996, included
in the Registration Statement of which this Prospectus is a part, have been
included herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission,
Washington, D.C. 20549 (the "Commission"), a Registration Statement on Form S-1
under the Securities Act with respect to the Shares offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto. For further information with
respect to the Company and the Shares offered hereby, reference is made to the
Registration Statement and the exhibits and schedules filed as part thereof
through the Electronic Data Gathering, Analysis and Retrieval system. Statements
contained in this Prospectus as to the contents of any contract or any other
document referred to are not necessarily complete, and, in each instance, if
such contract or document is filed as an exhibit, reference is made to the copy
of such contract or document filed as an exhibit to the Registration Statement.
Each statement is qualified in all respects by such reference to such exhibit.
The Registration Statement, including exhibits and schedules thereto, is
publicly available through the Commissions' World Wide Web site
(http:/www.sec.gov) or may be inspected without charge at the Commission's
principal office at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, and copies of all or any part thereof may be obtained from such office
after payment of fees prescribed by the Commission.
48
<PAGE>
MADE2MANAGE SYSTEMS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Financial Statements:
Report of Independent Accountants........................................................................ F-2
Balance Sheets as of December 31, 1995, 1996 and September 30, 1997 (unaudited).......................... F-3
Statements of Operations for the years ended December 31, 1994, 1995 and 1996 and the nine months ended
September 30, 1996 (unaudited) and 1997 (unaudited).................................................... F-4
Statements of Shareholders' Equity for the years ended December 31, 1994, 1995 and 1996 and the nine
months ended September 30, 1997 (unaudited)............................................................ F-5
Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996 and the nine months ended
September 30, 1996 (unaudited) and 1997 (unaudited).................................................... F-6
Notes to Financial Statements............................................................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Shareholders
Made2Manage Systems, Inc.
We have audited the accompanying balance sheets of Made2Manage Systems, Inc.
as of December 31, 1995 and 1996, and the statements of operations, changes in
shareholders' equity, and cash flows for each of the three years in the period
ended December 31, 1996. 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 financial position of Made2Manage Systems, Inc. at
December 31, 1995 and 1996, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
Indianapolis, Indiana
January 18, 1997
F-2
<PAGE>
MADE2MANAGE SYSTEMS, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
--------- --------- SEPTEMBER 30, 1997
------------------------
ACTUAL PRO FORMA
----------- -----------
(unaudited) (unaudited)
(Note 5)
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents........................................ $ 1,033 $ 1,139 $ 1,856
Trade accounts receivable, net of allowance for doubtful accounts
of $92, $188 and $256 in 1995, 1996 and 1997, respectively..... 1,880 3,450 3,917
Prepaid expenses and other....................................... 78 99 187
Deferred income taxes............................................ -- 554 393
--------- --------- -----------
Total current assets........................................... 2,991 5,242 6,353
Property and equipment, net........................................ 585 921 1,738
Deferred income taxes.............................................. -- 503 475
--------- --------- -----------
Total assets................................................... $ 3,576 $ 6,666 $ 8,566
--------- --------- -----------
--------- --------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt................................ $ 212 $ 357 $ 266
Accounts payable................................................. 190 426 561
Accrued liabilities.............................................. 266 480 404
Accrued compensation and related expenses........................ 547 539 591
Deferred revenue................................................. 1,315 2,267 3,309
--------- --------- -----------
Total current liabilities...................................... 2,530 4,069 5,131
Long-term obligations, net of current portion...................... 452 436 733
Deferred revenue................................................... 85 45 217
--------- --------- -----------
Total liabilities.............................................. 3,067 4,550 6,081
--------- --------- -----------
Commitments (Note 6)
Shareholders' Equity:
Convertible preferred stock, no par value:
Series A; 79,137 shares authorized, issued and outstanding in
1995, 1996 and 1997, no shares pro forma..................... 178 178 178 $ --
Series B; 255,331 shares authorized, issued and outstanding in
1995, 1996 and 1997, no shares pro forma..................... 471 471 471 --
Series C; 577,643 shares authorized and 563,580 issued and
outstanding in 1995, 1996 and 1997, no shares pro forma...... 2,234 2,234 2,234 --
Series D; 750,000 shares authorized and 581,776 issued and
outstanding in 1995, 1996 and 1997, no shares pro forma...... 1,159 1,159 1,159 --
Common stock, no par value; 10,000,000 shares authorized,
373,106, 376,544, 406,627 and 1,886,451 shares issued and
outstanding in 1995, 1996, 1997 and pro forma, respectively.... 309 310 356 4,398
Accumulated deficit.............................................. (3,842) (2,236) (1,913) (1,913)
--------- --------- ----------- -----------
Total shareholders' equity..................................... 509 2,116 2,485 $ 2,485
--------- --------- ----------- -----------
-----------
Total liabilities and shareholders' equity..................... $ 3,576 $ 6,666 $ 8,566
--------- --------- -----------
--------- --------- -----------
</TABLE>
See accompanying notes.
F-3
<PAGE>
MADE2MANAGE SYSTEMS, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED
------------------------------- SEPTEMBER 30,
1994 1995 1996 ------------------------
--------- --------- --------- 1996 1997
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Software................................................ $ 2,494 $ 3,572 $ 6,140 $ 3,733 $ 6,916
Services................................................ 1,748 2,160 2,998 2,238 3,728
Hardware................................................ 210 203 241 167 397
--------- --------- --------- ----------- -----------
Total revenues........................................ 4,452 5,935 9,379 6,138 11,041
--------- --------- --------- ----------- -----------
Costs of revenues:
Software................................................ 382 417 599 318 430
Services................................................ 977 1,175 1,762 1,214 2,409
Hardware................................................ 171 163 164 121 262
--------- --------- --------- ----------- -----------
Total costs of revenues............................... 1,530 1,755 2,525 1,653 3,101
--------- --------- --------- ----------- -----------
Gross profit.......................................... 2,922 4,180 6,854 4,485 7,940
--------- --------- --------- ----------- -----------
Operating expenses:
Sales and marketing..................................... 1,122 1,717 3,282 2,093 4,324
Product development..................................... 530 1,189 1,718 1,210 1,663
General and administrative.............................. 724 827 1,154 808 1,380
--------- --------- --------- ----------- -----------
Total operating expenses.............................. 2,376 3,733 6,154 4,111 7,367
--------- --------- --------- ----------- -----------
Operating income.......................................... 546 447 700 374 573
Other expense, net........................................ 98 49 122 58 53
--------- --------- --------- ----------- -----------
Income before income taxes................................ 448 398 578 316 520
Income tax provision (benefit)............................ 5 6 (1,028) 17 197
--------- --------- --------- ----------- -----------
Net income................................................ $ 443 $ 392 $ 1,606 $ 299 $ 323
--------- --------- --------- ----------- -----------
--------- --------- --------- ----------- -----------
Per share amounts:
Pro forma:
Net income per share.................................. $ .60 $ .15
--------- -----------
--------- -----------
Average number of shares.............................. 2,846 2,886
--------- -----------
--------- -----------
Unaudited Supplemental pro forma determined based on
SFAS No. 128 (Note 1):
Net income per share.................................. $ .63 $ .13
--------- -----------
--------- -----------
Average number of shares.............................. 2,561 2,575
--------- -----------
--------- -----------
</TABLE>
See accompanying notes.
F-4
<PAGE>
MADE2MANAGE SYSTEMS, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
CONVERTIBLE PREFERRED STOCK
-----------------------------------------------------------------------------------------
SERIES A SERIES B SERIES C SERIES D
------------------------ ------------------------ ------------------------ -----------
NUMBER OF NUMBER OF NUMBER OF NUMBER OF
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1994....... 79,137 $ 178 255,331 $ 471 563,580 $ 2,234 329,461
Issuance of shares............ -- -- -- -- -- -- 252,315
Exercise of stock options..... -- -- -- -- -- -- --
Net income.................... -- -- -- -- -- -- --
----------- ----- ----------- ----- ----------- ----------- -----------
Balances, December 31, 1994..... 79,137 178 255,331 471 563,580 2,234 581,776
Exercise of stock options..... -- -- -- -- -- -- --
Net income.................... -- -- -- -- -- -- --
----------- ----- ----------- ----- ----------- ----------- -----------
Balances, December 31, 1995..... 79,137 178 255,331 471 563,580 2,234 581,776
Exercise of stock options..... -- -- -- -- -- -- --
Net income.................... -- -- -- -- -- -- --
----------- ----- ----------- ----- ----------- ----------- -----------
Balances, December 31, 1996..... 79,137 178 255,331 471 563,580 2,234 581,776
Exercise of stock options
(unaudited)................. -- -- -- -- -- -- --
Net income (unaudited)........ -- -- -- -- -- -- --
----------- ----- ----------- ----- ----------- ----------- -----------
Balances, September 30, 1997
(unaudited)................... 79,137 $ 178 255,331 $ 471 563,580 $ 2,234 581,776
----------- ----- ----------- ----- ----------- ----------- -----------
----------- ----- ----------- ----- ----------- ----------- -----------
<CAPTION>
COMMON STOCK
------------------------ TOTAL
NUMBER OF ACCUMULATED SHAREHOLDERS'
AMOUNT SHARES AMOUNT DEFICIT EQUITY
----------- ----------- ----------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Balances, January 1, 1994....... $ 654 199,075 $ 263 $ (4,677) $ (877)
Issuance of shares............ 505 -- -- -- 505
Exercise of stock options..... -- 33,000 10 -- 10
Net income.................... -- -- -- 443 443
----------- ----------- ----- ------------- ------
Balances, December 31, 1994..... 1,159 232,075 273 (4,234) 81
Exercise of stock options..... -- 141,031 36 -- 36
Net income.................... -- -- -- 392 392
----------- ----------- ----- ------------- ------
Balances, December 31, 1995..... 1,159 373,106 309 (3,842) 509
Exercise of stock options..... -- 3,438 1 -- 1
Net income.................... -- -- -- 1,606 1,606
----------- ----------- ----- ------------- ------
Balances, December 31, 1996..... 1,159 376,544 310 (2,236) 2,116
Exercise of stock options
(unaudited)................. -- 30,083 46 -- 46
Net income (unaudited)........ -- -- -- 323 323
----------- ----------- ----- ------------- ------
Balances, September 30, 1997
(unaudited)................... $ 1,159 406,627 $ 356 $ (1,913) $ 2,485
----------- ----------- ----- ------------- ------
----------- ----------- ----- ------------- ------
</TABLE>
See accompanying notes.
F-5
<PAGE>
MADE2MANAGE SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
--------- --------- --------- NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
1996
-----------
(UNAUDITED) 1997
-----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating activities:
Net income............................................. $ 443 $ 392 $ 1,606 $ 299 $ 323
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of property and
equipment.......................................... 58 91 204 134 274
Amortization of software development costs........... 112 196 -- -- --
Provision for doubtful accounts...................... 132 90 140 93 280
Loss on disposition of property and equipment........ 11 17 44 -- --
Deferred income taxes................................ -- -- (1,057) -- 189
Changes in assets and liabilities:
Trade accounts receivable.......................... (223) (1,080) (1,710) (383) (747)
Prepaid expenses and other 64 29 (21) (3) (88)
Accounts payable and accrued liabilities........... (197) 213 450 20 59
Accrued compensation and related expenses.......... 153 218 (8) (143) 52
Deferred revenue................................... 179 340 912 185 1,214
--------- --------- --------- ----------- -----------
Net cash provided by operating activities............ 732 506 560 202 1,556
--------- --------- --------- ----------- -----------
Investing activities:
Purchases of property and equipment.................... (20) (517) (584) (416) (1,091)
Proceeds from sales of property and equipment.......... 1 4 -- -- --
Capitalization of software development costs........... (106) -- -- -- --
--------- --------- --------- ----------- -----------
Net cash used in investing activities................ (125) (513) (584) (416) (1,091)
--------- --------- --------- ----------- -----------
Financing activities:
Proceeds from long-term obligations.................... -- 282 333 252 604
Payments on long-term obligations...................... (232) (171) (204) (158) (398)
Proceeds from common stock options exercised........... 10 36 1 1 46
Proceeds from issuance of Series D preferred stock..... 350 -- -- -- --
--------- --------- --------- ----------- -----------
Net cash provided by financing activities............ 128 147 130 95 252
--------- --------- --------- ----------- -----------
Change in cash and cash equivalents...................... 735 140 106 (119) 717
Cash and cash equivalents, beginning of period........... 158 893 1,033 1,033 1,139
--------- --------- --------- ----------- -----------
Cash and cash equivalents, end of period................. $ 893 $ 1,033 $ 1,139 $ 914 $ 1,856
--------- --------- --------- ----------- -----------
--------- --------- --------- ----------- -----------
Supplemental disclosures:
Cash paid for:
Interest expense..................................... $ 129 $ 93 $ 75 $ 55 $ 78
Income taxes......................................... -- 26 18 17 21
Noncash investing and financing activities:
Equipment acquired under capital lease obligations..... 70 -- -- -- --
Conversion of notes payable and related accrued
interest to Series D preferred stock................. 155 -- -- -- --
</TABLE>
See accompanying notes.
F-6
<PAGE>
MADE2MANAGE SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF SEPTEMBER 30, 1997 AND FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Made2Manage Systems, Inc. develops, markets and supports innovative
management information systems for small and midsize manufacturing companies
located primarily in the United States. The Company is dependent upon its
primary product, Made2Manage for Windows, which is a fully integrated, Windows
NT-based ERP business software for manufacturing companies.
USE OF ESTIMATES
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 and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from these estimates.
INTERIM FINANCIAL INFORMATION (UNAUDITED)
The unaudited financial statements as of September 30, 1997 and for the nine
months ended September 30, 1996 and 1997 have been prepared on the same basis as
the audited financial statements and, in the opinion of management, include all
adjustments (consisting only of normal recurring adjustments) that the Company
considers necessary for a fair presentation of financial position at such date
and results of operations and cash flows for those periods in accordance with
generally accepted accounting principles. Results for interim periods are not
necessarily indicative of results for the entire year.
CASH AND CASH EQUIVALENTS
The Company considers highly liquid investments with original maturities of
three months or less to be cash equivalents. Such investments are valued at cost
which approximates market value.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Leasehold improvements are
amortized over the lesser of the term of the related lease or estimated useful
life. All other assets are depreciated using the straight-line method over their
estimated useful lives which range from 3 to 10 years.
COMPUTER SOFTWARE DEVELOPMENT COSTS
The Company accounts for computer software development costs in accordance
with Statement of Financial Accounting Standards No. 86, "Accounting for the
Costs of Computer Software to be Sold, Leased or Otherwise Marketed." Costs
incurred prior to establishing the technological feasibility of computer
software products and enhancements to such products are expensed as incurred.
Software development costs incurred by the Company following technological
feasibility, defined by the Company as the existence of a working model of the
product, and prior to the time the product is available for general release to
customers, have not been material and, therefore, have not been capitalized in
1995, 1996 or during the nine months ended September 30, 1997.
F-7
<PAGE>
MADE2MANAGE SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1997 AND FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Capitalized costs are amortized on a product-by-product basis once the
product is available for general release. Amortization is the greater of the
amount computed using the ratio of the current year's gross revenues and the
total of current and anticipated future gross revenues for that product or the
straight-line method over the remaining economic life of such products, which
does not exceed 36 months.
REVENUE RECOGNITION AND DEFERRED REVENUE
The Company recognizes revenue from the sale of its software and hardware
upon receipt of an executed sales agreement and shipment to the customer.
Services revenue includes support, education and consulting services. The
Company provides software support and product upgrades to its customers through
separately priced agreements. These support revenues are recognized on a
straight-line basis over the term of the contract. Revenues from technical
training and consulting services are recognized as provided to customers.
PRO FORMA NET INCOME PER SHARE
Pro forma net income per share is based upon the pro forma weighted average
number of common and common equivalent shares outstanding for the period. Pro
forma common equivalent shares consist of convertible preferred stock (using the
"if converted" method) and stock options and warrants (using the modified
treasury stock method). In accordance with Securities and Exchange Commission
Staff Accounting Bulletins and staff policy, common and common equivalent shares
issued during the twelve months immediately preceding the initial public
offering are included in the calculation of pro forma net income per share for
all periods presented, using the estimated offering price.
Under the modified treasury stock method, the assumed proceeds from the
exercise of stock options and warrants are first applied to the repurchase of
20% of the shares of common stock outstanding, and are thereafter applied to the
reduction of outstanding debt with the remaining proceeds invested in short-term
investments. As a result, net income used to calculate net income per share for
the years ended December 31, 1996 and the nine months ended September 30, 1997
has been increased by $115,000 and $109,000, respectively. This increase in pro
forma net income reflects the net of tax effect of the assumed decrease in
interest expense from the assumed retirement of outstanding debt and the assumed
increase in interest income from the assumed investment in short-term
investments.
Because of the significant impact the assumed conversion has on the
Company's capital structure and net income per share, historical net income per
share has been excluded from the financial statements as they are not considered
meaningful.
SUPPLEMENTAL PRO FORMA NET INCOME PER SHARE
In January 1997, the Financial Standards Board issued Statement of Financial
Accounting Standards No. 128 ("SFAS No. 128"), "Earning Per Share." SFAS No. 128
specifies new standards designed to improve the earnings per share ("EPS")
information provided in financial statements by simplifying the existing
computational guidelines, revising the disclosure requirements and increasing
the comparability of EPS data. Some of the changes made to simplify the EPS
computations include: (a) eliminating the presentation of primary EPS and
replacing it with basic EPS, with the principal difference being that
F-8
<PAGE>
MADE2MANAGE SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1997 AND FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
common stock equivalents are not considered in computing basic EPS, (b)
eliminating the modified treasury stock method and the three percent materiality
provision and (c) revising the contingent share provision and the supplemental
EPS data requirements. SFAS No. 128 also makes a number of changes to existing
disclosure requirement.
The supplemental pro forma net income presented on the Statement of
Operations presents EPS determined in accordance with SFAS No. 128 and is based
upon the pro form weighted average number of common and common equivalent shares
outstanding for the period, using the estimated offering price. Pro forma common
equivalent shares consist of convertible preferred stock (using the "if
converted" method) and stock options and warrants (using the treasury stock
method) as prescribed by SFAS No. 128. Under the treasury stock method the
assumed proceeds from the exercise of stock options and warrants are applied
solely to the repurchase of common stock. SFAS No. 128 is effective for
financial statements issued for periods ending after December 15, 1997.
The computational method used to determine the Company's supplemental pro
forma net income per share determined in accordance with SFAS No. 128 differs
significantly from the method used to determine pro forma net income per share
in accordance with current generally accepted accounting principles. The effect
of these different computational methods on net income per share varies
depending on the relative level of net income. Earnings per share presented in
the Company's quarterly and annual financial statements at December 31, 1997 and
thereafter will be determined in accordance with SFAS No. 128.
FAIR VALUE OF FINANCIAL INSTRUMENT
The fair value of the Company's financial instruments, which include cash
and cash equivalents and bank notes payable, approximate their carrying value at
December 31, 1995 and 1996 and September 30, 1997. The Company's
commercialization funding obligation (see Note 4), which has a carrying value of
$334,000 and $201,000 at December 31, 1995 and 1996 respectively, has a fair
market value of approximately $449,000 and $254,000 as of those dates and is
estimated based on the current rate offered to the Company on debt with similar
maturities. The commercialization funding obligation was repaid in full on March
31, 1997.
2. COMPUTER SOFTWARE DEVELOPMENT COSTS
During 1994 and 1995, the Company recorded amortization expense for
previously capitalized computer software development costs. As a result of the
completion of the Company's Windows-based product in late 1995, management fully
amortized those costs associated with the predecessor product.
F-9
<PAGE>
MADE2MANAGE SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1997 AND FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
3. PROPERTY AND EQUIPMENT
Property and equipment are summarized as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
-------------------- SEPTEMBER 30,
1995 1996 1997
--------- --------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Computer equipment........................................... $ 480 $ 763 $ 1,324
Furniture and equipment...................................... 282 406 821
Leasehold improvements....................................... 4 15 130
--------- --------- ------
766 1,184 2,275
Less accumulated depreciation and amortization............... 181 263 537
--------- --------- ------
$ 585 $ 921 $ 1,738
--------- --------- ------
--------- --------- ------
</TABLE>
4. DEBT AND CREDIT AGREEMENTS
LINE OF CREDIT
The Company has a $1,000,000 working capital facility with a bank which had
no amounts outstanding at September 30, 1997. This line of credit expires July
1, 1998. Interest is at the prime rate plus .75% (9.25% at September 30, 1997).
EQUIPMENT LINES OF CREDIT
The Company has equipment lines of credit with a bank totaling $1,000,000
under which had $424,000 outstanding at September 30,1997. These lines of credit
expire June 1, 1998. Amounts borrowed under this line of credit are expected to
be converted at the expiration date to a loan repayable over three years in
equal monthly installments with interest at the prime rate plus .75% (9.25% at
September 30, 1997).
LONG TERM OBLIGATIONS
Long-term obligations are summarized as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
-------------------- SEPTEMBER 30,
1995 1996 1997
--------- --------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Bank notes payable........................................... $ 279 $ 556 $ 974
Commercialization funding obligation......................... 334 200 --
Other........................................................ 51 37 25
--------- --------- ------
664 793 999
Less current portion......................................... 212 357 266
--------- --------- ------
$ 452 $ 436 $ 733
--------- --------- ------
--------- --------- ------
</TABLE>
F-10
<PAGE>
MADE2MANAGE SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1997 AND FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
4. DEBT AND CREDIT AGREEMENTS (CONTINUED)
Bank notes payable at September 30, 1997 require monthly payments of
$22,000, plus interest at the prime rate plus 1.0% (9.50% at September 30,
1997). The notes are collateralized by accounts receivable and property and
equipment, and include restrictive covenants, the most significant of which
require the Company to maintain a specified ratio of total liabilities to
tangible net worth and cash flow coverage of interest and principal.
The commercialization funding obligation required monthly principle payments
of $11,000 plus interest at 3%. The effective interest on the obligation was 20%
with the balance of the unpaid interest payable based on Company revenues
following the repayment of principal. This obligation and all accrued interest
was repaid on March 31, 1997. This loan was subordinate to the other borrowings.
Scheduled repayments of long-term obligations as of September 30, 1997 for
the years ended December 31 are as follows (in thousands) (unaudited):
<TABLE>
<CAPTION>
<S> <C>
1997................................................................................. $ 69
1998................................................................................. 325
1999................................................................................. 333
2000................................................................................. 201
2001................................................................................. 71
---------
$ 999
---------
---------
</TABLE>
5. SHAREHOLDERS' EQUITY
CONVERTIBLE PREFERRED STOCK
Convertible preferred stock has the same voting and dividend participation
rights as common stock, and has a preference in liquidation over common stock.
Under their provisions, all series of preferred stock will automatically convert
to common stock when the Company files a registration statement under the under
the 1933 Securities Act offering common stock for sale at a price of at least
$5.56 per share with proceeds of at least $5,000,000 (net of underwriting
discounts and offering expenses), or if the holders of not less than 75% of such
preferred shares approve the conversion. Each share of Series A, B, C and D
preferred stock are convertible into one share of common stock. At any time
after the conversion of 63,310 shares of Series A preferred, 204,264 shares of
Series B preferred, 462,114 shares of Series C preferred and 320,000 shares of
Series D preferred, the Company, at its option, may redeem the remaining
outstanding shares of preferred stock at a per share price of $3.06, $3.36,
$4.40 and $2.20 for Series A, B, C and D preferred stock, respectively.
The Series A has a fourth liquidation preference of $2.78 per share, the
Series B has a third liquidation preference up to $1.96 per share and fourth
liquidation preference of $1.098 per share, the Series C has a second
liquidation preference of $4.00 per share and the Series D has a first
liquidation preference of $2.00 per share.
F-11
<PAGE>
MADE2MANAGE SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1997 AND FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
5. SHAREHOLDERS' EQUITY (CONTINUED)
PRO FORMA STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
The pro forma statement of shareholders' equity as of September 30, 1997 is
presented on the face of the balance sheet to reflect the automatic conversion
of all the Company's outstanding convertible preferred stock as of September 30,
1997 into an aggregate of 1,479,824 shares of common stock, effective upon the
closing of the offering made hereby.
STOCK WARRANTS
In conjunction with a 1990 capital lease transaction, the Company issued
warrants that entitle the holders to purchase 14,063 shares of series C
preferred stock through November 1998 at an exercise price of $4.00 per share.
COMMON STOCK OPTIONS
The Company's Stock Option Plan, adopted in 1990 and amended in July 1996,
authorizes the granting of incentive and nonqualified stock options. The Board
of Directors has approved up to an aggregate of 1,600,000 shares for issuance
under this plan. The exercise price of the options must not be less than the
fair market value of the common stock for incentive options, or 85% of the fair
market value for nonqualified options, at the date of grant. Options granted
under the Stock Option Plan generally vest over four years, with 25% exercisable
one year from date of grant and the remaining 75% at the rate of 1/48th of the
amount granted at the end of each succeeding full month. Options granted prior
to 1996 generally expire five years from the date of grant and options granted
subsequently expire ten years from date of grant. The plan terminates in 2001
but may be terminated by the Board of Directors at any time.
At September 30, 1997, options for 325,663 shares of common stock were
available for future grants under the plan.
Activity in the option plan is summarized as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------------------------- 1997
-----------------------
1994 1995 1996
---------------------- ----------------------- ---------------------- (UNAUDITED)
WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE SHARES PRICE
--------- ----------- ---------- ----------- --------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
period................... 294,250 $ 0.24 318,250 $ 0.23 349,325 $ 0.22 856,368 $ 2.45
Granted.................. 61,000 0.20 176,500 0.25 529,500 3.86 254,500 5.91
Exercised................ (33,000) 0.30 (141,031) 0.26 (3,438) 0.20 (30,083) 1.55
Forfeited................ (4,000) 0.30 (4,394) 0.21 (19,019) 1.18 (20,000) 2.55
--------- ---------- --------- ----------
Outstanding at end of
period................... 318,250 0.23 349,325 0.22 856,368 2.45 1,060,785 3.31
--------- ---------- --------- ----------
--------- ---------- --------- ----------
Options exercisable at end
of period................ 247,123 0.23 137,751 0.20 217,622 0.21 399,867 1.61
</TABLE>
F-12
<PAGE>
MADE2MANAGE SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1997 AND FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
5. SHAREHOLDERS' EQUITY (CONTINUED)
Options outstanding at September 30, 1997 are summarized as follows
(unaudited):
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
REMAINING
NUMBER CONTRACTUAL NUMBER OF SHARES
EXERCISE PRICE OUTSTANDING LIFE EXERCISABLE
- ---------------- ----------- --------------- -----------------
<C> <C> <S> <C>
$0.20 275,618 2.58 years 220,234
0.40 30,000 2.93 15,000
3.50 368,167 8.35 145,572
4.40 61,000 8.69 19,061
5.30 74,000 9.17 --
5.75 214,000 9.35 --
6.85 38,000 9.83 --
</TABLE>
The Company applies APB Opinion 25 and related Interpretations in accounting
for its option plan. Accordingly, no compensation cost has been recognized. The
following table presents pro forma net income had compensation cost been
determined based on the fair value at the grant date for awards under the plan
in accordance with Statement of Financial Accounting Standards (SFAS) No. 123,
Accounting for Stock-Based Compensation.
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
-------------------- -------------
1995 1996 1997
--------- --------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Pro forma net income (in thousands).......................... $ 388 $ 1,403 $ 50
Pro forma net income per share............................... .53 .06
</TABLE>
Based on the option-pricing model, the fair value at grant date of options
granted for the years ended December 31, 1995, 1996 and the nine months ended
September 30, 1996 and 1997 was $0.12, $1.84 and $2.81, respectively.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following assumptions: risk-free
interest rate of 6%; expected life of one year beyond vesting date; and
volatility of 60%. In accordance with SFAS No. 123, only options granted in
1995, 1996 and 1997 are included in these calculations and, accordingly, the
disclosures are not likely to be representative of the effect on pro forma net
income for future years because awards vest over several years and the
disclosures do not take into consideration pro forma expense related to grants
made prior to 1995 and additional awards generally are made each year.
F-13
<PAGE>
MADE2MANAGE SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1997 AND FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
6. OPERATING LEASES
The Company has certain commitments, principally for office space, under
long-term operating leases. Future minimum lease payments required under these
noncancellable operating leases as of September 30, 1997 for the years ended
December 31 are as follows (in thousands) (unaudited):
<TABLE>
<S> <C>
Payable in:
1997.............................................................. $ 83
1998.............................................................. 411
1999.............................................................. 450
2000.............................................................. 459
2001.............................................................. 462
Thereafter........................................................ 581
---------
$ 2,446
---------
---------
</TABLE>
Rent expense for the years ended December 31, 1994, 1995 and 1996 and the
nine months ended September 30, 1997 was $73,000, $142,000, $171,000 and
$207,000, respectively.
7. INCOME TAXES
Income taxes are accounted for in accordance with Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes, which requires the
use of the asset and liability approach of accounting for deferred income taxes.
Deferred tax assets and liabilities are recognized on differences between the
book and tax bases of assets and liabilities using presently enacted tax rates.
The provision (benefit) for income taxes is the tax payable or recoverable for
the period and the change during the period in deferred tax assets and
liabilities.
In the fourth quarter of 1996, the Company recorded an income tax benefit of
$1,199,000, reflecting the elimination of the remaining balance of a valuation
allowance which had been established to offset future tax benefits of net
operating loss carryforwards. The valuation allowance was reversed because the
Company, based upon its recent operating results and the market acceptance of
its Windows product, believes it is more likely than not that the deferred
income taxes at December 31, 1996 will be realized.
F-14
<PAGE>
MADE2MANAGE SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1997 AND FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
7. INCOME TAXES (CONTINUED)
The components of the income tax provision (benefit) are as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS
------------------------------- ENDED SEPTEMBER
1994 1995 1996 30, 1997
--------- --------- --------- ---------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Current:
Federal........................................... $ -- $ -- $ 4 $ --
State............................................. 5 6 25 8
--------- --------- --------- -----
5 6 29 8
--------- --------- --------- -----
Deferred:
Federal........................................... -- -- (962) 166
State............................................. -- -- (95) 23
--------- --------- --------- -----
-- -- (1,057) 189
--------- --------- --------- -----
$ 5 $ 6 $ (1,028) $ 197
--------- --------- --------- -----
--------- --------- --------- -----
</TABLE>
The provision for income taxes differs from the federal statutory tax rate
as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS
------------------------------- ENDED SEPTEMBER
1994 1995 1996 30, 1997
--------- --------- --------- ---------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Federal tax at statutory rate..................... $ 152 $ 135 $ 197 $ 177
State income tax, net of federal tax benefit...... 17 16 23 21
Non-deductible expenses........................... 4 7 14 15
Research and experimentation credit............... -- -- (97) (20)
Reduction in valuation allowance.................. (169) (155) (1,199) --
Other............................................. (1) 3 34 4
--------- --------- --------- -----
$ 5 $ 6 $ (1,028) $ 197
--------- --------- --------- -----
--------- --------- --------- -----
</TABLE>
F-15
<PAGE>
MADE2MANAGE SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1997 AND FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
7. INCOME TAXES (CONTINUED)
Deferred tax assets and liabilities are comprised of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 30,
1995 1996 1997
--------- --------- ---------------
(UNAUDITED)
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforward............................................ $ 1,159 $ 919 $ 611
Research and experimentation tax credits carry forward..................... -- 97 117
Accounts receivable allowance.............................................. 34 70 83
Accrued vacation pay....................................................... 7 23 64
Deferred revenue........................................................... 32 17 80
Accrued interest expense................................................... -- 16 --
Other...................................................................... 1 4 11
--------- --------- -----
1,233 (1,146) 966
--------- --------- -----
Deferred tax liabilities:
Depreciation............................................................... (34) (54) (63)
Deferred state tax......................................................... -- (35) (35)
--------- --------- -----
(34) (89) (98)
--------- --------- -----
Valuation allowance.......................................................... $ (1,199) $ 1,057 $ 868
--------- --------- -----
--------- --------- -----
Recorded as:
Current deferred income tax asset.......................................... $ -- $ 554 $ 393
Long-term deferred income tax asset........................................ -- 503 475
--------- --------- -----
$ -- $ 1,057 $ 868
--------- --------- -----
--------- --------- -----
</TABLE>
As of September 30, 1997, the Company had net operating loss carryforwards
for income tax reporting purposes of approximately $1.9 million which expire
commencing in 2003 and research and experimentation tax credits of $117,000
which expire commencing in 2009.
8. EMPLOYEE SAVINGS PLAN
The Company has an employee savings plan which is qualified under Section
401(k) of the Internal Revenue Code. This plan covers substantially all
employees who meet minimum age requirements and allows participants to defer a
portion of their annual compensation on a pre-tax basis. Company contributions
to the plan may be made at the discretion of the Board of Directors. No Company
contributions had been made through December 31, 1995. The Board of Directors
approved a matching contribution of 25% of the first 6% of employee
contributions beginning January 1996. The Company's matching contribution to the
savings plan was $39,000 in 1996 and $53,000 in the nine months ended September
30, 1997.
F-16
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN OR ANY PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR, THE SELLING
SHAREHOLDERS OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THE
SECURITIES OFFERED BY THIS PROSPECTUS OR AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY THE SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 6
Use of Proceeds........................................................... 11
Dividend Policy........................................................... 11
Dilution.................................................................. 12
Capitalization............................................................ 13
Selected Financial Data................................................... 14
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 16
Business.................................................................. 24
Management................................................................ 34
Principal and Selling Shareholders........................................ 40
Description of Capital Stock.............................................. 42
Shares Eligible for Future Sale........................................... 44
Underwriting.............................................................. 46
Legal Matters............................................................. 48
Experts................................................................... 48
Additional Information.................................................... 48
Index to Financial Statements............................................. F-1
</TABLE>
------------------------
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE SECURITIES, WHETHER OR NOT PARTICIPATING
IN THE DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
2,000,000 SHARES
[LOGO]
COMMON STOCK
---------------------
PROSPECTUS
---------------------
FIRST ALBANY
CORPORATION
VAN KASPER & COMPANY
RVR SECURITIES CORP.
DECEMBER , 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.*
The following is a statement of the estimated expenses to be paid by the
Registrant in connection with the issuance and distribution of the securities
being registered:
<TABLE>
<CAPTION>
EXPENSES AMOUNT
- ---------------------------------------------------------------------------------- ----------
<S> <C>
Securities and Exchange Commission Registration fee............................... $ 7,667
National Association of Securities Dealers, Inc. fee.............................. 3,030
Nasdaq National Market listing fee................................................ 16,500
Printing and engraving expenses................................................... 125,000
Legal fees and expenses........................................................... 150,000
Accounting fees and expenses...................................................... 125,000
Blue Sky fees and expenses (including fees of counsel)............................ 25,000
Transfer agent and registrar fees and expenses.................................... 5,000
Miscellaneous..................................................................... 92,803
----------
Total......................................................................... $ 550,000
----------
----------
</TABLE>
* All of the above items, except the Securities and Exchange Commission
registration fee, the National Association of Securities Dealers, Inc. fee
and the Nasdaq fee, are estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Indiana Business Corporation Law ("IBCL"), the provisions of which
govern the Registrant, empowers an Indiana corporation to indemnify present and
former directors, officers, employees, or agents or any person who may have
served at the request of the corporation as a director, officer, employee, or
agent of another corporation ("Eligible Persons") against liability incurred in
any proceeding, civil or criminal, in which the Eligible Person is made a party
by reason of being or having been in any such capacity, or arising out of his
status as such, if the individual acted in good faith and reasonably believed
that (a) the individual was acting in the best interests of the corporation, or
(b) if the challenged action was taken other than in the individual's official
capacity as an officer, director, employee or agent, the individual's conduct
was at least not opposed to the corporation's best interests, or (c) if in a
criminal proceeding, either the individual had reasonable cause to believe his
conduct was lawful or no reasonable cause to believe his conduct was unlawful.
The IBCL further empowers a corporation to pay or reimburse the reasonable
expenses incurred by an Eligible Person in connection with the defense of any
such claim, including counsel fees; and, unless limited by its Articles of
Incorporation, the corporation is required to indemnify an Eligible Person
against reasonable expenses if he is wholly successful in any such proceeding,
on the merits or otherwise. Under certain circumstances, a corporation may pay
or reimburse an Eligible Person for reasonable expenses prior to final
disposition of the matter. Unless a corporation's articles of incorporation
otherwise provide, an Eligible Person may apply for indemnification to a court
which may order indemnification upon a determination that the Eligible Person is
entitled to mandatory indemnification for reasonable expenses or that the
Eligible Person is fairly and reasonably entitled to indemnification in view of
all the relevant circumstances without regard to whether his actions satisfied
the appropriate standard of conduct.
Before a corporation may indemnify any Eligible Person against liability or
reasonable expenses under the IBCL, a quorum consisting of directors who are not
parties to the proceeding must (1) determine that indemnification is permissible
in the specific circumstances because the Eligible Person met the requisite
II-1
<PAGE>
standard of conduct, (2) authorize the corporation to indemnify the Eligible
Person and (3) if appropriate, evaluate the reasonableness of expenses for which
indemnification is sought. If it is not possible to obtain a quorum of
uninvolved directors, the foregoing action may be taken by a committee of two or
more directors who are not parties to the proceeding, special legal counsel
selected by the Board or such a committee, or by the shareholders of the
corporation.
In addition to the foregoing, the IBCL states that the indemnification it
provides shall not be deemed exclusive of any other rights to which those
indemnified may be entitled under any provision of the articles of incorporation
or bylaws, resolution of the board of directors or shareholders, or any other
authorization adopted after notice by a majority vote of all the voting shares
then issued and outstanding. The IBCL also empowers an Indiana corporation to
purchase and maintain insurance on behalf of any Eligible Person against any
liability asserted against or incurred by him in any capacity as such, or
arising out of his status as such, whether or not the corporation would have had
the power to indemnify him against such liability.
Reference is made to Article 9 of the Articles of Incorporation of the
Registrant concerning indemnification of directors, officers, employees and
agents.
The Registrant may obtain directors' and officers' liability insurance, the
effect of which will be to indemnify the directors and officers of the
corporation and its subsidiaries against certain losses caused by errors,
misleading statements, wrongful acts, omissions, neglect or breach of duty by
them or any matter claimed against them in their capacities as directors and
officers.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The Registrant has issued the following securities during the three year
period ending October 17, 1997:
1. An aggregate of 164,052 shares of Common Stock were issued to 19 key
employees, former employees and members of the Registrant's Board of Directors
at various times upon the exercise of options granted pursuant to the
Registrant's Stock Option Plan for consideration equal to the fair market value
of the shares purchased on the date of the option grant. The issuances of these
shares of Common Stock were exempt from registration under the Securities Act by
reason of Rule 701 of the Securities and Exchange Commission and Section 4(2)
thereof.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS:
The list of exhibits is incorporated herein by reference to the Index to
Exhibits on pages E-1 through E-2.
(b) FINANCIAL STATEMENT SCHEDULES:
The following Schedule is filed as part of this Registration Statement:
Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted since the required information is not
present in amounts sufficient to require submission of the schedule, or because
the information required is included in the financial statements and notes
thereto.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
II-2
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification for such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liabilities under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
the form of prospectus to be filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this Registration Statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Indianapolis, State of
Indiana, on the 17th day of October, 1997.
<TABLE>
<S> <C> <C>
MADE2MANAGE SYSTEMS, INC.
By: /s/ DAVID B. WORTMAN
-----------------------------------------
David B. Wortman
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
POWER OF ATTORNEY
Each person whose signature appears below irrevocably constitutes and
appoints David B. Wortman and Stephen R. Head, and each or either of them (with
full power to act alone), his true and lawful attorneys-in-fact and agents with
full power of substitution and re-substitution, for him and in his name, place
and stead, in any and all capacities, to sign any and all amendments to this
registration statement therewith and any registration statements filed pursuant
to Rule 462(b), filed with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact, agents
or their substitute or substitutes may lawfully do or cause to be done by virtue
hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
SIGNATURE CAPACITY DATE
- ------------------------------ -------------------------- -------------------
President, Chief Executive
/s/ DAVID B. WORTMAN Officer and Director
- ------------------------------ (Principal Executive October 17, 1997
David B. Wortman Officer)
Vice President, Finance
and Administration,
/s/ STEPHEN R. HEAD Chief Financial Officer,
- ------------------------------ Secretary and Treasurer October 17, 1997
Stephen R. Head (Principal Financial
Officer and Principal
Accounting Officer)
/s/ IRA CORON
- ------------------------------ Chairman of the Board of October 17, 1997
Ira Coron Directors
/s/ GREGORY F. EHLINGER
- ------------------------------ Director October 17, 1997
Gregory F. Ehlinger
/s/ STANDISH H. O'GRADY
- ------------------------------ Director October 17, 1997
Standish H. O'Grady
II-4
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
Made2Manage Systems, Inc.
In connection with our audits of the financial statements of Made2Manage
Systems, Inc. as of December 31, 1995 and 1996, and for each of the three years
in the period ended December 31, 1996, which financial statements are included
in the Prospectus, we have also audited the financial statement schedules listed
in Item 16b herein.
In our opinion, these financial statement schedules, when considered in
relation to the basic financial statements taken as a whole, present fairly, in
all material respects, the information required to be included therein.
/s/ COOPERS & LYBRAND L.L.P.
Indianapolis, Indiana
January 18, 1997
S-1
<PAGE>
MADE2MANAGE SYSTEMS, INC.
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
ADDITIONS
------------------------
CHARGED CHARGED
BALANCE AT TO COSTS TO BALANCE
BEGINNING AND SUPPORT AT THE END
DESCRIPTION OF PERIOD EXPENSES REVENUE DEDUCTIONS OF PERIOD
- --------------------------------------------------- --------------- ----------- ----------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1994:
Deducted from asset accounts:
Allowance for doubtful accounts.................. $ 46 $ 132 $ -- $ (103) $ 75
Year Ended December 31, 1995:
Deducted from asset accounts:
Allowance for doubtful accounts.................. $ 75 $ 90 $ -- $ (73) $ 92
Year Ended December 31, 1996:
Deducted from asset accounts:
Allowance for doubtful accounts.................. $ 92 $ 140 $ -- $ (44) $ 188
Nine Months Ended September 30, 1997
(unaudited):
Deducted from asset accounts:
Allowance for doubtful accounts.................. $ 188 $ 165 $ 115 $ (212) $ 256
</TABLE>
S-2
<PAGE>
MADE2MANAGE SYSTEMS, INC.
REGISTRATION STATEMENT
ON
FORM S-1
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
NUMBER ASSIGNED IN EXHIBIT
REGULATION S-K ITEM 601 NUMBER DESCRIPTION OF EXHIBIT
- ----------------------- ----------- ------------------------------------------------------------------------------------
<S> <C> <C>
(1) 1.1 Form of Underwriting Agreement......................................................
(2) No Exhibit..........................................................................
(3) 3.1 Second Restated Articles of Incorporation of Made2Manage Systems, Inc...............
3.2 By-Laws of Made2Manage Systems, Inc.................................................
(4) 4.1 Specimen Stock Certificate for Common Stock*........................................
4.2 See Exhibits 3.1 and 3.2............................................................
(5) 5.1 Form of Opinion of Ice Miller Donadio & Ryan........................................
(8) No Exhibit..........................................................................
(9) No Exhibit..........................................................................
(10) 10.1 Office Lease by and between Nationwide Insurance Company and Teksyn, Inc. dated
November 2, 1994, as amended November 2, 1994.....................................
10.2 First Amendment to Lease by and between Nationwide Life Insurance Company and
Made2Manage Systems, Inc., formerly known as Teksyn, Inc., dated January 21,
1997..............................................................................
10.3 Abra Cadabra Software Reseller Agreement between Abra Cadabra Software, Inc. and
Made2Manage Systems, Inc., dated August 1, 1995...................................
10.4 License Agreement by and between Sourcemate Information Systems, Inc. and Teksyn,
Inc. dated April 1, 1986..........................................................
10.5 Term Loan Agreement by and between NBD Bank, N.A. and Teksyn, Inc. dated March 20,
1995, in the amount of $112,500.00................................................
10.6 Installment Business Loan Note by and between NBD Bank, N.A. and Teksyn, Inc. dated
March 20, 1995, in the amount of $112,500.00......................................
10.7 Assignment of Deposit Account by and between NBD Bank, N.A. and Made2Manage Systems,
Inc. dated March 20, 1995.........................................................
10.8 Business Credit Note by and between NBD Bank, N.A. and Made2Manage Systems, Inc.
f/n/a Teksyn, Inc. dated June 9,1995, in the amount of $112,500.00................
10.9 Business Credit Note by and between NBD Bank, N.A. and Made2Manage Systems, Inc.
dated September 27, 1995, in the amount of $212,500.00............................
10.10 Business Credit Note by and between NBD Bank, N.A. and Made2Manage Systems, Inc.
dated March 27, 1996, in the amount of $510,000.00................................
10.11 First Amendment to Credit Agreement by and between NBD Bank, N.A. and Made2Manage
Systems, Inc. dated September 27, 1995, increasing borrowing under Facility B to a
maximum aggregate amount of $212,500.00...........................................
10.12 Second Amendment to Credit Agreement by and between NBD Bank, N.A. and Made2Manage
Systems, Inc. dated March 27, 1996, increasing borrowing under Facility C to a
maximum aggregate amount of $510,000.00...........................................
</TABLE>
E-1
<PAGE>
<TABLE>
<CAPTION>
NUMBER ASSIGNED IN EXHIBIT
REGULATION S-K ITEM 601 NUMBER DESCRIPTION OF EXHIBIT
- ----------------------- ----------- ------------------------------------------------------------------------------------
<S> <C> <C>
10.13 Third Amendment to Credit Agreement by and between NBD Bank, N.A. and Made2Manage
Systems, Inc. dated June 25, 1996, increasing borrowing under Facility A to a
maximum aggregate amount of $1,000,000.00.........................................
10.14 Extension Agreement by and between NBD Bank, N.A. and Made2Manage Systems, Inc.
dated January 14, 1997, extending the expiration date on Promissory Note to June
30, 1997..........................................................................
10.15 Continuing Security Agreement by and between NBD Bank, N.A. and Made2Manage Systems,
Inc. dated March 20, 1995.........................................................
10.16 Form of Stock Option Agreement......................................................
10.17 Stock Option Plan...................................................................
(11) 11.1 Statement Regarding Computation of Per Share Earnings...............................
(12) No Exhibit..........................................................................
(15) No Exhibit..........................................................................
(16) No Exhibit..........................................................................
(21) No Exhibit..........................................................................
(23) 23.1 Consent of Ice Miller Donadio & Ryan (included in Exhibit 5.1)......................
23.2 Consent of Coopers & Lybrand L.L.P., independent public accountants.................
(24) See Signature Page..................................................................
(25) No Exhibit..........................................................................
(26) No Exhibit..........................................................................
(27) 27.1 Financial Data Schedule.............................................................
(99) No Exhibit..........................................................................
</TABLE>
- ------------------------
* To be filed by amendment.
E-2
<PAGE>
OHS DRAFT 10/16/97
MADE2MANAGE SYSTEMS, INC.
2,000,000 Shares of Common Stock*
UNDERWRITING AGREEMENT
__________ __, 1997
First Albany Corporation
Van Kasper & Company
RvR Securities Corp.,
As Representatives of
the several Underwriters
c/o First Albany Corporation
One Penn Plaza, 42nd Floor
New York, NY 10119
Ladies and Gentlemen:
Section 1. INTRODUCTORY. Made2Manage Systems, Inc., an Indiana
corporation (the "Company"), has an authorized capital stock consisting of
10,000,000 shares, no par value, of Common Stock ("Common Stock") and 2,000,000
shares, no par value, of Preferred Stock, of which 1,686,451 shares were
outstanding as of October 15, 1997. The Company, and the person named in
Schedule II (the "Primary Selling Shareholder"), propose to issue and sell
2,000,000 shares (the "Firm Shares") of Common Stock, of which 1,800,000 shares
are to be issued and sold by the Company and 200,000 shares are to be sold by
the Primary Selling Shareholder to the several underwriters named in Schedule I
as it may be amended by the Pricing Agreement hereinafter defined (the
"Underwriters"), who are acting severally and not jointly. In addition, certain
persons named in Schedule III (the "Option Selling Shareholders") propose to
grant to the Underwriters an option to purchase up to 300,000 additional shares
of Common Stock ("Option Shares"), in the respective amounts set forth opposite
their respective names in Schedule III, as provided in Section 5 hereof. The
Firm Shares and, to the extent such option is exercised, the Option Shares, are
hereinafter collectively referred to as the "Shares." The Primary Selling
Shareholder and the Option Selling Shareholders are hereinafter collectively
referred to as the "Selling Shareholders." Each Selling Shareholder has
executed and delivered a Custody Agreement and a Power of Attorney in the form
attached hereto as Exhibit A (collectively, the "Custody Agreement and Power of
Attorney") pursuant to which each Selling Shareholder has placed his Firm Shares
in custody and appointed the persons designated therein as a committee (the
"Committee") with authority to execute and deliver this Agreement on behalf of
such Selling Shareholder and to take certain other actions with respect thereto
and hereto.
- --------------------------------------------------------------------------------
*Plus an option to acquire up to 300,000 additional shares to cover
over-allotments.
<PAGE>
You have advised the Company that the Underwriters propose to make a public
offering of their respective portions of the Shares as soon as you deem
advisable after the registration statement hereinafter referred to becomes
effective, if it has not yet become effective, and the Pricing Agreement
hereinafter defined has been executed and delivered.
Prior to the purchase and public offering of the Shares by the several
Underwriters, the Company and the Representatives, acting on behalf of the
several Underwriters, shall enter an agreement substantially in the form of
Exhibit B hereto (the "Pricing Agreement"). The Pricing Agreement may take the
form of an exchange of any standard form of written telecommunication between
the Company and the Representative and shall specify such applicable information
as is indicated in Exhibit B hereto. The offering of the Shares will be
governed by this Agreement, as supplemented by the Pricing Agreement. From and
after the date of the execution and delivery of the Pricing Agreement, this
Agreement shall be deemed to incorporate the Pricing Agreement.
The Company and the Selling Shareholders hereby confirm their agreement with the
Underwriters as follows:
Section 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents, warrants and covenants to each Underwriter that:
(a) The Company meets the requirements for use of Form S-1 and a
registration statement (Registration No. 333- ___) on Form S-1 relating to the
Shares, including a preliminary prospectus and such amendments to such
registration statement as may have been required to the date of this Agreement,
has been prepared by the Company under the provisions of the Securities Act of
1933, as amended (the "Act"), and the rules and regulations (collectively
referred to as the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") thereunder, and has been filed with the
Commission. The term "preliminary prospectus" as used herein means a
preliminary prospectus as contemplated by Rule 430 or Rule 430A of the Rules and
Regulations included at any time as part of the registration statement. Copies
of such registration statement and amendments and of each related preliminary
prospectus have been delivered to the Representatives. If such registration
statement has not become effective, a further amendment to such registration
statement, including a form of final prospectus, necessary to permit such
registration statement to become effective will be filed promptly by the Company
with the Commission. If such registration statement has become effective, a
final prospectus containing information permitted to be omitted at the time of
effectiveness by Rule 430A of the Rules and Regulations will be filed promptly
by the Company with the Commission in accordance with Rule 424(b) of the Rules
and Regulations. The term "Registration Statement" means the registration
statement as amended at the time it becomes or became effective (the "Effective
Date"), including financial statements and all exhibits and any information
deemed to be included by Rule 430A. The term "Prospectus" means the prospectus
as first filed with the Commission pursuant to Rule 424(b) of the Rules and
Regulations or, if no such filing is required, the form of final prospectus
included in the Registration Statement at the Effective Date.
2
<PAGE>
(b) On the Effective Date, the date the Prospectus is first filed
with the Commission pursuant to Rule 424(b) (if required), at all times
subsequent to and including the Closing Date and, if later, the Option Closing
Date and when any post-effective amendment to the Registration Statement becomes
effective or any amendment or supplement to the Prospectus is filed with the
Commission, the Registration Statement and the Prospectus (as amended or
supplemented if the Company shall have filed with the Commission any amendment
or supplement thereto) did or will comply with all applicable provisions of the
Act and the Rules and Regulations and will contain all statements required to be
stated therein in accordance with the Act and the Rules and Regulations. On the
Effective Date and when any post-effective amendment to the Registration
Statement becomes effective, no part of the Registration Statement, the
Prospectus or any such amendment or supplement did or will contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading. At the Effective Date, the date the Prospectus or any amendment or
supplement to the Prospectus is filed with the Commission and at the Closing
Date and, if later, the Option Closing Date, the Prospectus did not or will not
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The foregoing representations and
warranties in this Section 2(b) do not apply to any statements or omissions made
in reliance on and in conformity with information relating to any Underwriter
furnished in writing to the Company by the Representatives specifically for
inclusion in the Registration Statement or Prospectus or any amendment or
supplement thereto. The Company acknowledges that the statements set forth
under the heading "Underwriting" in the Prospectus constitute the only
information relating to any Underwriter furnished in writing to the Company by
the Representatives specifically for inclusion in the Registration Statement.
(c) The Company is, and at the Closing Date will be, a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. The Company has, and at the Closing Date will
have, full power and authority to conduct all the activities conducted by it, to
own or lease all the assets owned or leased by it and to conduct its business as
described in the Registration Statement and the Prospectus. The Company is, and
at the Closing Date will be, duly licensed or qualified to do business and in
good standing as a foreign corporation in all jurisdictions in which the nature
of the activities conducted by it or the character of the assets owned or leased
by it makes such license or qualification necessary. The Company does not own,
and at the Closing Date will not own, directly or indirectly, any shares of
stock or any other equity or long-term debt securities of any corporation or
have any equity interest in any firm, partnership, joint venture, association or
other entity. Complete and correct copies of the certificate of incorporation
and of the by-laws of the Company and all amendments thereto have been delivered
to the Representatives, and no changes therein will be made subsequent to the
date hereof and prior to the Closing Date or, if later, the Option Closing Date.
(d) The outstanding shares of Common Stock have been, and the Shares
to be issued and sold by the Company upon such issuance will be, duly
authorized, validly issued, fully paid and nonassessable and will not be subject
to any preemptive or similar right. The description of the Common Stock in the
Registration Statement and the Prospectus is, and at the
3
<PAGE>
Closing Date will be, complete and accurate in all respects. Except as set
forth in the Prospectus, the Company does not have outstanding, and at the
Closing Date will not have outstanding, any options to purchase, or any rights
or warrants to subscribe for, or any securities or obligations convertible into,
or any contracts or commitments to issue or sell, any shares of Common Stock,
any shares of capital stock of any subsidiary or any such warrants, convertible
securities or obligations.
(e) The financial statements and schedules included in the
Registration Statement or the Prospectus present fairly the financial condition
of the Company as of the respective dates thereof and the results of operations
and cash flows of the Company for the respective periods covered thereby, all in
conformity with generally accepted accounting principles applied on a consistent
basis throughout the entire period involved, except as otherwise disclosed in
the Prospectus. No other financial statements or schedules of the Company are
required by the Act or the Rules and Regulations to be included in the
Registration Statement or the Prospectus. Coopers & Lybrand, L.L.P., (the
"Accountants") who have reported on such financial statements and schedules, are
independent accountants with respect to the Company as required by the Act and
the Rules and Regulations.
(f) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus and prior to the Closing
Date, except as set forth in or contemplated by the Registration Statement and
the Prospectus, (i) there has not been and will not have been any change in the
capitalization of the Company, or in the business, properties, business
prospects, condition (financial or otherwise) or results of operations of the
Company arising for any reason whatsoever, (ii) the Company has not incurred nor
will it incur any material liabilities or obligations, direct or contingent, nor
has it entered into nor will it enter into any material transactions other than
pursuant to this Agreement and the transactions referred to herein and (iii) the
Company has not and will not have paid or declared any dividends or other
distributions of any kind on any class of its capital stock.
(g) The Company is not an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an "investment
company," as such terms are defined in the Investment Company Act of 1940, as
amended.
(h) Except as set forth in the Registration Statement and the
Prospectus, there are no actions, suits or proceedings pending or threatened
against or affecting the Company or any of its respective officers in their
capacity as such, before or by any Federal or state court, commission,
regulatory body, administrative agency or other governmental body, domestic or
foreign, wherein an unfavorable ruling, decision or finding might materially and
adversely affect the Company or its business, properties, business prospects,
condition (financial or otherwise) or results of operations.
(i) The Company has, and at the Closing Date will have, (i) all
governmental licenses, permits, consents, orders, approvals and other
authorizations necessary to carry on its business as contemplated in the
Prospectus, (ii) complied in all respects with all laws, regulations and orders
applicable to it or its business and (iii) performed all its obligations
required to be performed by it, and is not, and at the Closing Date will not be,
in default, under any contract
4
<PAGE>
or other instrument to which it is a party or by which its property is bound or
affected and, to the best knowledge of the Company, there does not exist any
state of facts which constitutes an event of default as defined in such contract
or instrument or which, with notice or lapse of time or both, would constitute
such an event of default. To the best knowledge of the Company, no other party
under any contract or other instrument to which it is a party is in default in
any respect thereunder. The Company is not, nor at the Closing Date will be, in
violation of any provision of its certificate of incorporation or by-laws.
(j) No consent, approval, authorization or order of, or any filing or
declaration with, any court or governmental agency or body is required for the
execution of this Agreement or the Pricing Agreement or the consummation by the
Company of the transactions on its part herein contemplated, except such as have
been obtained under the Act or the Rules and Regulations and such as may be
required under state securities or Blue Sky laws or the by-laws and rules of the
National Association of Securities Dealers, Inc. (the "NASD") in connection with
the purchase and distribution by the Underwriters of the Shares to be sold by
the Company.
(k) The Company has full corporate power and authority to enter into
this Agreement. This Agreement has been duly authorized, executed and delivered
by the Company and constitutes a valid and binding agreement of the Company and
is enforceable against the Company in accordance with the terms hereof. The
performance of this Agreement and the consummation of the transactions
contemplated hereby will not result in the creation or imposition of any lien,
charge or encumbrance upon any of the assets of the Company pursuant to the
terms or provisions of, or result in a breach or violation of any of the terms
or provisions of, or constitute a default under, or result in the acceleration
of any obligation under, the certificate of incorporation or by-laws of the
Company, any indenture, mortgage, deed of trust, voting trust agreement, loan
agreement, bond, debenture, note agreement or other evidence of indebtedness,
lease, contract or other agreement or instrument to which the Company is a party
or by which the Company or any of its properties is bound or affected, or
violate or conflict with any judgment, ruling, decree, order, statute, rule or
regulation of any court or other governmental agency or body applicable to the
business or properties of the Company.
(l) Except as disclosed in the Prospectus, there are no holders of
securities of the Company having rights to registration thereof or preemptive
rights to purchase Common stock.
(m) The Company has good and marketable title to all properties and
assets described in the Prospectus as owned by it, free and clear of all liens,
charges, encumbrances or restrictions, except such as are described in the
Prospectus or are not material to the business of the Company. The Company has
valid, subsisting and enforceable leases for the properties described in the
Prospectus as leased by it, with such exceptions as are not material and do not
materially interfere with the use made and proposed to be made of such
properties by the Company.
(n) There is no document or contract of a character required to be
described in the Registration Statement or the Prospectus or to be filed as an
exhibit to the Registration
5
<PAGE>
Statement which is not described or filed as required. All such contracts to
which the Company is a party have been duly authorized, executed and delivered
by the Company, constitute valid and binding agreements of the Company and are
enforceable against the Company in accordance with the terms thereof.
(o) No statement, representation, warranty or covenant made by the
Company in this Agreement or made in any certificate or document required by
this Agreement to be delivered to the Representatives was or will be, when made,
inaccurate, untrue or incorrect.
(p) Neither the Company nor any or its directors, officers or
controlling persons has taken, directly or indirectly, any action designed, or
which might reasonably be expected, to cause or result, under the Act or
otherwise, in, or which has constituted, stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of the
Shares.
(q) No holder of securities of the Company has rights to the
registration of any securities of the Company because of the filing of the
Registration Statement.
(r) Prior to the Effective Date, the Shares will be duly authorized
for listing by the Nasdaq National Market, upon official notice of issuance.
(s) To the best of the Company's knowledge, none of the trademarks,
trade names, service marks, service names, copyrights, patents and patent
applications, and none of the licenses and rights to the foregoing, presently
owned or held by the Company are in dispute or are in conflict with the right of
any other person or entity. The Company (i) owns or has the right to use, free
and clear of all liens, charges, claims, encumbrances, pledges, security
interests, defects or other restrictions or equities of any kind whatsoever, all
trademarks, trade names, service marks, service names, copyrights, patents and
patent applications, and licenses and rights with respect to the foregoing, used
in the conduct of its business as now conducted or proposed to be conducted
without infringing upon or otherwise acting adversely to the right or claimed
right of any person, corporation or other entity under or with respect to any of
the foregoing and (ii) is not obligated or under any liability whatsoever to
make any payments by way of royalties, fees or otherwise to any owner or
licensee of, or other claimant to, any trademark, trade name, service mark,
service name, copyright, patent or patent application except as set forth in the
Registration Statement or the Prospectus. There is no action, suit, proceeding,
inquiry, arbitration, investigation, litigation or governmental or other
proceeding, domestic or foreign, pending or threatened (or circumstances that
may give rise to the same) against the Company which challenges the exclusive
rights of the Company with respect to any trademarks, trade names, service
marks, service names, copyrights, patents, patent applications or licenses or
rights to the foregoing used in the conduct of its business.
Section 3. REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDERS.
Each Selling Shareholder, severally and not jointly, represents, warrants and
covenants to each Underwriter that:
6
<PAGE>
(a) Such Selling Shareholder has full power and authority to enter
into this Agreement and the Custody Agreement and Power of Attorney. All
authorizations and consents necessary for the execution and delivery by such
Selling Shareholder of the Custody Agreement and Power of Attorney, and for the
execution of this Agreement on behalf of such Selling Shareholder, have been
given. Each of the Custody Agreement and Power of Attorney and this Agreement
has been duly authorized, executed and delivered by or on behalf of such Selling
Shareholder and constitutes a valid and binding agreement of such Selling
Shareholder and is enforceable against such Selling Shareholders in accordance
with the terms thereof and hereof.
(b) Such Selling Shareholder now has, and at the time of delivery
thereof hereunder will have, (i) good and marketable title to the Shares to be
sold by such Selling Shareholder hereunder, free and clear of all liens,
encumbrances and claims whatsoever (other than pursuant to the Custody Agreement
and Power of Attorney) and (ii) full legal right and power, and all
authorizations and approvals required by law, to sell, transfer and deliver such
Shares to the Underwriters hereunder and to make the representations, warranties
and agreements made by such Selling Shareholder herein. Upon the delivery of
and payment for such Shares hereunder, such Selling Shareholder will deliver
good and marketable title thereto, free and clear of all liens, encumbrances and
claims whatsoever.
(c) On the Closing Date or Option Closing Date, as the case may be,
all stock transfer or other taxes (other than income taxes) which are required
to be paid in connection with the sale and transfer of the shares to be sold by
such Selling Shareholder to the several Underwriters hereunder will have been
fully paid or provided for by such Selling Shareholder and all laws imposing
such taxes will have been fully complied with.
(d) The performance of this Agreement and the consummation of the
transactions contemplated hereby will not result in the creation or imposition
of any lien, charge or encumbrance upon any of the assets of such Selling
Shareholder pursuant to the terms or provisions of, or result in a breach or
violation of any of the terms or provisions of, or constitute a default under,
or result in the acceleration of any obligation under, if such Selling
Shareholder is a corporation or partnership, the organizational documents of
such Selling Shareholder, or, as to all such Selling shareholders, any
indenture, mortgage, deed of trust, voting trust agreement, loan agreement,
bond, debenture, note agreement or other evidence of indebtedness, lease,
contract or other agreement or instrument to which such Selling Shareholder is a
party or by which such Selling Shareholder or any of its property is bound or
affected, or under any ruling, decree, judgment, order, statute, rule or
regulation of any court or other governmental agency or body having jurisdiction
over such Selling Shareholder or the property of such Selling Shareholder.
(e) No consent, approval, authorization or order of, or any filing or
declaration with, any court or governmental agency or body is required for the
consummation by such Selling Shareholder of the transactions on its part
contemplated herein and in the Custody Agreement and Power of Attorney, except
such as have been obtained under the Act or the Rules and Regulations and such
as may be required under state securities or Blue Sky laws or the by-laws and
rules of the NASD in connection with the purchase and distribution by the
Underwriters of the Shares to be sold by such Selling Shareholder.
7
<PAGE>
(f) Such Selling Shareholder has no knowledge of any material fact or
condition not set forth in the Registration Statement or Prospectus which has
adversely affected, or may adversely affect, the business, properties, business
prospects, condition (financial or otherwise) or results of operations of the
Company, and the sale of the Shares proposed to be sold by such Selling
Shareholder is not prompted by any such knowledge.
(g) All information with respect to such Selling Shareholder
contained in the Registration Statement and the Prospectus (as amended or
supplemented, if the Company shall have filed with the Commission any amendment
or supplement thereto) complied and will comply with all applicable provisions
of the Act and the Rules and Regulations, contains and will contain all
statements required to be stated therein in accordance with the Act and the
Rules and Regulations, and does not and will not contain an untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein not misleading.
(h) To the best knowledge of such Selling Shareholder, the
representations and warranties of the Company contained in Section 2 are true
and correct.
(i) Other than as permitted by the Act and the Rules and Regulations,
such Selling Shareholder has not distributed and will not distribute any
preliminary prospectus, the Prospectus or any other offering material in
connection with the offering and sale of the Shares. Such Selling Shareholder
has not taken, directly or indirectly, any action designed, or which might
reasonably be expected, to cause or result in, under the Act or otherwise, or
which has caused or resulted in, stabilization or manipulation of the price of
any security of the Company to facilitate the sale or resale of the Shares.
(j) Certificates in negotiable form for the Firm Shares to be sold
hereunder by such Selling Shareholder have been placed in custody, for the
purpose of making delivery of such Firm Shares under this Agreement, under the
Custody Agreement and Power of Attorney which appoints ___________ as custodian
(the "Custodian") for each Selling Shareholder. Such Selling Shareholder agrees
that the Shares represented by the certificates held in custody for him or it
under the Agreement and Power of Attorney are for the benefit of and coupled
with and subject to the interest hereunder of the Custodian, the Committee, the
Underwriters, each other Selling Shareholder and the Company, that the
arrangements made by such Selling Shareholder for such custody and the
appointment of the Custodian and the Committee by such Selling Shareholder are
irrevocable, and that the obligations of such Selling Shareholder hereunder
shall not be terminated by operation of law, whether by the death, disability,
incapacity or liquidation of any Selling Shareholder or the occurrence of any
other event. If any Selling Shareholder should die, become disabled or
incapacitated or is liquidated or if any other such event should occur before
the delivery of the Shares hereunder, certificates for the Shares shall be
delivered by the Custodian in accordance with the terms and conditions of this
Agreement and actions taken by the Committee and the Custodian pursuant to the
Agreement and Power of Attorney shall be as valid as if such death, liquidation,
incapacity or other event had not occurred, regardless of whether or not the
Custodian or the Committee, or either of them, shall have received notice
thereof.
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Section 4. REPRESENTATIONS AND WARRANTIES OF THE UNDERWRITERS. The
Representatives, on behalf of the several Underwriters, represent and warrant to
the Company that the information set forth (a) on the cover page of the
Prospectus with respect to price, underwriting discounts and commissions and
terms of the offering and (b) under "Underwriting" in the Prospectus was
furnished to the Company by and on behalf of the Underwriters for use in
connection with the preparation of the Registration and is correct and complete
in all material respects.
Section 5. AGREEMENT TO SELL AND PURCHASE.
(a) The Company and each of the Selling Shareholders, severally and
not jointly, agree to sell to the Underwriters named in Schedule I, and upon the
basis of the respective representations, warranties and agreements of the
Company and the Selling Shareholders herein contained and subject to all the
terms and conditions of this Agreement, each Underwriter agrees, severally and
not jointly, to purchase from the Company and the Selling Shareholders, the
respective number of Firm Shares set forth opposite its name on Schedule I. The
initial public offering price and the purchase price shall be set forth in the
Pricing Agreement.
(b) Subject to all the terms and conditions of this Agreement, the
Option Selling Shareholders grant the Option to the several Underwriters to
purchase, severally and not jointly, up to 300,000 Option Shares at the same
price per share as the Underwriters shall pay for the Firm Shares. The Option
may be exercised only to cover over-allotments in the sale of the Firm Shares by
the Underwriters and may be exercised in whole or in part at any time (but not
more than once) on or before the 45th day after the date of this Agreement upon
written or telegraphic notice (the "Option Shares Notice") by the
Representatives to the Company no later than 12:00 noon, New York City time, at
least two and no more than five business days before the date specified for
closing on the Option Shares Notice (the "Option Closing Date") setting forth
the aggregate number of Option Shares to be purchased and the time and date for
such purchase. On the Option Closing Date, the Selling Shareholders will issue
and sell to the Underwriters the number of Option Shares set forth in the Option
Shares Notice, and each Underwriter will purchase such percentage of the Option
Shares as is equal to the percentage of Firm Shares that such Underwriter is
purchasing, as adjusted by the Representatives in such manner as they deem
advisable to avoid fractional Shares.
Section 6. DELIVERY AND PAYMENT. Delivery of the Firm Shares shall be
made to the Representatives for the accounts of the Underwriters against payment
of the purchase price by certified or official bank checks payable in New York
Clearing House (next-day) funds to the order of each of the Company and the
Selling Shareholder at the office of First Albany Corporation, at 10:00 a.m.,
New York City time, on the third business day following the date of this
Agreement, or at such time on such other date, not later than seven business
days after the date of this Agreement, as may be agreed upon by the Company and
the Representatives (such date is hereinafter referred to as the "Closing
Date").
To the extent the Option is exercised, delivery of the Option Shares
against payment by the Underwriters (in the manner specified above) will take
place at the offices specified above
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for the Closing Date at the time and date (which may be the Closing Date)
specified in the Option Shares Notice.
Certificates evidencing the Shares shall be in definitive form and shall be
registered in such names and in such denominations as the Representatives shall
request at least two (2) business days prior to the Closing Date or the Option
Closing-Date, as the case may be, by written notice to the Company. For the
purpose of expediting the checking and packaging of certificates for the Shares,
the Company agrees to make such certificates available for inspection at least
24 hours prior to the Closing Date or the Option Closing Date, as the case may
be.
The cost of original issue tax stamps, if any, in connection with the
issuance and delivery of the Firm Shares and Option Shares by the Company to the
respective Underwriters shall be borne by the Company. The cost of tax stamps,
if any, in connection with the sale of the Firm Shares by the Selling
Shareholders shall be borne by the Selling Shareholders. The Company and the
Selling Shareholders will pay and save each Underwriter and any subsequent
holder of the Shares harmless from any and all liabilities with respect to or
resulting from any failure or delay in paying Federal and state stamp and other
transfer taxes, if any, which may be payable or determined to be payable in
connection with the original issuance or sale to such Underwriter of the Firm
Shares and Option Shares.
Section 7. AGREEMENTS OF THE COMPANY AND THE SELLING SHAREHOLDERS. The
Company and the Selling Shareholders agree, severally and not jointly, with the
several Underwriters as follows:
(a) The Company will not, either prior to the Effective Date or
thereafter during such period as the Prospectus is required by law to be
delivered in connection with sales of the Shares by an Underwriter or dealer,
file any amendment or supplement to the Registration Statement or the
Prospectus, unless a copy thereof shall first have been submitted to the
Representatives within a reasonable period of time prior to the filing thereof
and the Representatives shall not have objected thereto in good faith.
(b) The Company will use its best efforts to cause the Registration
Statement to become effective, and will notify the Representatives promptly, and
will confirm such advice in writing, (1) when the Registration Statement has
become effective and when any post-effective amendment thereto becomes
effective, (2) of any request by the Commission for amendments or supplements to
the Registration Statement or Prospectus or for additional information, (3) of
the issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement or the initiation of any proceedings for that purpose
or the threat thereof, (4) of the happening of any event during the period
mentioned in the second sentence of Section 7(e) that in the judgment of the
Company makes any statement made in the Registration Statement or the Prospectus
untrue or that requires the making of any changes in the registration Statement
or Prospectus in order to make the statements therein, in light of the
circumstances in which they are made, not misleading, and (5) of receipt by the
Company or any representative or attorney of the Company of any other
communication from the Commission relating to the Company, the Registration
Statement, any preliminary prospectus or the Prospectus. If at any time the
Commission shall issue any order suspending the effectiveness of the
Registration
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Statement, the Company will make every reasonable effort to obtain the
withdrawal of such order at the earliest possible moment. If the Company has
omitted any information from the Registration Statement pursuant to Rule 430A of
the Rules and Regulations, the Company will use its best efforts to comply with
the provisions of and make all requisite filings with the Commission pursuant to
said Rule 430A and to notify the Representatives promptly of all such filings.
(c) The Company will furnish to the Representatives, without charge,
two signed copies of the Registration Statement and of any post-effective
amendment thereto, including financial statements and schedules, and all
exhibits thereto, and will furnish to the Representatives, without charge, for
transmittal to each of the other Underwriters, a copy of the Registration
Statement and any post-effective amendment thereto, including financial
statements and schedules but without exhibits.
(d) The Company will comply with all the provisions of any
undertakings contained in the Registration Statement.
(e) On the Effective Date, and thereafter from time to time, the
Company will deliver to each of the Underwriters, without charge, as many copies
of the Prospectus or any amendment or supplement thereto as the Representatives
may reasonably request. The Company consents to the use of the Prospectus or
any amendment thereto by the several Underwriters and by all dealers to whom the
Shares may be sold, both in connection with the offering or sale of the Shares
and for any period of time thereafter during which the Prospectus is required by
law to be delivered in connection therewith. If during such period of time any
event shall occur which in the judgment of the Company or counsel to the
Underwriters should be set forth in the Prospectus in order to make any
statement therein, in light of the circumstances under which it was made, not
misleading, or if it is necessary to supplement or amend the Prospectus to
comply with law, the Company will forthwith prepare and duly file with the
Commission an appropriate supplement or amendment thereto, and will deliver to
each of the Underwriters, without charge, such number of copies thereof as the
Representatives may reasonably request.
(f) Prior to any public offering of the Shares by the Underwriters,
the Company will cooperate with the Representatives and counsel to the
Underwriters in connection with the registration or qualification of the Shares
for offer and sale under the securities or Blue Sky laws of such jurisdictions
as the Representatives may request; provided, that in no event shall the Company
be obligated to qualify to do business in any jurisdiction where it is not now
so qualified or to take any action which would subject it to general service of
process in any jurisdiction where it is not now so subject.
(g) During the period of five years commencing on the Effective Date,
the Company will furnish to the Representatives and each other Underwriter who
may so request copies of such financial statements and other periodic and
special reports as the Company may from time to time distribute generally to the
holders of any class of its capital stock, and will furnish to the
Representatives and each other Underwriter who may so request a copy of each
annual or other report it shall be required to file with the Commission.
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(h) The Company will make generally available to holders of its
securities as soon as may be practicable but in no event later than the last day
of the fifteenth full calendar month following the calendar quarter in which the
Effective Date falls, an earnings statement (which need not be audited but shall
be in reasonable detail) for a period of 12 months ended commencing after the
Effective Date, and satisfying the provisions of Section 11(a) of the Act
(including Rule 158 of the Rules and Regulations).
(i) Whether or not the transactions contemplated by this Agreement
are consummated or this Agreement is terminated, the Company and the Selling
Shareholders, in such proportions (aggregating 100%) as they may agree upon
among themselves, will pay, or reimburse if paid by the Representatives, all
costs and expenses incident to the performance of the obligations of the Company
and the Selling Shareholders under this Agreement, including but not limited to
costs and expenses of or relating to (1) the preparation, printing and filing of
the Registration Statement and exhibits to it, each preliminary prospectus, the
Prospectus and any amendment or supplement to the Registration Statement or
Prospectus, (2) the preparation and delivery of certificates representing the
Shares, (3) the printing of this Agreement, the Agreement Among Underwriters,
any Dealer Agreements, any Underwriters' Questionnaire and the Custody Agreement
and Power of Attorney, (4) furnishing (including costs of shipping and mailing)
such copies of the Registration Statement, the Prospectus and any preliminary
prospectus, and all amendments and supplements thereto, as may be requested for
use in connection with the offering and sale of the Shares by the Underwriters
or by dealers to whom shares may be sold, (5) the quotation of the Shares on the
National Association of Securities Dealers Automated Quotation System, (6) any
filings required to be made by the Underwriters with the NASD, and the fees,
disbursements and other charges of counsel for the Underwriters in connection
therewith, (7) the registration or qualification of the Shares for offer and
sale under the securities or Blue Sky laws of such jurisdictions designated
pursuant to Section 7(f), including the fees, disbursements and other charges of
counsel to the Underwriters in connection therewith, and the preparation and
printing of preliminary, supplemental and final Blue Sky memoranda, (8) counsel
to the Company and counsel to the Selling Shareholders and (9) the transfer
agent for the Shares.
(j) If this Agreement shall be terminated by the Company or the
Selling Shareholders pursuant to any of the provisions hereof or if for any
reason the Company or any Selling Shareholder shall be unable to perform its
obligations hereunder, the Company and the Selling Shareholders, in such
proportions (aggregating 100%) as they may agree among themselves, will
reimburse the several Underwriters for all out-of-pocket expenses (including the
fees, disbursements and other charges of counsel to the Underwriters) reasonably
incurred by them in connection herewith.
(k) The Company will not at any time, directly or indirectly, take
any action designed, or which might reasonably be expected, to cause or result
in, or which will constitute, stabilization of the price of the shares of Common
Stock to facilitate the sale or resale of any of the Shares.
(l) The Company will apply the net proceeds from the offering and
sale of the Shares to be sold by the Company in the manner set forth in the
Prospectus under "Use of
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<PAGE>
Proceeds" and shall file such reports with the Commission with respect to the
sale of the Shares and the application of the proceeds therefrom as may be
required in accordance with Rule 463 under the Act.
(m) During the period of six months commencing at the Closing Date,
the Company will not, without the prior written consent of the Representatives,
grant options to purchase shares of Common Stock at a price less than the
initial public offering price.
(n) On or before the Effective Date, the Company shall provide the
Representatives with true copies of duly executed, legally binding and
enforceable agreements pursuant to which for a period of six months from the
Effective Date, the officers and directors of the Company, holders of all shares
of Common Stock and holders of securities exchangeable or exercisable for or
convertible into shares of Common Stock, agree that it or he or she will not
directly or indirectly, issue, offer to sell, sell, grant an option for the sale
of, assign, transfer, pledge, hypothecate, distribute or otherwise encumber or
dispose of any shares of Common Stock or securities convertible into,
exercisable or exchangeable for or evidencing any right to purchase or subscribe
for any shares of Common stock (either pursuant to Rule 144 of the Rules and
Regulations or otherwise) or dispose of any beneficial interest therein without
the prior written consent of First Albany Corporation.
(o) The Selling Shareholders will not, for a period of six months
after the commencement of the public offering of the Shares, without the prior
written consent of the Representatives, sell, contract to sell or otherwise
dispose of any shares of Common Stock.
(p) The Selling Shareholders will not, without the prior written
consent of the Representatives, make any bid for or purchase any shares of
Common Stock during the six month period commencing on the date hereof.
(q) As soon as any Selling Shareholder is advised thereof, such
Selling Shareholder will advise the Representatives and confirm such advice in
writing, (1) of receipt by such Selling Shareholder, or by any representative of
such Selling Shareholder, of any communication from the Commission relating to
the Registration Statement, the Prospectus or any preliminary prospectus, or any
notice or order of the Commission relating to the Company or any of the Selling
Shareholders in connection with the transactions contemplated by this Agreement
and (2) of the happening of any event during the period from and after the
Effective Date that in the judgment of such Selling Shareholder makes any
statement made in the Registration Statement or the Prospectus untrue or that
requires the making of any changes in the Registration Statement or the
Prospectus in order to make the statements therein, in light of the
circumstances in which they were made, not misleading.
Section 8. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS. The
obligations of each Underwriter are subject to the following conditions:
(a) Notification that the Registration Statement has become effective
shall be received by the Representatives not later than 5:00 p.m., New York City
time, on the date of this Agreement or at such later date and time as shall be
consented to in writing by the
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<PAGE>
Representatives and all filings required by Rule 424 and Rule 430A of the Rules
and Regulations shall have been made.
(b) (i) No stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall be pending or threatened by the Commission, (ii) no order
suspending the effectiveness of the Registration Statement or the qualification
or registration of the Shares under the securities or Blue Sky laws of any
jurisdiction shall be in effect and no proceeding for such purpose shall be
pending before or threatened or contemplated by the Commission or the
authorities of such jurisdiction, (iii) any request for additional information
on the part of the staff of the Commission or any such authorities shall have
been complied with to the satisfaction of the staff of the Commission or such
authorities and (iv) after the date hereof no amendment or supplement to the
Registration Statement or the Prospectus shall have been filed unless a copy
thereof was first submitted to the Representatives and the Representatives did
not object thereto in good faith, and the Representatives shall have received
certificates, dated the Closing Date and the Option Closing Date and signed by
the Chief Executive Officer or the Chairman of the Board of Directors of the
Company and the Chief Financial Officer of the Company (who may, as to
proceedings threatened, rely upon the best of their information and belief), to
the effect of clauses (i), (ii), (iii) and (iv).
(c) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, (i) there shall not have been a
material adverse change in the general affairs, business, business prospects,
properties, management, condition (financial or otherwise) or results of
operations of the Company and its subsidiaries, taken as a whole, whether or not
arising from transactions in the ordinary course of business, in each case other
than as set forth in or contemplated by the Registration Statement or Prospectus
and (ii) the Company shall not have sustained any material loss or interference
with its business or properties from fire, explosion, flood or other casualty,
whether or not covered by insurance, or from any labor dispute or any court or
legislative or other governmental action, order or decree, which is not set
forth in the Registration Statement and the Prospectus, if in the judgment of
the Representatives any such development makes it impracticable or inadvisable
to consummate the sale and delivery of the Shares by the Underwriters at the
initial public offering price.
(d) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, there shall have been no
litigation or other proceeding instituted against the Company or any of its
respective officers or directors in their capacities as such, before or by any
Federal, state or local court, commission, regulatory body, administrative
agency or other governmental body, domestic or foreign, in which litigation or
proceeding an unfavorable ruling, decision or finding would materially and
adversely affect the Company or its business, properties, business prospects,
condition (financial or otherwise) or results of operations.
(e) Each of the representations and warranties of the Company and the
Selling Shareholders contained herein shall be true and correct in all material
respects at the Closing Date and, with respect to the Option Shares, at the
Option Closing Date, as if made at the
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Closing Date and, with respect to the Option Shares, at the Option Closing Date,
and all covenants and agreements herein contained to be performed on the part of
the Company and the Selling Shareholders and all conditions herein contained to
be fulfilled or complied with by the Company and the Selling Shareholders at or
prior to the Closing Date Closing Date and, with respect to the Option Shares,
at or prior to the Option Closing Date, shall have been duly performed,
fulfilled or complied with.
(f) The Representatives shall have received an opinion, dated the
Closing Date and, with respect to the Option Shares, the Option Closing Date,
and satisfactory in form and substance to counsel for the Underwriters, from
Ice, Miller, Donadio & Ryan, counsel to the Company and the Selling
Shareholders, to the effect set forth in Exhibit C.
(g) The Representatives shall have received an opinion, dated the
Closing Date and the Option Closing Date, from Orrick, Herrington & Sutcliffe
LLP, counsel to the Underwriters, with respect to the Registration Statement,
the Prospectus and this Agreement, which opinion shall be satisfactory in all
respects to the Representatives.
(h) Concurrently with the execution and delivery of this Agreement,
the Accountants shall have furnished to the Representatives a letter, dated the
date of its delivery, addressed to the Representatives and in form and substance
satisfactory to the Representatives, confirming that they are independent
accountants with respect to the Company as required by the Act and the Rules and
Regulations and with respect to the financial and other statistical and
numerical information contained in the Registration Statement. At the Closing
Date and, as to the Option Shares, the Option Closing Date, the Accountants
shall have furnished to the Representatives a letter, dated the date of its
delivery, which shall confirm, on the basis of a review in accordance with the
procedures set forth in the letter from the Accountants, that nothing has come
to their attention during the period from the date of the letter referred to in
the prior sentence to a date (specified in the letter) not more than five days
prior to the Closing Date and the Option Closing Date which would require any
change in their letter dated the date hereof if it were required to be dated and
delivered at the Closing Date and the Option Closing Date.
(i) Concurrently with the execution and delivery of this Agreement
and at the Closing Date and, as to the Option Shares, the Option Closing Date,
there shall be furnished to the Representatives an accurate certificate, dated
the date of its delivery, signed by each of the Chief Executive Officer and the
Chief Financial Officer, in form and substance satisfactory to the
Representatives, to the effect that:
i) Each signer of such certificate has carefully examined the
Registration Statement and the Prospectus and (A) as of the date of such
certificate, such documents are true and correct in all material respects
and do not omit to state a material fact required to be stated therein or
necessary in order to make the statements therein not untrue or misleading
and (B) in the case of the certificate delivered at the Closing Date and
the Option Closing Date, since the Effective Date no event has occurred as
a result of which it is necessary to amend or supplement the Prospectus in
order to make the statements therein not untrue or misleading in any
material respect.
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ii) Each of the representations and warranties of the Company
contained in this Agreement were, when originally made, and are, at the
time such certificate is dated, true and correct in all material respects.
iii) Each of the covenants required herein to be performed by
the Company on or prior to the date of such certificate has been duly,
timely and fully performed and each condition herein required to be
complied with by the Company on or prior to the date of such certificate
has been duly, timely and fully complied with.
(j) Concurrently with the execution and delivery of this Agreement
and at the Closing Date and, as to the Option Shares, the Option Closing Date,
there shall have been furnished to the Representatives an accurate certificate,
dated the date of its delivery, signed by the Committee on behalf of each of the
Selling Shareholders, in form and substance satisfactory to the Representatives,
to the effect that the representations and warranties of each of the Selling
Shareholders contained herein are true and correct in all material respects on
and as of the date of such certificate as if made on and as of the date of such
certificate, and each of the covenants and conditions required herein to be
performed or complied with by the Selling Shareholders on or prior to the date
of such certificate has been duly, timely and fully performed or complied with.
(k) On or prior to the Closing Date, the Representatives shall have
received the executed agreements referred to in Section 7(n).
(l) The Shares shall be qualified for sale in such states as the
Representatives may reasonably request, and each such qualification shall be in
effect and not subject to any stop order or other proceeding on the Closing Date
and the Option Closing Date.
(m) Prior to the Closing Date, the Shares shall have been duly
authorized for listing by the Nasdaq National Market upon official notice of
issuance.
(n) The Company and the Selling Shareholders shall have furnished to
the Representatives such certificates, in addition to those specifically
mentioned herein, as the Representatives may have reasonably requested as to the
accuracy and completeness at the Closing Date and the Option Closing Date of any
statement in the Registration Statement or the Prospectus, as to the accuracy at
the Closing Date and the Option Closing Date of the representations and
warranties of the Company and the Selling Shareholders herein, as to the
performance by the Company and the Selling Shareholders of its and their
respective obligations hereunder, or as to the fulfillment of the conditions
concurrent and precedent to the obligations hereunder of the Representatives.
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Section 9. INDEMNIFICATION.
(a) Each of the Company and the Selling Shareholders, jointly and
severally, will indemnify and hold harmless each Underwriter, the directors,
officers, employees and agents of each Underwriter and each person, if any, who
controls each Underwriter within the meaning of Section 15 of the Act or Section
20 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), from
and against any and all losses, claims, liabilities, expenses and damages
(including any and all investigative, legal and other expenses reasonably
incurred in connection with, and any amount paid in settlement of, any action,
suit or proceeding or any claim asserted), to which they, or any of them, may
become subject under the Act, the Exchange Act or other Federal or state
statutory law or regulation, at common law or otherwise, insofar as such losses,
claims, liabilities, expenses or damages arise out of or are based on any untrue
statement of a material fact contained in any preliminary prospectus, the
Registration Statement or the Prospectus or any amendment or supplement to the
Registration Statement or the Prospectus, or the omission or alleged omission to
state in such document a material fact required to be stated in it or necessary
to make the statements in it not misleading, provided that the Company and the
Selling Shareholders will not be liable to the extent that such loss, claim,
liability, expense or damage arises from the sale of the Shares in the public
offering to any person by an Underwriter and is based on an untrue statement or
alleged untrue statement or omission made in reliance on and in conformity with
information relating to any Underwriter furnished in writing to the Company by
the Representatives on behalf of any Underwriter expressly for inclusion in the
Registration Statement, any preliminary prospectus or the Prospectus, and
provided further that the Company and the Selling Shareholders will not be
liable to any Underwriter, the directors, officer, employees or agents of such
Underwriter or any person controlling such Underwriter with respect to any loss,
claim, liability, expense, charge or damage arising out of or based on any
untrue statement or alleged untrue statement or omission or alleged omission to
state a material fact in any preliminary prospectus which is corrected in the
Prospectus if the person asserting any such loss, claim, liability, charge or
damage purchased Shares from such Underwriter but was not sent or given a copy
of the Prospectus at or prior to the written confirmation of the sale of such
Shares to such Person. The Company and the Selling Shareholders acknowledge
that the statements set forth under the heading "Underwriting" in any
preliminary prospectus and the Prospectus constitute the only information
relating to any Underwriter furnished in writing to the Company by the
Representatives on behalf of the Underwriters expressly for inclusion in the
Registration Statement, any preliminary prospectus or the Prospectus. This
indemnity agreement will be in addition to any liability that the Company or any
Selling Shareholder might otherwise have.
(b) Each Underwriter will indemnify and hold harmless the Company,
the Selling Shareholders, each person, if any, who controls the Company or the
Selling Shareholders within the meaning of Section 15 of the Act or Section 20
of the Exchange Act, each director of the Company and each officer of the
Company who signs the Registration Statement to the same extent as the foregoing
indemnity from the Company and the Selling Shareholders to each Underwriter, but
only insofar as losses, claims, liabilities, expenses and damages arise out of
or are based on any untrue statement or omission or alleged untrue statement or
omission made in reliance on and in conformity with information relating to any
Underwriter furnished in writing to the Company by the Representatives on behalf
of such Underwriter expressly for use
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in the Registration Statement, any preliminary prospectus or the Prospectus.
The Company and the Selling Shareholders acknowledge that the statements set
forth under the heading "Underwriting" in any preliminary prospectus and the
Prospectus constitute the only information relating to any Underwriter furnished
in writing to the Company by the Representatives on behalf of the Underwriters
expressly for inclusion in the Registration Statement, any preliminary
prospectus or the Prospectus. This indemnity will be in addition to any
liability that each Underwriter might otherwise have.
(c) Any party that proposes to assert the right to be indemnified
under this Section 9 will, promptly after receipt of notice of commencement of
any action against such party in respect of which a claim is to be made against
an indemnifying party or parties under this Section 9, notify each such
indemnifying party of the commencement of such action, enclosing a copy of all
papers served, but the omission so to notify such indemnifying party will not
relieve it from any liability that it may have to any indemnified party under
this Section unless, and only to the extent that, such omission results in the
forfeiture of substantive rights or defenses by the indemnifying party. If any
such action is brought against any indemnified party and it notifies the
indemnifying party of its commencement, the indemnifying party will be entitled
to participate in and, to the extent that it elects by delivering written notice
to the indemnified party promptly after receiving notice of the commencement of
the action from the indemnified party, jointly with any other indemnifying party
similarly notified, to assume the defense of the action, with counsel
satisfactory to the indemnified party, and after notice from the indemnifying
party to the indemnified party of its election to assume the defense, the
indemnifying party will not be liable to the indemnified party for any legal or
other expenses except as provided below and except for the reasonable costs of
investigation subsequently incurred by the indemnified party in connection with
the defense. The indemnified party will have the right to employ its own
counsel in any such action, but the fees, expenses and other charges of such
counsel will be at the expense of such indemnified party unless (l) the
employment of counsel by the indemnified party has been authorized in writing by
the indemnifying party, (2) the indemnified party has reasonably concluded
(based on advice of counsel) that there may be legal defenses available to it or
other indemnified parties that are different from or in addition to those
available to the indemnifying party, (3) a conflict or potential conflict exists
(based on advice of counsel to the indemnified party) between the indemnified
party and the indemnifying party (in which case the indemnifying party will not
have the right to direct the defense of such action on behalf of the indemnified
party) or (4) the indemnifying party has not in fact employed counsel to assume
the defense of such action within a reasonable time after receiving notice of
the commencement of the action, in each of which cases the reasonable fees,
disbursements and other charges of counsel will be at the expense of the
indemnifying party or parties. It is understood that the indemnifying party or
parties shall not, in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the reasonable fees, disbursements and
other charges of more than one separate firm admitted to practice in such
jurisdiction at any one time for all such indemnified party or parties. All
such fees, disbursements and other charges will be reimbursed by the
indemnifying party promptly as they are incurred. An indemnifying party will
not be liable for any settlement of any action or claim effected without its
written consent (which consent will not be unreasonably withheld).
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(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in the foregoing
paragraphs of this Section 9 is applicable in accordance with its terms but for
any reason is held to be unavailable from the Company, the Selling Shareholders
or the Underwriters, the Company, the Selling Shareholders and the Underwriters
will contribute to the total losses, claims, liabilities, expenses and damages
(including any investigative, legal and other expenses reasonably incurred in
connection with, and any amount paid in settlement of, any action, suit or
proceeding or any claim asserted, but after deducting any contribution received
by the Company or the Selling Shareholders from persons other than the
Underwriters, such as persons who control the Company or the Selling
Shareholders within the meaning of the Act, officers of the Company who signed
the Registration Statement and directors of the Company, who also may be liable
for contribution) to which the Company or the Selling Shareholders and any one
or more of the Underwriters may be subject in such proportion so that the
Underwriters are responsible for that portion represented by the percentage that
the underwriting discount appearing on the cover of the Prospectus bears to the
public offering price appearing on the cover and the Company and the Selling
Shareholders are responsible in such proportion as shall be appropriate to
reflect the relative benefits received by the Company and Selling Shareholders.
If, but only if, the allocation provided by the foregoing sentence is not
permitted by applicable law, the allocation of contribution shall be made in
such proportion as is appropriate to reflect not only the relative benefits
referred to in the foregoing sentence but also the relative fault of the Company
and the Selling Shareholders, on the one hand, and the Underwriters, on the
other, with respect to the statement or omissions which resulted in such loss,
claim, liability, expense or damage, or action in respect thereof, as well as
any other relevant equitable considerations with respect to such offering. Such
relative fault shall be determined by reference to whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Company or the
Representatives on behalf of the Underwriters, the intent of the parties and
their relative knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Company, the Selling Shareholders and the Underwriters agree that it
would not be just and equitable if contributions pursuant to this Section 9(d)
were to be determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of allocation
which does not take into account the equitable considerations referred to
herein. The amount paid or payable by an indemnified party as a result of the
loss, claim, liability, expense or damage, or action in respect thereof,
referred to above in this Section 9(d) shall be deemed to include, for purpose
of this Section 9(d), any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 9(d), no Underwriter
shall be required contribute any amount in excess of the underwriting discounts
received by it, and no person found guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) will be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute as provided in
this Section 9(d) are several in proportion to their respective underwriting
obligations and not joint. For purposes of this Section 9(d), any person who
controls a party to this Agreement within the meaning of the Act will have the
same rights to contribution as that party, and each officer of the Company who
signed the Registration Statement will have the same rights to contribution as
the Company,
19
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subject in each case to the provisions hereof. Any party entitled to
contribution, promptly after receipt of notice of commencement of any action
against such party in respect of which a claim for contribution may be made
under this Section 9(d), will notify any such party or parties from whom
contribution may be sought, but the omission so to notify will not relieve the
party or parties from whom contribution may be sought from any other obligation
it or they may have under this Section 9(d). No party will be liable for
contribution with respect to any action or claim settled without its written
consent (which consent will not be unreasonably withheld).
(e) The indemnity and contribution agreements contained in this
Section 9 and the representations and warranties of the Company contained in
this Agreement shall remain operative and in full force and effect regardless of
(i) any investigation made by or on behalf of the Underwriters, (ii) acceptance
of any of the Securities and payment therefor or (iii) any termination of this
Agreement.
Section 10. TERMINATION. The obligations of the several Underwriters
under this Agreement may be terminated at any time prior to the Closing Date
(or, with respect to the Option Shares, on or prior to the Option Closing Date),
by notice to the Company from the Representatives, without liability on the part
of any Underwriter to the Company, if, prior to delivery and payment for the
Shares (or the Option Shares, as the case may be), in the sole judgment of the
Representatives, (i) trading in any of the equity securities of the Company
shall have been suspended by the Commission, by an exchange that lists the
Shares or by the National Association of Securities Dealers Automated Quotation
Market System, (ii) trading in securities generally on the New York Stock
Exchange shall have been suspended or limited or minimum or maximum prices shall
have been generally established on such exchange, or additional material
governmental restrictions, not in force on the date of this Agreement, shall
have been imposed upon trading in securities generally by such exchange or by
order of the Commission or any court or other governmental authority, (iii) a
general banking moratorium shall have been declared by either Federal or New
York State authorities or (iv) any material adverse change in the financial or
securities markets in the United States or in political, financial or economic
conditions in the United States or any outbreak or material escalation of
hostilities or other calamity or crisis shall have occurred, the effect of which
is such as to make it, in the sole judgment of the Representatives,
impracticable to market the Shares.
Section 11. SUBSTITUTION OF UNDERWRITERS. If any one or more of the
Underwriters shall fail or refuse to purchase any of the Firm Shares which it or
they have agreed to purchase hereunder, and the aggregate number of Firm Shares
which such defaulting Underwriter or Underwriters agreed but failed or refused
to purchase is not more than one-tenth of the aggregate number of Firm Shares,
the other Underwriters shall be obligated, severally, to purchase the Firm
Shares which such defaulting Underwriter or Underwriters agreed but failed or
refused to purchase, in the proportions which the number of Firm Shares which
they have respectively agreed to purchase pursuant to Section 5 bears to the
aggregate number of Firm Shares which all such non-defaulting Underwriters have
so agreed to purchase, or in such other proportions as the Representatives may
specify; provided that in no event shall the maximum number of Firm Shares which
any Underwriter has become obligated to purchase pursuant to Section 5 be
increased pursuant to this Section 11 by more than one-ninth of such number of
Firm Shares without the prior written consent of such Underwriter. If any
Underwriter or Underwriters shall
20
<PAGE>
fail or refuse to purchase any Firm Shares and the aggregate number of Firm
Shares which such defaulting Underwriter or Underwriters agreed but failed or
refuse to purchase exceeds one-tenth of the aggregate number of the Firm Shares
and arrangements satisfactory to the Representatives and the Company for the
purchase of such Firm Shares are not made within 48 hours after such default,
this Agreement will terminate without liability on the part of any
non-defaulting Underwriter or the Company for the purchase or sale of any Shares
under this Agreement. In any such case either the Representatives or the
Company shall have the right to postpone the Closing Date, but in no event for
longer than seven days, in order that the required changes, if any, in the
Registration Statement and in the Prospectus or in any other documents or
arrangements may be effected. Any action taken pursuant to this Section 11
shall not relieve any defaulting Underwriter from liability in respect of any
default of such Underwriter under this Agreement.
Section 12. MISCELLANEOUS. Notice given pursuant to any of the
provisions of this Agreement shall be in writing and, unless otherwise
specified, shall be mailed or delivered (a) if to the Company, at the office of
the Company, Made2Manage Systems, Inc., 9002 Purdue Road, Suite 200,
Indianapolis, IN 46268, Attention: David B. Wortman or (b) if to the
Underwriters, to the Representatives at the offices of First Albany Corporation,
One Penn Plaza, 42nd Floor, New York, New York 10119, Attention: Corporate
Finance Department. Any such notice shall be effective only upon receipt. Any
notice under Section 10 or 11 may be made by telex or telephone, but if so made
shall be subsequently confirmed in writing.
This Agreement has been and is made solely for the benefit of the several
Underwriters and the Company and of the controlling persons, directors and
officers referred to in Section 9, and their respective successors and assigns,
and no other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" as used in this Agreement shall
not include a purchaser, as such purchaser, of Shares from any of the several
Underwriters.
Any action required or permitted to be taken by the Representatives under
this Agreement may be taken by them jointly or by First Albany Corporation.
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York applicable to contracts made and to be performed
entirely within such State.
This Agreement may be signed in two or more counterparts with the same
effect as if the signatures thereto and hereto were upon the same instrument.
In case any provision in this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
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<PAGE>
Please confirm that the foregoing correctly sets forth the agreement among
the Company and the several Underwriters.
Very truly yours,
MADE2MANAGE SYSTEMS, INC.
By:
-----------------------------------------
Name:
Title:
Confirmed as of the date first
above mentioned:
FIRST ALBANY CORPORATION
VAN KASPER & COMPANY
RvR SECURITIES CORP.
Acting on behalf of themselves
and as the Representatives
of the other several Underwriters
named in Schedule II hereof.
BY: FIRST ALBANY CORPORATION
By:
------------------------------------
Name:
Title:
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<PAGE>
SCHEDULE I
UNDERWRITERS
Name Number of Shares
---- ----------------
----------------
Total ----------------
23
<PAGE>
SCHEDULE II
PRIMARY SELLING SHAREHOLDER
Name Number of Shares
---- ----------------
----------------
Total ----------------
24
<PAGE>
SCHEDULE III
OPTION SELLING SHAREHOLDERS
Name Number of Shares
---- ----------------
----------------
Total ----------------
25
<PAGE>
ARTICLES OF INCORPORATION
OF
MADE2MANAGE, INC.
Made2Manage Systems, Inc. (hereinafter referred to as the
"Corporation"), existing pursuant to the Indiana Business Corporation Law,
desiring to give notice of corporate action effectuating a Restatement of its
Articles of Incorporation, sets forth the following facts:
ARTICLE 1
RESTATEMENT
SECTION 1.01. The date of incorporation of the Corporation is January
22, 1986.
SECTION 1.02. The name of the corporation following this amendment to
the Articles of Incorporation is Made2Manage Systems, Inc.
ARTICLE 2
PURPOSE AND POWERS
SECTION 2.01 PURPOSE. The purpose for which the Corporation is
formed is the transaction of any or all lawful business for which
corporations may be incorporated under the Act.
SECTION 2.02 POWERS. The Corporation shall have the capacity to act
possessed by natural persons and, subject to any limitations or restrictions
imposed by the Act, other law or the Articles of Incorporation, shall have
the power to do all acts and things necessary, convenient or expedient to
carry out the purposes for which it is formed.
SECTION 2.03 LIMITATIONS. Nothing in these Articles of Incorporation
shall be construed to authorize the conduct by the Corporation of the
business of rural loan and savings associations, credit unions, or
corporations for the conduct of banking, railroad, insurance, surety, trust,
safe deposit, mortgage guarantee, or building and loan business, or to
authorize the Corporation to carry on the business of receiving deposits of
money, bullion, or foreign coins, or issuing bills, notes or other evidences
of debt for circulation as money.
ARTICLE 3
PERIOD OF EXISTENCE
SECTION 3.01 PERIOD. The period during which the Corporation shall
continue is perpetual.
<PAGE>
ARTICLE 4
PRINCIPAL OFFICE AND RESIDENT AGENT
SECTION 4.01 PRINCIPAL OFFICE. The post office address of the
principal office of the Corporation is:
9002 Purdue Road, Suite 200
Indianapolis, Indiana 46268
SECTION 4.02 RESIDENT AGENT. The name and post office address of its
Resident Agent in charge of such office are:
Katherine Kinder
9002 Purdue Road, Suite 200
Indianapolis, Indiana 46268
ARTICLE 5
TERMS OF SHARES
"This Corporation is authorized to issue two classes of shares to be
designated respectively Common Stock and Preferred Stock. The total number of
shares of Common Stock this corporation shall have authority to issue is
10,000,000 and the total number of shares of Preferred Stock this Corporation
shall have authority to issue is 3,662,111. The initial series of Preferred
Stock shall be designated Series A Preferred Stock ("Series A Preferred")
consisting of 79,137 shares, the second series of Preferred Stock shall be
designated Series B Preferred Stock ("Series B Preferred") consisting of
255,331 shares, the third series of Preferred Stock shall be designated
Series C Preferred Stock ("Series C Preferred") consisting of 577,643 shares
and the fourth series of Preferred Stock shall be designated Series D
Preferred Stock ("Series D Preferred") consisting of 750,000 shares.
"The Board of Directors of the Corporation is vested with authority to
determine and state the designations and relative preferences, limitations,
voting rights, if any, and other rights of one or more additional series of
Preferred Stock (the "Additional Preferred Series") by the adoption and
filing in accordance with the Act before the issuance of any such shares of
Additional Preferred Series, of an amendment or amendments to these
Articles, as the same may, from time to time, be amended, determining the
terms of such shares as Additional Preferred Series."
The Corporation shall from time to time in accordance with the laws of
the State of Indiana increase the authorized amount of its Common Stock if at
any time the number of shares of Common Stock remaining unissued and
available for issuance shall not be sufficient to permit conversion of the
Preferred Stock.
The relative rights, preferences, privileges and restrictions granted to
or imposed on the respective classes of the shares of capital stock or the
holders thereof are as follows:
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<PAGE>
SECTION 5.01 DIVIDENDS. The holders of Preferred Stock shall be
entitled to receive, when and as declared by the Board of Directors, out of
funds legally available therefor, dividends at a rate per share equal to the
amount per share, whether in cash or property (other than capital stock of
the Corporation) proposed by the Board of Directors for distribution with
respect to Common Stock payable in preference and priority to any payment of
any dividend on Common Stock of the Corporation. No dividends or other
distributions shall be made with respect to the Common Stock, other than
dividends payable solely in Common Stock, until all declared dividends on the
Preferred Stock have been paid or set apart for payment. Such dividends
shall not be cumulative and no right to such dividends shall accrue to
holders of Preferred Stock unless declared by the Board of Directors.
SECTION 5.02 LIQUIDATION PREFERENCE. In the event of any liquidation,
dissolution, or winding up of the Corporation, either voluntary or
involuntary, distributions to the shareholders of the Corporation shall be
made in the following manner:
(a) The holders of each share of Series D Preferred shall be entitled
to receive, prior and in preference to any distribution of any of the
assets or surplus funds of this Corporation to the holders of Series A
Preferred, Series B Preferred, Series C Preferred or Common Stock by reason
of their ownership thereof, an amount equal to $2.00 per share for each
share of Series D preferred then so held, adjusted for any combinations,
consolidations, or stock distributions or dividends with respect to such
shares. If the assets and funds thus distributed among the holders of
Series D Preferred shall be insufficient to permit the payment to such
holders of the full aforesaid preferential amount, then the entire assets
and funds of the Corporation legally available for distribution shall be
distributed ratably among the holders of Series D Preferred in proportion
to the shares of Series D Preferred then held by them.
(b) After the payment of the preferential amounts to the holders of
Series D Preferred as provided in paragraph (a) above the holders of each
share of Series C Preferred shall be entitled to receive, prior and in
preference to any distribution of any of the assets or surplus funds of
this Corporation to the holders of Series A Preferred, Series B Preferred
or Common Stock by reason of their ownership thereof, an amount equal to
$4.00 per share for each share of Series C Preferred then so held, adjusted
for any combinations, consolidations, or stock distributions or dividends
with respect to such shares. If the assets and funds thus distributed
among the holders of Series C Preferred shall be insufficient to permit
the payment to such holders of the full aforesaid preferential amount,
then the entire assets and funds of the Corporation legally available for
distribution shall be distributed ratably among the holders of Series C
Preferred in proportion to the shares of Series C preferred then held by
them.
(c) After the payment of the preferential amounts to the holders of
Series D Preferred and Series C Preferred as provided in paragraphs (a) and
(b) above, the holders of each share of Series B Preferred shall be
entitled to receive, prior and in preference to any distribution of any
of the assets or surplus funds of this Corporation to the holders of Series
A Preferred or Common Stock by reason of their ownership thereof, an amount
equal to
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<PAGE>
$1.96 per share for each share of Series B Preferred then so held, adjusted
for any combinations, consolidations, or stock distributions or dividends
with respect to such shares. If the assets and funds thus distributed
among the holders of Series B Preferred shall be insufficient to permit
the payment to such holders of the full aforesaid preferential amount,
then the entire assets and funds of the Corporation legally available for
distribution shall be distributed ratably among the holders of Series B
Preferred in proportion to the shares of Series B Preferred then held by
them.
(d) After the payment of the preferential amounts to the holders of
Series D Preferred and holders of Series C Preferred and holders of Series
B Preferred as provided in paragraphs (a), (b) and (c) above, the holders
of the Series A Preferred and the Series B Preferred shall be entitled to
receive, prior and in preference to any distribution of any of the assets
or surplus funds of the Corporation to the holders of the Common Stock by
reason of their ownership of such stock, the amount of $2.78 per share for
each share of Series A Preferred and $1.098 per share for each share of
Series B Preferred then held by them, adjusted for any combinations,
consolidations, or stock distributions or dividends with respect to such
shares and, in addition, an amount equal to all declared but unpaid
dividends on the Series A Preferred and the Series B Preferred as then held
by them. If the assets and funds thus distributed among the holders of the
Series A Preferred and the Series B Preferred shall be insufficient to
permit the payment to such holders of the full aforesaid preferential
amount, then the entire assets and funds of the Corporation legally
available for distribution shall be distributed ratably among the holders
of the Series A Preferred and the Series B Preferred in proportion to the
shares of Series A Preferred and the Series B Preferred then held by them.
(e) After payment has been made to the holders of the Preferred of
the full amounts to which they shall be entitled as aforesaid, the holders
of the Common Stock shall be entitled to share ratably in the remaining
assets.
(f) For purposes of this Section 2, a merger or consolidation of the
Corporation with or into any other corporation or corporations, or a sale
of all or substantially all of the assets of the Corporation, shall be
treated as a liquidation, dissolution or winding up, unless the
shareholders of this Corporation hold at least 50% of the outstanding
voting equity securities of the surviving corporation.
(g) Each holder of an outstanding share of Preferred Stock shall be
deemed to have consented to distributions made by the Corporation in
connection with the repurchase of shares of Common Stock issued to or
held by employees or consultants upon termination of their employment
or services pursuant to agreements providing for the right of said
repurchase between the Corporation and such persons.
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<PAGE>
SECTION 5.03 VOTING RIGHTS.
(a) GENERAL VOTING. Except as set forth in subparagraph (b) below or
as otherwise required by law, the holder of each share of Common Stock
issued and outstanding shall have one vote and the holder of each share
of Preferred Stock shall be entitled to the number of votes equal to the
number of shares of Common Stock into which the Preferred Stock could be
converted at the record date for determination of the shareholders
entitled to vote on such matters, or, if no such record date is established
at the date such vote is taken or any written consent of shareholders is
solicited, such votes to be counted together with all other shares of stock
of the Corporation having general voting power and not separately as
a class.
(b) VOTING FOR THE ELECTION OF DIRECTORS. Except as provided below
and so long as at least 368,741 shares of Preferred Stock (appropriately
adjusted for any stock split stock dividend, combination, recapitalization
or similar event; remain outstanding and have not been converted into
Common Stock, the holders of Preferred Stock shall be entitled, voting as
a separate class, to elect three (3) of the directors of the Company at
each annual election of directors; provided, however, that holders of not
less than a majority of the outstanding shares of Common Stock shall have
approved one (1) of the three (3) directors elected by the holders of the
Preferred Stock pursuant thereto. The holders of shares of Common Stock,
voting as a separate class, shall be entitled to elect two directors of the
Company at each annual election of directors. The foregoing provisions are
subject to cumulative voting rights, under Indiana law. In the case of any
vacancy in the office of a director occurring among the directors elected
by the holders of a class as set forth above, the remaining directors so
elected by that class may, by the affirmative vote of a majority thereof
(or the remaining director so elected if there be but one), elect a
successor or successors to hold office for the unexpired term of the
director or directors whose place or places shall be vacant. Any director
who shall have been elected by the holders of a class as aforesaid may be
removed during the term of office, either for or without cause by, and
only by, the affirmative vote of the holders of a majority of the shares of
the class of stock who elect such director or directors, given at a special
meeting of such shareholders duly called for that purpose, or by the
written consent of such shareholders and any vacancy thereby created may
be filled by the holders of that class of stock represented at such meeting
or signing such action by written consent. Notwithstanding the foregoing
provisions, the special vote provisions contained in this subparagraph (b)
shall terminate and be of no further force or effect upon the occurrence
of any of the following events: (i) the closing of the Corporation's
initial firmly underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended,
covering the offer and sale of Common Stock for the account of the Company
having a minimum aggregate gross offering price of $5,000,000 and a
minimum price per share (prior to underwriting commissions and offering
expenses) of $5.56 adjusted for stock splits, stock dividends,
combinations, recapitalization or similar events; (ii) upon the
conversion of a least 737,482 shares of Preferred Stock (appropriately
adjusted for any stock split, stock dividends, combination,
recapitalization or similar event); or (iii) in the event of any
reorganization or merger of this Corporation with or into any other
entity, provided.-the
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<PAGE>
shareholders of this corporation are holders of 50% or less of the voting
equity securities of the surviving corporation.
(c) NOTICE: FRACTIONAL SHARES. Holders of Common Stock and Preferred
Stock shall be entitled to notice of any shareholders' meeting in
accordance with the Bylaws of the Corporation. Fractional votes by the
holders of Preferred Stock shall not, however, be permitted and any
fractional voting rights resulting hereunder (after aggregating all
shares into which shares of Preferred Stock held by each holder could be
converted) shall be rounded to the nearest whole number.
SECTION 5.04 CONVERSION. The holders of the Preferred Stock
have conversion rights as follows (the "Conversion Rights"):
(a) RIGHT TO CONVERT. Each share of Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the
date of issuance of such share at the office of the Corporation or any
transfer agent for the Preferred Stock, into such number of fully paid
and nonassessable shares of Common Stock, as is determined by dividing
(i) $2.78, in the case of Series A Preferred, (ii) $3.058, in the case
of Series B Preferred, (iii) $4.00 in the case of Series C Preferred,
and (iv) $2.00 in the case of Series D Preferred by the Conversion
Price, determined as hereinafter provided, in effect at the time of the
conversion. The price at which shares of Common Stock shall be
deliverable upon conversion (the "Conversion Price") shall initially be
(i) $2.78, in the case of Series A Preferred, (ii) $3.058, in the case
of Series B Preferred, (iii) $4.00 in the case of Series C Preferred,
and (iv) $2.00 in the case of Series D Preferred, per share of Common
Stock. Such initial Conversion Price shall be subject to adjustment as
hereinafter provided.
(b) AUTOMATIC CONVERSION. Each share of Preferred Stock
shall automatically be converted into shares of Common Stock
at the then effective Conversion Price upon the occurrence of
any of the following events: (i) the closing of a firm
commitment underwritten public offering pursuant to an
effective registration statement under the Securities Act of
1933, as amended, covering the offer and sale of Common Stock
for the account of the Corporation to the public having gross
proceeds of at least $5,000,000 (net of underwriting
commissions and offering expenses) at a minimum price per
share of $5.56 per share (appropriately adjusted for any stock
split stock dividend, combination, recapitalization or similar
event; and an aggregate gross offering price of not less than
$5,000,000; or (ii) approval of such conversion by the vote of
the holders of not less than 75% of the aggregate number of
outstanding shares of Preferred Stock. In the event of the
automatic conversion of the Preferred Stock upon a public
offering as aforesaid, the person(s) entitled to receive the
Common Stock issuable upon such conversion of Preferred Stock
shall not be deemed to have converted such Preferred Stock
until immediately prior to the closing of such sale of
securities.
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<PAGE>
(c) MECHANICS OF CONVERSION. No fractional shares of Common Stock
shall be issued upon conversion of Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the then
effective Conversion Price. Before any holder of Preferred Stock shall
be entitled to convert the same into full shares of Common Stock and to
receive certificates therefor, the holder shall surrender the
certificate or certificates therefor, duly endorsed, at the office of
the Corporation or of any transfer agent for the Preferred Stock, and
shall give written notice to the Corporation at such office that the
holder elects to convert the same. The Corporation shall, as soon as
practicable thereafter, issue and deliver at such office to such holder
of Preferred Stock, a certificate or certificates for the number of
shares of Common Stock to which such holder shall be entitled as
aforesaid and a check payable to the holder in the amount of any cash
amounts payable as the result of a conversion into fractional shares of
Common Stock. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender
of the shares of Preferred Stock to be converted, or in the case of
automatic conversion on the date of closing of the offering or vote of
the Preferred Stock, as applicable, and the person or persons entitled
to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of
such shares of Common Stock on such date.
(d) ADJUSTMENTS TO CONVERSION PRICE FOR DILUTING ISSUES.
(i) SPECIAL DEFINITIONS. For purposes of this Section 4(d),
the following definitions shall apply:
(1) 'OPTIONS' shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire either Common Stock
or Convertible Securities.
(2) 'ORIGINAL ISSUE DATED' shall mean the date on which
the first share of Preferred Stock was first issued.
(3) 'CONVERTIBLE SECURITIES' shall mean any evidences of
indebtedness, shares (other than the 1,629,137 shares of
Preferred Stock) or other securities convertible into or
exchangeable for Common Stock.
(4) 'ADDITIONAL SHARES OF COMMON STOCK' shall mean all
shares of Common Stock issued (or, pursuant to Section 4(d)
(iii), deemed to be issued) by the Corporation after the Original
Issue Date, other than shares of Common Stock issued or issuable
at any time
(A) upon conversion of the 1,312,111 shares of
Preferred Stock;
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<PAGE>
(B) to officers, directors, and employees of, and
consultants to, the Corporation to be designated and
approved by the Board of Directors, in an aggregate
amount of not more than 400,000 shares, appropriately
adjusted for any recapitalization (provided that any
shares repurchased by the Corporation from employees,
directors and consultants at cost pursuant to the terms
of stock repurchase agreements approved by the Board of
Directors shall not be counted as issued for purposes of
this calculation), plus any additional shares, the issuance
of which has been approved by unanimous consent of the
Board of Directors;
(C) as a dividend or distribution on Preferred Stock
or any event for which adjustment is made pursuant to
subparagraph (d) (vi) hereof;
(D) by way of dividend or other distribution on shares
of Common Stock excluded from the definition of Additional
Shares of Common Stock by the foregoing clauses (A), (B) or
(C) or this clause (D) or on shares of Common Stock so
excluded; or
(E) shares reissued which were originally issued in a
transaction described in (A)-(D) above.
(ii) NO ADJUSTMENT OF CONVERSION PRICE. No adjustment in the
Conversion Price of a particular share of Preferred Stock shall be
made in respect of the issuance of Additional Shares of Common Stock
unless the consideration per share for an Additional Share of Common
Stock issued or deemed to be issued by the Corporation is less than
the Conversion Price in effect on the date of, and immediately prior
to such issue, for such share ofPreferred Stock.
(iii) DEEMED ISSUE OF ADDITIONAL SHARES OF COMMON STOCK.
(1) OPTIONS' AND CONVERTIBLE SECURITIES. Except as
otherwise provided in Section 4(d) (ii), in the event the
Corporation at any time or from time to time after the
Original Issue Date shall issue any Options or Convertible
Securities or shall fix a record date for the determination of
holders of any class of securities entitled to receive any
such Options or Convertible Securities, then the maximum
number of shares (as set forth in the instrument relating
thereto without regard to any provisions contained therein for
a subsequent adjustment of such number) of Common Stock
issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options therefor, the conversion or
exchange of such Convertible Securities, shall be deemed to be
Additional Shares of Common Stock issued as of the
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time of such issue or, in case such a record date shall have been
fixed, as of the close of business on such record date, provided
that Additional Shares of Common Stock shall not be deemed to
have been issued unless the consideration per share (determined
pursuant to Section 4 (d) (v) hereof) of such Additional Shares
of Common Stock would be less than the Conversion Price in effect
on the date of and immediately prior to such issue, or such
record date, as the case may be, and provided further that in any
such case in which Additional Shares of Common Stock are deemed
to be issued:
(A) no further adjustment in the Conversion Price
shall be made upon the subsequent issue of Convertible
Securities or shares of Common Stock upon the exercise of
such Options or conversion or exchange of such Convertible
Securities;
(B) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for
any increase in the consideration payable to the
Corporation, or decrease in the number of Common Stock
issuable, upon the exercise, conversion or exchange thereof,
the Conversion Price computed upon the original issue
thereof (or upon the occurrence of a record date with
respect thereto), and any subsequent adjustments based
thereon, shall, upon any such increase or decrease becoming
effective, be recomputed to reflect such increase or
decrease insofar as it affects such Options or the rights of
conversion or exchange under such Convertible Securities;
(C) upon the expiration of any such Options or any
rights of conversion or exchange under such Convertible
Securities which shall not have been exercised, the
Conversion Price computed upon the original issue thereof
(or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon,
shall, upon such expiration, be recomputed as if;
(I) in the case of Convertible Securities or
Options for Common Stock, the only Additional Shares
of Common Stock issued were shares of Common Stock,
if any, actually issued upon the exercise of such
Options or the conversion or exchange of such
Convertible Securities and the consideration received
therefor was the consideration actually received
by the Corporation for the issue of all such Options,
whether or not exercised, plus the consideration
actually received by the Corporation upon such
exercise, or for the issue of all such Convertible
Securities which were actually converted or
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exchanged, plus the additional consideration, if any,
actually received by the Corporation upon such
conversion or exchange, and
(II) in the case of Options for Convertible
Securities, only the Convertible Securities, if any,
actually issued upon the exercise thereof were
issued at the time of issue of such Options, and the
consideration received by the Corporation for the
Additional Shares of Common Stock deemed to have been
then issued was the consideration actually received
by the Corporation for the issue of all such Options,
whether or not exercised plus the consideration deemed
to have been received by the Corporation upon the
issue of the Convertible Securities with respect to
which such Options were actually exercised;
(D) no readjustment pursuant to clause (B) or (C)
above shall have the effect of increasing the Conversion
Price to an amount which exceeds the lower of (i) the
Conversion Price on the original adjustment date, or (ii)
the Conversion Price that would have resulted from any
issuance of Additional Shares of Common Stock between the
original adjustment date and such readjustment date; and
(E) in the case of any Options which expire by their
terms not more than 30 days after the date of issue thereof,
no adjustment of the Conversion Price shall be made until
the expiration or exercise of all such Options.
(2) STOCK DIVIDENDS. In the event the Corporation at any
time or from time to time after the Original Issue Date shall
declare or pay any dividend on the Common Stock payable in Common
Stock, then and in any such event, Additional Shares of Common
Stock shall be deemed to have been issued immediately after the
close of business on the record date for the determination of
holders of any class of securities entitled to receive such
dividends; provided, however, that if such record date is fixed
and such dividend is not fully paid the only Additional Shares
of Common Stock deemed to have been issued will be the number of
shares of Common Stock actually issued in such dividend, and
such shares will be deemed to have been issued as of the close of
business on such record date and the Conversion Price shall be
recomputed accordingly.
(iv) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF ADDITIONAL
SHARES OF COMMON STOCK. In the event thisCorporation shall issue
Additional Shares of
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Common Stock (including Additional Shares of Common Stock
deemed to be issued pursuant to Section 4 (d) (iii)) without
consideration or for a consideration per share less than the
Conversion Price in effect on the date of and immediately prior to
such issue, then and in such event, such Conversion Price shall be
reduced, concurrently with such issue, to a price (calculated to
the nearest cent) determined by multiplying such Conversion Price
by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such issue
plus the number of shares of Common Stock which the aggregate
consideration received by the Corporation for the total number of
Additional Shares of Common Stock so issued would purchase at such
Conversion Price; and the denominator of which shall be the number
of shares of Common Stock outstanding immediately prior to such
issue plus the number of such Additional Shares of Common Stock so
issued; and provided further that, for the purposes of this
Section (iv), all shares of Common Stock issuable upon conversion
of outstanding Options, Convertible Securities and the Preferred
Stock shall be deemed to be outstanding, and immediately after any
Additional Shares of Common Stock are deemed issued pursuant to
Section 4(d) (iii), such Additional Shares of Common Stock shall
be deemed to be outstanding.
(v) DETERMINATION OF CONSIDERATION. For purposes of this
Section 4(d), the consideration received by the Corporation for the
issue of any Additional Shares of Common Stock shall be computed as
follows:
(1) CASH AND PROPERTY: Such consideration shall:
(A) insofar as its consists of cash, be computed at
the aggregate amount of cash received by the Corporation
excluding amounts paid or payable for accrued interest
or accrued dividends;
(B) insofar as it consists of property other than
cash, be computed at the fair value thereof at the time
of such issue, as determined in good faith by the Board;
and
(C) in the event Additional Shares of Common Stock
are issued together with other shares or securities or
other assets of the Corporation for consideration which
covers both, be the proportion of such consideration so
received in clauses (A) and (B) above, as determined in
good faith by the Board.
(2) OPTIONS' AND CONVERTIBLE SECURITIES. The consideration
per share received by the Corporation for Additional Shares of
Common Stock deemed to have been issued pursuant to Section 4(d)
(iii) (l), relating to Options and Convertible Securities, shall
be determined by dividing
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(x) the total amount, if any, received or
receivable by the Corporation as consideration for the
issue of such Options or Convertible Securities, plus
the minimum aggregate amount of additional consideration
(as set forth in the instruments relating thereto,
without regard to any provision contained therein for a
subsequent adjustment of such consideration) payable to
the Corporation upon the exercise of such Options or the
conversion or exchange of such Convertible Securities,
or in the case of Options for Convertible Securities,
the exercise of such Options for Convertible Securities
and the conversion or exchange of such Convertible
Securities by
(y) the maximum number of shares of Common Stock
(as set forth in the instruments relating thereto,
without regard to any provision contained therein for a
subsequent adjustment of such number) issuable upon the
exercise of such Options or the conversion or exchange
of such Convertible Securities.
(3) STOCK DIVIDENDS. Any Additional Shares of Common Stock
deemed to have been issued pursuant to Section 4(d) (iii) (2),
relating to stock dividends and stock subdivisions, shall be
deemed to have been issued for no consideration.
(vi) ADJUSTMENTS FOR SUBDIVISIONS COMBINATIONS OR
CONSOLIDATION OF COMMON STOCK. In the event the outstanding shares
of Common Stock shall be subdivided (by stock split, or otherwise),
into a greater number of shares of Common Stock, the Conversion
Price then in effect shall, concurrently with the effectiveness of
such subdivision, be proportionately decreased. In the event the
outstanding shares of Common Stock shall be combined or
consolidated, by reclassification or otherwise, into a lesser
number of shares of Common Stock, the Conversion Price then in
effect shall, concurrently with the effectiveness of such
combination or consolidation, be proportionately increased.
(vii) ADJUSTMENTS FOR OTHER DISTRIBUTIONS. In the event
the Corporation at any time or from time to time makes, or fixes a
record date for the determination of holders of Common Stock
entitled to receive any distribution payable in securities of the
Corporation other than shares of Common Stock and other than as
otherwise adjusted in this Section 4 or as otherwise provided in
Section 1, then and in each such event provision shall be made so
that the holders of Preferred Stock shall receive upon conversion
thereof, in addition to the number of shares of Common Stock
receivable thereupon, the amount of securities of the Corporation
which they would have received had their Preferred Stock been
converted into Common Stock on the date of such event and had they
thereafter, during the period from the date of such event
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to and including the date of conversion, retained such securities
receivable by them as aforesaid during such period, subject to all
other adjustments called for during such period under this Section
4 with respect to the rights of the holders of the Preferred Stock.
(viii) ADJUSTMENTS FOR RECLASSIFICATION, EXCHANGE AND
SUBSTITUTION. If the Common Stock issuable upon conversion of the
Preferred Stock shall be changed into the same or a different
number of shares of any other class or classes of stock, whether by
capital reorganization, reclassification or otherwise (other than a
subdivision or combination of shares provided for above), the
Conversion Price then in effect shall, concurrently with the
effectiveness of such reorganization or reclassification, be
proportionately adjusted such that the Preferred Stock shall be
convertible into, in lieu of the number of shares of Common Stock
which the holders would otherwise have been entitled to receive, a
number of shares of such other class or classes of stock equivalent
to the number of shares of Common Stock that would have been
subject to receipt by the holders upon conversion of the Preferred
Stock immediately before that change.
(e) NO IMPAIRMENT. The Corporation will not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities
or any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder by
the Corporation but will at all times in good faith assist in the
carrying out of all the provisions of this Section 4 and in the taking
of all such action as may be necessary or appropriate in order to
protect the Conversion Rights of the holders of the Preferred Stock
against impairment.
(f) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this
Section 4, the Corporation at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and
furnish to each holder of Preferred Stock a certificate setting forth
such adjustment or readjustment and showing in detail the facts upon
which such adjustment or readjustment is based. The Corporation shall,
upon the written request at any time of any holder of Preferred Stock,
furnish or cause to be furnished to such holder a like certificate
setting forth (i) such adjustments and readjustments, (ii) the
Conversion Price at the time in effect, and (iii) the number of shares
of Common Stock and the amount, if any, of other property which at the
time would be received upon the conversion of Preferred Stock.
(g) NOTICES OF RECORD DATE. In the event that this Corporation
shall propose at any time:
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(i) to declare any dividend or distribution upon its Common
Stock, whether in cash, property, stock or other securities,
whether or not a regular cash dividend and whether or not out of
earnings or earned surplus;
(ii) to offer for subscription pro rata to the holders of any
class or series of its stock any additional shares of stock of any
class or series or other rights;
(iii) to effect any reclassification or recapitalization
of its Common Stock outstanding involving a change in the Common
Stock; or
(iv) to merge or consolidate with or into any other
corporation, or sell, lease or convey all or substantially all of
its property or business, or to liquidate, dissolve or wind up;
then, in connection with each such event, this Corporation shall
send to the holders of the Preferred Stock:
(1) at least 20 days' prior written notice of the date
on which a record shall be taken for such dividends,
distribution or subscription rights (and specifying the date
on which the holders of Common Stock shall be entitled
thereto) or for determining rights to vote in respect of the
matters referred to in (iii) and (iv) above; and
(2) in the case of the matters referred to in (iii) and
(iv) above, at least 20 days' prior written notice of the date
when the gain shall take place (and specifying the date on
which the holders of Common Stock shall be entitled to
exchange their Common Stock for securities or other property
deliverable upon the occurrence of such event).
Each such written notice shall be delivered personally or given by first
class mail, postage prepaid, addressed to the holders of the Preferred Stock
at the address for each such holder as shown on the books of this Corporation.
SECTION 5.05 OPTIONAL REDEMPTION.
(a) At any time after (i) the conversion of at least 63,310 shares
of Series A Preferred into Common Stock, with respect to the Series A
Preferred, (ii) the conversion of at least 204,264 shares of Series B
Preferred Stock into Common Stock, with respect to the Series B
Preferred, (iii) the conversion of at least 462,114 shares of Series C
Preferred into Common Stock, with respect to the Series C Preferred
Stock, and (iv) the conversion of at least 320,000 shares of Series D
Preferred Stock into Common Stock, with respect to the Series D
Preferred, this Corporation may, at the option of the Board of Directors
upon satisfaction of the terms and conditions as stated herein, redeem
any and all of the outstanding shares of Preferred Stock from any source
of funds legally available therefor by paying a sum equal to the
Optional Redemption Price, as defined below, of each share so redeemed.
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(b) The redemption price for each share of Preferred Stock
repurchased pursuant to paragraph (a) above shall be (i) $3.06 per share
for each share of Series A Preferred, (ii) $3.36 per share of Series B
Preferred, (iii) $4.40 per share for each share of Series C Preferred,
and (iv) $2.20 per share for each share of Series D Preferred, plus an
amount equal to all declared but unpaid dividends on such share of
Series A Preferred, Series B Preferred, Series C Preferred, or Series D
Preferred as the case may be (the ("Optional Redemption Price").
Redemption of less than all of the then outstanding shares of Preferred
Stock shall be pro rata among the holders of any series of Preferred
Stock as to the number of shares held on the date of notice of
redemption.
(c) At least 60 days' previous notice by mail, postage prepaid,
shall be given to the holders of record of the Preferred Stock for any
redemption, such notice to be addressed to each holder at the address
shown in the corporations records and which shall specify the date of
redemption, the number of shares or the holder to be redeemed and the
date at which conversion rights terminate. On or after the date of
redemption as specified in such notice, each holder shall surrender such
holder's certificate for the number of shares to be redeemed as stated
in the notice (except that such number of shares shall be reduced by the
number of shares which have been converted pursuant to Section 4 hereof
between the date of notice and the date on which conversion rights
terminate) to this corporation at the place specified in such notice.
If less than all of the shares represented by such certificates are
redeemed, a new certificate shall forthwith be issued for the unredeemed
shares. Provided such notice is duly given, and provided that on the
redemption date specified there shall be a source of funds legally
available for such redemption and funds necessary for the redemption
shall have been paid or made available at the place fixed for
redemption, then all rights with respect to such shares shall, after the
specified redemption date, terminate, whether or not said certificates
have been surrendered, excepting only in the latter instance the right
of the holder to receive the redemption price thereof, without interest,
upon such surrender.
On or prior to the date of redemption, the Corporation shall deposit the
redemption price of all shares of Preferred designated for redemption in said
notice and not yet redeemed with a bank or trust company having aggregate
capital and surplus in excess of $25,000,000 as a trust fund for the beef it
of the respective holders of the shares designated for redemption and not yet
redeemed. Any moneys deposited by the Corporation pursuant hereto, for the
redemption of shares thereafter converted into shares of Common pursuant to
Section 4 hereof no later than the fifth (5th) day preceding the date of
redemption, shall be returned to the corporation forthwith upon such
conversion. The balance of any moneys deposited by the corporation pursuant
hereto remaining unclaimed at the expiration of one (1) year following the
date of redemption shall thereafter be returned to the corporation upon its
request expressed in a resolution of its Board of Directors.
SECTION 5.06 COVENANTS. In addition to any other rights provided by
law, so long as any Preferred Stock shall be outstanding, this Corporation
shall not, without first obtaining the affirmative vote of the holders of at
least 75% of such outstanding shares of Preferred Stock:
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(a) amend or repeal any provision of, or add any provision to,
this Corporation's Articles of Incorporation if such action would alter
or change the rights, preferences, privileges and restrictions of the
Preferred Stock, or increase or decrease the number of shares of Series
A Preferred, Series B Preferred, Series C Preferred, Series D Preferred
or Preferred Stock authorized hereby;
(b) change the number of directors as set forth in the Corporations
By-laws on the date of filing this Amendment;
(c) authorize or issue shares of any class or series or stock
having any preference or priority as to dividends or assets superior to
or on a parity with any such preference or priority of the Preferred
Stock, or authorize or issue any bonds, debentures, notes or other
obligations convertible into or exchangeable for, or having option
rights to purchase, any shares of stock of this Corporation other than
Common Stock;
(d) reclassify any shares of Common Stock and any other shares of
this Corporation other than the Preferred Stock into shares having any
preference or priority as to dividends or assets superior to or on a
parity with any such preference or priority of the Preferred Stock;
(e) authorize or approve any merger or consolidation with or into
any other corporation or any sale of all or substantially all of the
assets of the Corporation or any reorganization of the Corporation.
SECTION 5.07 RESIDUAL RIGHTS. All rights accruing to the outstanding
shares of this corporation not expressly provided for to the contrary herein
shall be vested in the Common Stock."
ARTICLE 6
CAPITAL
SECTION 6.01 AMOUNT. The Corporation shall not transact any business
or incur any indebtedness, except such business or indebtedness as shall be
incidental to its organization or to obtaining subscriptions to or payment
for the shares of the Corporation, until consideration of the value of at
least One Thousand Dollars ($1,000.00) has been received for the issuance of
shares and allocated to the stated capital of the Corporation.
ARTICLE 7
INCORPORATOR
SECTION 7.01 NAME AND POST OFFICE ADDRESS. The name and post office
address of the Incorporator of the Corporation are as follows:
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Douglas P. Long
BARNES & THORNBURG
1313 Merchants Bank Building
11 South Meridian Street
Indianapolis, Indiana 46204
ARTICLE 8
PROVISIONS FOR REGULATION OF BUSINESS
AND CONDUCT OF AFFAIRS OF CORPORATION
SECTION 8.01 LOCATION OF MEETINGS. Meetings of the Shareholders, the
Board of Directors or any committees of the Board of Directors may be held at
such place, within or without the State of Indiana, as may be specified in
the respective notices or waivers of notice thereof.
SECTION 8.02 PROVISIONS OF WORKING CAPITAL. The Board of Directors of
the Corporation shall have power, from time to time, to fi: and determine and
to vary the amount to be reserved as working capital of the Corporation and,
before the payment of any dividends, it may set aside out of the net pro-fits
of the Corporation such sum or sums as it may from time to time in its
absolute discretion determine to be proper, whether as a reserve fund to meet
contingencies or for the equalizing of dividends, or for repairing or
maintaining any property of the Corporation, or for an addition to surplus,
or for any corporate purposes that the Board of Directors shall think
conducive to the best interest of the Corporation, subject only to such
limitations as the Code of By-Laws of the Corporation may from time to time
impose.
SECTION 8.03 INTEREST OF DIRECTORS IN CONTRACTS. Any contract or
other transaction between the Corporation and one or more of its Directors,
or between the Corporation and any firm of which one or more of its Directors
are members or employees, or in which they are interested, or between the
Corporation and any corporation, partnership or association of which one or
more of its Directors are shareholders, members, directors, officers, or
employees, or in which they are interested, or in which the Corporation is a
member, shareholder, or otherwise interested, shall be valid for all
purposes, notwithstanding the presence of such Director or Directors at the
meeting of the Board of Directors of the Corporation which acts upon, or in
reference to, such contract or transaction and notwithstanding his or their
participation in such action, if the fact of such interest shall be disclosed
or known to the Board of Directors and the Board of Directors shall,
nevertheless, authorize, approve or ratify such contract or transaction by a
vote of a majority of the disinterested Directors present, notwithstanding
the fact that such majority of the disinterested Directors present may not
constitute a quorum, a majority of the Board of Directors, or a majority of
the Directors present at the meeting at which the contract or transaction is
considered. This Section shall not be construed to invalidate any contract
or other transaction which would otherwise be valid under the common and
statutory law applicable thereto.
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SECTION 8.04 DIRECTION OF PURPOSES AND EXERCISE OF POWERS BY
DIRECTORS. The Board of Directors, subject to any specific limitations or
restrictions imposed by the Act or these Articles of Incorporation, shall
direct-the carrying out of the purpose and exercise the powers of the
Corporation, without previous authorization or subsequent approval by the
Shareholders of the Corporation.
"In addition to any other considerations which the Board of Directors
may lawfully take into account, in determining whether to take or to refrain
from taking corporate action on any matter, including making or declining to
make any recommendation to the Shareholders of the Corporation, the Board of
Directors may in its discretion consider the long-term as well as short-term
best interests of the Corporation (including the possibility that these
interests may be best served by the continued independence of the
Corporation), taking into account, and weighing as the Directors deem
appropriate, the social and economic effects of such action on present and
future employees, suppliers and customers of the Corporation and any
subsidiaries of the Corporation (including account holders and borrowers of
any such subsidiaries), the effect upon communities in which offices or other
facilities of the Corporation are located, the effect on the Corporation's
ability to fulfill its corporate obligations, and any other factors the
Directors consider pertinent. The Corporation intends to be subject to the
provisions of the Indiana Control Share Acquisitions Statute (codified at IC
23-I-42, ET. SEQ.) and the Indiana Business Combinations Statute (codified at
IC 23-1-43, ET. SEQ.)"
SECTION 8.05 AMENDMENTS OF ARTICLES OF INCORPORATION. The Corporation
reserves the right to amend, alter, change or repeal any provision contained
in the Articles of Incorporation, or in any amendment hereto, or to add any
provision to the Articles of Incorporation or to any amendment hereto, in any
manner now or hereafter prescribed or permitted by the provisions of the Act
or any amendment thereto, or by the provisions of any other applicable
statute of the State of Indiana; and all rights conferred upon Shareholders
in the Articles of Incorporation or any amendment hereto are granted subject
to this reservation.
ARTICLE 9
INDEMNIFICATION
SECTION 9.01 GENERAL. The Corporation -shall, to the fullest extent
to which it is empowered to do so by the Indiana Business Corporations Law,
as the same may be amended from time to time (the "Act"), or any other
applicable laws, as from time to time in effect, indemnify any person who was
or is a party, or is threatened to be made a party, to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative and whether formal or informal, by reason of
the fact that he is or was a Director, Officer, employee or agent of the
Corporation, or who, while serving as such Director, Officer, employee or
agent of the Corporation, is or was -serving at the request of the
Corporation as a director, officer, partner, trustee, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise, whether for profit or not, against expenses (including
counsel fees), judgments, settlements, penalties and fines (including excise
taxes assessed with respect to employee benefit plans) actually or reasonably
incurred by him in accordance with such action, suit or proceeding, if
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he acted in good faith and in a manner he reasonably believed, in the case
of conduct in his official capacity, was in the best interests of the
Corporation, and in all other cases, was not opposed to the best interests of
the Corporation, and, with respect to any criminal action or proceeding, he
either had reasonable cause to believe his conduct was lawful or no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement or conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not meet the prescribed standard of
conduct.
SECTION 9.02 AUTHORIZATION OF INDEMNIFICATION. To the extent that a
Director, Officer, employee or agent of the Corporation has been successful,
on the merits or otherwise, in the defense of any action, suit or proceeding
referred to in Section 10.01 of this Article, or in the defense of any claim,
issue or matter therein, the Corporation shall indemnify that person against
expenses (including counsel fees) actually and reasonably incurred by that
person in connection therewith. Any other indemnification under Section
10.01 of this Article (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case, upon a determination
that indemnification of the Director, Officer, employee or agent is
permissible in the circumstances because he has met the applicable standard
of conduct. Such determination shall be made (a) by the Board of Directors
by a majority vote of a quorum consisting of Directors who were not at the
time parties to such action, suit or proceeding; or (b) if a quorum cannot be
obtained under subdivision (a), by a majority vote of a committee duly
designated by the Board of Directors (in which designation Directors who are
parties may participate), consisting solely of two (2) or more Directors not
at the time parties to such action, suit or proceeding; or (c) by special
legal counsel: (i) selected by the Board of Directors or its committee in the
manner prescribed in subdivision (a) or (b), or (ii) if a quorum of the Board
of Directors cannot be obtained under subdivision (a) and a committee cannot
be designated under subdivision (b), selected by a majority vote of the full
Board of Directors (in which selection Directors who are parties may
participate); or (c) by the Shareholders, but shares owned by or voted under
the control of Directors who are at the time parties to such action, suit or
proceeding may not be voted on the determination.
Authorization of indemnification and evaluation as to reasonableness of
expenses shall be made in the same manner as the determination that
indemnification is permissible, except that if the determination is made by
special legal counsel, authorization of indemnification and evaluation as to
reasonableness of expenses shall be made by those entitled under subdivision
(c) to select counsel.
SECTION 9.03 GOOD FAITH DEFINED. For purposes of any determination
under Section 10.01 of this Article 10, a person shall be deemed to have
acted in good faith and to have otherwise met the applicable standard of
conduct set forth in Section 10.01 if his action is based on information,
opinions, reports or statements, including financial statements and other
financial data, if prepared or presented by (a) one or more Officers or
employees of the Corporation or another enterprise whom he reasonably
believes to be reliable and competent in the matters presented; (b) legal
counsel, public accountants, appraisers or other persons as to matters he
reasonably believes are within the person's professional or expert
competence; or (c) a committee of the Board of Directors of the Corporation
or another enterprise of which the person is not a member if he reasonably
believes the
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committee merits confidence. The term "another enterprise" as used in this
Section 10.03 shall mean any other corporation or any partnership, joint
venture, trust, employee benefit plan or other enterprise of which the person
is or was serving at the request of the Corporation as a director, officer,
partner, trustee, employee or agent. The provisions of this Section 10.03
shall not be deemed to be exclusive or to limit in any way the circumstances
in which a person may be deemed to have met the applicable standards of
conduct set forth in Section 10.01 of this Article 10.
SECTION 9.04 PAYMENT OF EXPENSES IN ADVANCE. Expenses incurred in
connection with any civil or criminal action, suit or proceeding may be paid
for or reimbursed by the Corporation in advance of the final disposition of
such action, suit or proceeding, as authorized in the specific case in the
same manner described in Section 10.02 of this Article 10, upon receipt of a
written affirmation of the Director, Officer, employee or agent's good faith
belief that he has met the standard of conduct described in Section 10.01 of
this Article 10 and upon receipt of a written undertaking by or on behalf of
the Director, Officer, employee or agent to repay such amount if it shall
ultimately be determined that he did not meet the standard of conduct set
forth in Section 10.01 of this Article 10, and a determination is made that
the facts then known to those making the determination would not preclude
indemnification under this Article 10.
SECTION 9.05 PROVISIONS NOT EXCLUSIVE. The indemnification provided
by this Article 10 shall not be deemed exclusive of any other rights to which
a person seeking indemnification may be entitled under these Articles, the
Corporation's Code of By-laws, any resolution of the Board of Directors or
shareholders, any other authorization, whenever adopted, after notice, by a
majority vote pf all voting stock then outstanding, or any contract, both as
to action in his official capacity and as to action in another capacity while
holding that office, and shall continue as to a person who has ceased to be a
Director, Officer, employee or agent, and shall inure to the benefit of the
heirs, executors and administrators of that person.
SECTION 9.06 VESTED RIGHT TO INDEMNIFICATION. The right of any
individual to indemnification under this Article shall vest at the time of
occurrence or performance of any event, act or omission giving rise to any
action, suit or proceeding of the nature referred to in Section 10.01 of this
Article 10 and, once vested, shall not later be impaired as a result of any
amendment, repeal, alteration or other modification of any or all of these
provisions. Notwithstanding the foregoing, the indemnification afforded under
this Article 10 shall be applicable to all alleged prior acts or omissions of
any individual seeking indemnification hereunder, regardless of the fact that
such alleged acts or omissions may have occurred prior to the adoption of
this Article 10. To the extent such prior acts or omissions cannot be deemed
to be covered by this Article 10, the right of any individual to
indemnification shall be governed by the indemnification provisions in effect
at the time of the prior acts or omissions.
SECTION 9.07 INSURANCE. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a Director, Officer, employee
or agent of the Corporation, or who is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan
or other
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enterprise, against any liability asserted against or incurred by the
individual in that capacity or arising from the individual's status as a
Director, Officer, employee or agent, whether or not the Corporation would
have power to indemnify the individual against the same liability under this
Article.
SECTION 9.08 ADDITIONAL DEFINITIONS. For purposes of this Article,
references to the "Corporation" shall include any domestic or foreign
predecessor entity of the Corporation in a merger or other transaction in
which the predecessor's existence ceased upon consummation of the transaction.
For purposes of this Article 10, "serving an employee benefit plan at
the request of the Corporation" shall include any service as a Director,
Officer, employee or agent of the Corporation which imposes duties on, or
involves services by that Director, Officer, employee, or agent with respect
to an employee benefit plan, its participants, or beneficiaries. A person
who acted in good faith and in a manner he reasonably believed to be in the
best interests of the participants and beneficiaries of an employee benefit
plan shall be deemed to have acted in a manner "not opposed to the best
interest of the Corporation" referred to in this Article 10.
For purposes of this Article 10, "party" includes any individual who is
or was a plaintiff, defendant or respondent in any action, suit or
proceeding, or who is threatened to be made a named defendant or respondent
in any action, suit or -proceeding.
For purposes of this Article 10, "official capacity," when used with
respect to a Director, shall mean the position of director of the
Corporation; and when used with respect to an individual other than a
Director, shall mean the office in the Corporation held by the Officer or the
employment or agency relationship undertaken by the employee or agent on
behalf of the Corporation.
"Official capacity" does not include service for any other foreign or
domestic corporation or any partnership, joint venture, trust, employee
benefit plan, or other enterprise, whether for profit or not.
SECTION 9.09 PAYMENTS A BUSINESS EXPENSES. Any payments made to any
indemnified party under this Article under any other right to
indemnification shall be deemed to be an ordinary and necessary business
expense of the Corporation, and payment thereof shall not subject any person
responsible for the payment, or the Board of Directors, to any action for
corporate waste or to any similar action."
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IN WITNESS WHEREOF, the undersigned, being the Incorporator designated
in Article 8, executes these Articles of Incorporation and verifies and
affirms, subject to penalties for perjury, that the facts herein stated are
true this ______ day of October, 1997.
----------------------------------------
By: Katherine Kinder
Its: Secretary
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AMENDED AND RESTATED
CODE OF BY-LAWS
OF
TEKSYN, INC.
ARTICLE 1
IDENTIFICATION
SECTION 1.01. NAME. The name of the Corporation is TEKSYN, INC.
(hereinafter referred to as the "Corporation").
SECTION 1.02. PLACE OF KEEPING CORPORATE BOOKS AND RECORDS. The books of
account, records, documents and papers of the Corporation shall be kept at any
place or places within or without the State of Indiana as directed by the Board
of Directors. In the absence of a direction, the books of account, records,
documents and papers shall be kept at the principal office of the Corporation.
SECTION 1.03. SEAL. The Board of Directors of the Corporation may
designate the design and cause the Corporation to obtain and use a corporate
seal, but the failure of the Board to designate a seal or the absence of the
impression of the corporate seal from any document shall not affect in any way
the validity or effect of such document.
SECTION 1.04. FISCAL YEAR. The fiscal year of the Corporation shall end
at such time as the Board of Directors shall determine. In the event the Board
of Directors shall not make such a determination, the fiscal year of the
Corporation shall be the fiscal year adopted in the first federal income tax
return of the Corporation.
ARTICLE 2
SHARES
SECTION 2.01. CERTIFICATES FOR SHARES. Each holder of shares of Common
Stock or Preferred Stock of the Corporation shall be entitled to a certificate
in such form as the Board of Directors may prescribe from time to time, signed
by the President or the Vice-President, and the Secretary (or an Assistant
Secretary, if any) of the Corporation.
SECTION 2.02. TRANSFER OF SHARES. The Common Stock and Preferred Stock of
the Corporation shall be transferable only on the books of the Corporation upon
surrender of the certificate or certificates representing the same, properly
endorsed by the registered holder or by his duly authorized attorney, such
endorsement or endorsements to be witnessed by one witness. The requirement for
such witnessing may be waived in writing upon the form of endorsement by the
President of the Corporation.
SECTION 2.03. LOST, STOLEN OR DESTROYED CERTIFICATES. The Corporation may
issue a new certificate for shares of Common Stock and Preferred Stock in the
place of any certificate theretofore
<PAGE>
issued and alleged to have been lost, stolen or destroyed, but the Board of
Directors may require the owner of such lost, stolen or destroyed certificate,
or his legal representative, to furnish an affidavit as to such loss, theft or
destruction and to give a bond in such form and substance, and with such surety
or sureties, with fixed or open penalty, as it may direct to indemnify the
Corporation against any claim that may be made on account of the alleged loss,
theft or destruction of such certificate. A new certificate may be issued
without requiring any bond when, in the judgment of the Board of Directors, it
is not imprudent to do so.
ARTICLE 3
MEETINGS OF SHAREHOLDERS
SECTION 3.01. PLACE OF MEETINGS. All meetings of Shareholders of the
Corporation shall be held at the principal office of the Corporation or at such
other place, within or without the State of Indiana, as may be specified in the
respective notices or waivers of notice thereof.
SECTION 3.02. ANNUAL MEETING. Unless otherwise determined by the Board of
Directors, the annual meeting of the Shareholders for the election of Directors,
and for the transaction of such other business as may properly come before the
meeting, shall be held at 10:00 a.m. on the third Saturday of the third month
following the close of each fiscal year, if such day is not a legal holiday, and
if a holiday then on the first following day that is not a legal holiday.
Failure to hold the annual meeting at the designated time shall not work any
forfeiture or a dissolution of the Corporation.
SECTION 3.03. SPECIAL MEETINGS. Special meetings of the Shareholders may
be called by the President, by the Board of Directors, or by Shareholders
holding of record not less than one-fourth of all the shares of Common Stock and
Preferred Stock outstanding and entitled by the Articles of Incorporation to
vote on the business proposed to be transacted thereat; and shall be called by
the President at the request in writing of a majority of the Board of Directors
or Shareholders holding of record a majority of all the shares of Common Stock
and Preferred Stock outstanding and entitled by the Articles of Incorporation to
vote on the business for which the meeting is being called. Any request for a
special meeting of the Shareholders shall state the purpose or purposes of the
proposed meeting.
SECTION 3.04. RECORD DATE. The Board of Directors may fix a record date,
not exceeding seventy (70) days prior to the date of any meeting of
Shareholders, for the purpose of determining the Shareholders entitled to notice
of and to vote at such meeting. In the absence of action by the Board of
Directors fixing a record date as herein provided, the record date shall be the
fourteenth day prior to the date of the meeting.
SECTION 3.05. NOTICE OF MEETINGS. A written or printed notice, stating
the place, day and hour of the meeting, and, in the case of a special meeting or
when otherwise required by any provision of The Indiana General Corporation Act,
the Articles of Incorporation or the Code of By-Laws, the purpose or purposes
for which the meeting is called, shall be delivered or mailed by the Secretary
or by the persons calling the meeting to each holder of Common Stock and
Preferred Stock of the
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Corporation at the time entitled to vote, at such address as appears on the
records of the Corporation, at least ten (10) days before the date of the
meeting. Each Shareholder who has in the manner provided below waived notice of
a Shareholders' meeting, or who personally attends a Shareholders' meeting, or
is represented thereat by a proxy duly authorized to appear by an instrument of
proxy complying with the requirements hereinafter set forth, shall be
conclusively presumed to have been given due notice of such meeting.
SECTION 3.06. WAIVER OF NOTICE. Notice of any such meeting may be waived
in writing by any Shareholder if the waiver sets forth in reasonable detail the
purpose or purposes for which the meeting is called, and the time and place
thereof. Attendance at any meeting, in person or by proxy, shall constitute a
waiver of notice of such meeting.
Section 3.07. PROXIES. A Shareholder entitled to vote at any meeting of
Shareholders may vote either in person or by proxy executed in writing by the
Shareholder or a duly authorized attorney-in-fact of such Shareholder. For
purposes of this section, a proxy granted by telegram, telex, telecopy or other
document transmitted electronically for or by a Shareholder shall be deemed
"executed in writing by the Shareholder." The general proxy of a fiduciary
shall be given the same effect as the general proxy of any other Shareholder.
No proxy shall be valid after eleven months from the date of its execution
unless a longer time is expressly provided therein.
SECTION 3.08. QUORUM. At any meeting of Shareholders, the holders of a
majority of the outstanding shares which may be voted on the business to be
transacted at such meeting, represented thereat in person or by proxy, shall
constitute a quorum, and a majority vote of such quorum shall be necessary for
the transaction of any business by the meeting, unless a greater number is
required by law, the Articles of Incorporation or the Code of By-Laws. In case
a quorum shall not be present at any meeting, the holders of record of a
majority of such shares so present in person or by proxy may adjourn the meeting
from time to time, without notice, other than announcement at the meeting, until
a quorum shall be present or represented. At any such adjourned meeting at
which a quorum shall be present or represented, any business may be transacted
which might have been transacted at the meeting as originally scheduled.
SECTION 3.09. VOTING LISTS. The Secretary of the Corporation shall make,
at least five (5) days before each election of Directors, a complete list of the
Shareholders entitled by the Articles of Incorporation to vote at such election,
arranged in alphabetical order, with the address and number of shares so
entitled to vote held by each, which list shall be on file at the principal
office of the Corporation and subject to inspection by any Shareholder at any
time during usual business hours for a period of five (5) days prior to such
election. Such list shall be produced and kept open at the time and place of
election and subject to the inspection of any Shareholder during the holding of
such election. The original stock register or transfer book, or a duplicate
thereof kept in the State of Indiana, shall be the only evidence as to who are
the Shareholders entitled to examine such list, or the stock ledger or transfer
book, or to vote at any meeting of the Shareholders.
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SECTION 3.10. ORDER OF BUSINESS. The order of business at the annual
meetings, and so far as practicable at all other meetings, of Shareholders,
shall be:
ITEM (1). Proof of due notice of meeting.
ITEM (2). Determination of quorum.
ITEM (3). Reading and disposal of any unapproved minutes.
ITEM (4). Reports of Officers and Committees.
ITEM (5). Unfinished business.
ITEM (6). New business.
ITEM (7). Election of Directors.
ITEM (8). Adjournment.
SECTION 3.11. ACTION WITHOUT MEETING. Any action required or permitted to
be taken at any meeting of the Shareholders may be taken without a meeting if a
consent in writing setting forth the action so taken is signed by all the
Shareholders entitled to vote with respect thereto, and such written consent is
filed with the proceedings of the Shareholders.
ARTICLE 4
BOARD OF DIRECTORS
SECTION 4.01. DUTIES AND NUMBER. The business and affairs of the
Corporation shall be managed under the direction of a Board of five (5)
Directors.
SECTION 4.02. ELECTION, TERM OF OFFICE AND QUALIFICATION. Directors shall
be elected at each annual meeting of the Shareholders by the holders of the
Common Stock and Preferred Stock entitled by the Articles of Incorporation to
elect Directors. Directors shall be elected for a term of one year and shall
hold office until their respective successors are elected and qualified.
Directors need not be Shareholders of the Corporation. No decrease in the
number of Directors at any time provided for by the Code of By-Laws shall have
the effect of shortening the term of any incumbent Director.
SECTION 4.03. POWERS OF DIRECTORS. The Board of Directors shall exercise
all the powers of the Corporation, subject to the restrictions imposed by law,
the Articles of Incorporation, or the Code of By-Laws.
SECTION 4.04. ANNUAL MEETING. Unless otherwise determined by the
President or the Board of Directors, the Board of Directors shall meet each year
immediately after the annual meeting of the
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Shareholders, at the place where such meeting of the Shareholders has been held,
for the purpose of organization, election of Officers, and consideration of any
other business that may properly be brought before the meeting. No notice shall
be necessary for the holding of this annual meeting. If such meeting is not
held as above provided, the election of Officers may be held at any subsequent
duly constituted meeting of the Board.
SECTION 4.05. OTHER MEETINGS. Regular meetings of the Board of Directors
may be held, without notice, at such time as may from time to time be fixed by
resolution of the Board. Special meetings of the Board of Directors may be
called at any time by the President, and shall be called on the written request
of any member of the Board of Directors. Notice of such a special meeting shall
be sent by the Secretary to each Director at his residence or usual place of
business by letter or telegram, at such time that, in regular course, such
notice would reach such place not later than during the second day immediately
preceding the day for such meeting; or may be delivered by the Secretary to a
Director personally at any time during such second preceding day. At any
meeting at which all Directors are present, notice of the time, place and
purpose thereof shall be deemed waived; and notice may be waived (either before
or after the time of the meeting) by absent Directors, either by written
instrument or telegram. Such meetings may be held at any place within or
without the State of Indiana, as may be specified in the respective notices, or
waivers of notice, thereof.
SECTION 4.06. MEETING BY TELEPHONE, ETC. Any or all of the members of the
Board of Directors or of any committee designated by the Board may participate
in a meeting of the Board or the committee by means of conference telephone or
similar communications equipment by which all persons participating in the
meeting can communicate with each other, and participation by these means
constitutes presence in person at the meeting.
SECTION 4.07. QUORUM. The presence of four Directors shall be necessary
to constitute a quorum for the transaction of any business except as may
otherwise be required in the Articles of Incorporation with respect to the
filling of vacancies in the Board of Directors. The act of the majority of the
Directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors unless the act of a greater number is required by law,
the Articles of Incorporation, or the Code of By-Laws. Anything herein to the
contrary notwithstanding, two-thirds of the Directors present at a meeting at
which a quorum is present shall be necessary to approve the (i) sale or merger
of the Corporation, the disposition of all or substantially all of its assets or
any similar transaction, (ii) engagement of the Company in any business other
than microcomputer hardware and software design, manufacture, sale and service,
(iii) declaration of dividends or similar distributions, (iv) acquisition of any
material business or assets, (v) incurrence or forgiveness of a loan to any
Corporation shareholder or officer, (vi) annual budget, (vii) compensation plans
for top management including bonuses, (viii) incurrence of any capital
expenditures in excess of budget, (ix) employee stock incentive plans, (x)
incurrence of debt or issuance of new equity, (xi) hiring relatives of employees
and (xii) any amendment, alteration or repeal of the Code of By-Laws.
SECTION 4.08. ACTION WITHOUT MEETING. Any action required or permitted to
be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if
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a written consent thereto is signed by all members of the Board of Directors or
of such committee, as the case may be, and such written consent is filed with
the minutes of proceedings of the Board of Directors or committee.
SECTION 4.09. RESIGNATIONS. Any Director may resign at any time by giving
written notice to the Board of Directors, the President or the Secretary. Such
resignation shall take effect at the time specified therein, and unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
SECTION 4.10. COMPENSATION OF DIRECTORS. The Board of Directors is
empowered and authorized to fix and determine the compensation of Directors for
attendance at meetings of the Board and additional compensation for such
additional services any of such Directors may perform for the Corporation.
ARTICLE 5
OFFICERS
SECTION 5.01. NUMBER AND QUALIFICATIONS. The Officers of the Corporation
shall consist of the President, one (l) or more Vice-Presidents (if any), the
Secretary, the Treasurer, and such other officers as may be chosen by the Board
of Directors at such time and in such manner and for such terms as the Board of
Directors may prescribe. The President shall be chosen from among the
Directors. Any two (2) or more offices may be held by the same person.
SECTION 5.02. ELECTION AND TERM OF OFFICE. The officers shall be chosen
annually by the Board of Directors. Each officer shall hold office until his
successor is chosen and qualified, or until his death, or until he shall have
resigned, or shall have been removed in the manner hereinafter provided.
SECTION 5.03. RESIGNATIONS. Any Officer may resign at any time by giving
written notice to the Board of Directors, the President or the Secretary. Such
resignation shall take effect at the time specified therein, and unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
SECTION 5.04. REMOVAL. Any Officer may be removed either with or without
cause, at any time, by the vote of a majority of the actual number of Directors
elected and qualified.
SECTION 5.05. VACANCIES. Whenever any vacancies shall occur in any office
by death, resignation, removal, increase in the number of offices of the
Corporation, or otherwise, the same shall be filled by the Board of Directors,
and the Officer so chosen shall hold office during the remainder of the term for
which his predecessor was chosen or as otherwise provided herein.
SECTION 5.06. PRESIDENT. Subject to the general control of the Board of
Directors, the President shall manage and supervise all the affairs and
personnel of the Corporation and shall
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discharge all the usual functions of the chief executive officer of a
corporation. He shall preside at all meetings of Shareholders and Directors,
discharge all the duties which devolve upon a presiding officer, and perform
such other duties as the Code of By-Laws or the Board of Directors may
prescribe. The President shall have full authority to execute proxies in behalf
of the Corporation, to vote stock owned by it in any other corporation, and to
execute, with the Secretary, powers of attorney appointing other corporations,
partnerships, or individuals the agent of the Corporation, all subject to the
provisions of The Indiana General Corporation Act, the Articles of Incorporation
and the Code of By-Laws.
SECTION 5.07. VICE-PRESIDENTS. The Vice-Presidents, in the order
designated by the President or the Board of Directors, shall have all powers of,
and perform all duties incumbent upon, the President during his absence or
disability and shall have such other powers and duties as the Code of By-Laws,
the Board of Directors or the President may prescribe.
SECTION 5.08. SECRETARY. The Secretary shall attend all meetings of the
Shareholders and of the Board of Directors, and shall keep or cause to be kept
in a book provided for the purpose a true and complete record of the proceedings
of such meetings, and shall perform a like duty, when required, for all
committees appointed by the Board of Directors. He shall perform such other
duties as the Code of By-Laws, the Board of Directors or the President may
prescribe. He shall give all notices of the Corporation and, in case of his
absence, negligence or refusal so to do, any notice may be given by a person so
directed by the President or by the requisite number of Directors or
Shareholders upon whose request the meeting is called as provided by these the
Code of By-Laws.
SECTION 5.09. TREASURER. The Treasurer shall keep correct and complete
records of account, showing accurately at all times the financial condition of
the Corporation. He shall be the legal custodian of all moneys, notes,
securities and other valuables which may from time to time come into the
possession of the Corporation. He shall immediately deposit all funds of the
Corporation coming into his hands in some reliable bank or other depository to
be designated by the Board of Directors, and shall keep such bank account in the
name of the Corporation. He shall furnish at meetings of the Board of
Directors, or whenever requested, a statement of the financial condition of the
Corporation, and shall perform such other duties as the Code of By-Laws, the
Board of Directors or the President may prescribe. The Treasurer may be
required to furnish bond in such amount as shall be determined by the Board of
Directors.
SECTION 5.10. ASSISTANT OFFICERS. The Board of Directors may from time to
time designate and elect assistant officers who shall have such powers and
duties as the officers whom they are elected to assist shall specify and
delegate to them, and such other powers and duties as the Code of By-Laws, the
Board of Directors or the President may prescribe. An Assistant Secretary may,
in the absence or disability of the Secretary, attest the execution of all
documents by the Corporation.
SECTION 5.11. DELEGATION OF AUTHORITY. In case of the absence of any
Officer of the Corporation, or for any other reason that the Board may deem
sufficient, the Board may delegate the
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powers or duties of such Officer to any other Officer or to any Director, for
the time being, provided a majority of the entire Board concurs therein.
ARTICLE 6
SPECIAL CORPORATE ACTS, NEGOTIABLE
INSTRUMENTS, DEEDS, CONTRACTS AND STOCK
SECTION 6.01. EXECUTION OF NEGOTIABLE INSTRUMENTS. All checks, drafts,
bills of exchange and orders for the payment of money of the Corporation shall,
unless otherwise directed by the Board of Directors, or unless otherwise
required by law, be signed by any two of the following officers: President,
Vice-President, Secretary or Treasurer. The Board of Directors may, however,
authorize any one or more of such officers to sign checks, drafts, bills of
exchange and orders for the payment of money by the Corporation singly and
without necessity of countersignature; and the Board of Directors may designate
any employee or employees of the Corporation, in addition to those named above,
who may, in the name of the Corporation, execute checks, drafts, bills of
exchange and orders for the payment of money by the Corporation or in its
behalf.
SECTION 6.02. EXECUTION OF DEEDS, CONTRACTS, ETC. All deeds, notes, bonds
and mortgages made by the Corporation and all other written contracts and
agreements, other than those executed in the ordinary course of corporate
business, to which the Corporation shall be a party shall be executed in its
name by the President, the Vice-President or by any other Officer so authorized
by the Board of Directors, acting by resolution; and the Secretary, when
necessary or required, shall attest the execution thereof.
SECTION 6.03. ORDINARY CONTRACTS AND AGREEMENTS. All written contracts
and agreements into which the Corporation enters in the ordinary course of
business operations shall be executed by any Officer of the Corporation or by
any other employee of the Corporation designated by the President to execute
such contracts and agreements.
SECTION 6.04. ENDORSEMENT OF CERTIFICATES FOR SHARES. Unless otherwise
directed by the Board of Directors, any share or shares issued by any
corporation and owned by the Corporation (including reacquired shares of the
Corporation) may, for sale or transfer, be endorsed in the name of the
Corporation by the President or the Vice-President, and such endorsement shall
be duly attested by the Secretary.
SECTION 6.05. VOTING OF SHARES OWNED BY CORPORATION. Unless otherwise
directed by the Board of Directors, any share or shares issued by any other
corporation and owned, or controlled by the Corporation may be voted at any
shareholders' meeting of such other corporation by the President of the
Corporation if he be present, or in his absence by the Vice-President of the
Corporation. Whenever, in the judgment of the President, it is desirable for
the Corporation to execute a proxy or give a shareholders' consent in respect to
any share or shares issued by any other corporation and owned by the
Corporation, such proxy or consent shall be executed in the name of the
Corporation by the President or the Vice-President of the Corporation. Any
person or persons designated in the
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manner above stated as the proxy or proxies of the Corporation shall have full
right, power and authority to vote the share or shares issued by such other
corporation and owned by the Corporation in the same manner as such share or
shares might be voted by the Corporation.
ARTICLE 7
AMENDMENTS
SECTION 7.01. AMENDMENT OF BY-LAWS. Subject to the requirements of
Section 4.07, the power to make, alter, amend or repeal the Code of By-Laws of
the Corporation is vested in the Board of Directors.
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[FORM OF LEGAL OPINION]
_____________________, 1997
Board of Directors
Made2Manage Systems, Inc.
9002 Purdue Road
Indianapolis, IN 46268
Gentlemen:
We have acted as counsel to Made2Manage Systems, Inc., an Indiana
corporation (the "Company"), in connection with the filing of a Registration
Statement on Form S-1 (the "Registration Statement") with the Securities and
Exchange Commission (the "Commission") for the purposes of registering under
the Securities Act of 1933, as amended (the "Securities Act"), an aggregate
of up to 2,300,000 shares of Common Stock of the Company (the "Shares") which
are to be offered to the public. Of the Shares, 180,000 Shares will be sold
by the Company (the "Company Shares"), 200,000 Shares will be sold by certain
shareholders of the Company and up to 300,000 Shares may be sold by certain
shareholders of the Company to cover the over-allotment option to be granted
to the underwriters (collectively, the "Shareholder Shares") as set forth and
described in the Registration Statement.
In connection therewith, we have investigated those questions of law we
have deemed necessary or appropriate for purposes of this opinion. We have
also examined originals, or copies certified or otherwise identified to our
satisfaction, of those documents, corporate or other records, certificates
and other papers that we deemed necessary to examine for the purpose of this
opinion, including:
1. The proposed form of Second Restated Articles of Incorporation of the
Company;
2. A proposed form of specimen certificate representing the Shares; and
3. The Registration Statement.
For purposes of this opinion, we have assumed (i) that the Company
Shares will be issued pursuant to the terms of the Registration Statement;
and (ii) that no changes will occur in the applicable law or the pertinent
facts before the issuance of the Shares.
<PAGE>
Board of Directors
October 16, 1997
Page 2
Based upon the foregoing and subject to the qualifications set forth in
this letter, we are of the opinion that when (a) the pertinent provisions of
the Securities Act and all relevant state securities laws have been complied
with and (b) the Company Shares have been delivered against payment therefor
as contemplated by the Registration Statement, the Shares will be validly
authorized, legally issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this Firm under the caption
"Legal Matters" in the Prospectus, included as a part of the Registration
Statement. In giving this consent, we do not admit that we are within the
category or persons whose consent is required under Section 7 of the
Securities Act or under the rules and regulations relating thereto.
Very truly yours,
<PAGE>
OFFICE LEASE
by and between
NATIONWIDE LIFE INSURANCE COMPANY
as LANDLORD,
and
TEKSYN, INC.
as TENANT
City of Indianapolis
County of Marion
State of Indiana
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OFFICE LEASE
This Lease, made as of this 2nd day of November 1994 by and between
NATIONWIDE LIFE INSURANCE COMPANY, as Landlord, and Teksyn, Inc., as Tenant.
W I T N E S S E T H:
WHEREAS, Landlord and Tenant wish to enter into a lease of that certain
space in Landlord's Building (hereinafter defined), which space is described as
the Leased Premises (hereinafter defined), subject to the terms and conditions
hereinafter set forth;
NOW THEREFORE, the parties hereto agree as follows:
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the
Leased Premises, on and subject to the terms and conditions set forth
hereinbelow as the Specific Lease Provisions, on and subject to the terms and
conditions set forth hereinbelow as the General Lease Provisions, and on and
subject to the terms and conditions set forth in the following addenda, exhibits
and appendices attached hereto and made a part hereof;
(i) Addendum - Supplements and Amendments
(ii) Exhibit A - Building Floor Plan(s)
(iii) Exhibit B - Work
which addenda, exhibits and appendices thereto, if any, and all provisions
thereof are, by this reference, incorporated into this Lease, and constitute an
integral part of this Lease.
SPECIFIC LEASE PROVISIONS
These Specific Lease Provisions constitute an integral part of the Lease.
Without limiting the generality of the foregoing, the following fundamental
terms and conditions and definitions shall be used in and shall apply to this
Lease.
(a) Landlord: NATIONWIDE LIFE INSURANCE COMPANY
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(i) form of entity (corporation, partnership, joint venture,
etc.): CORPORATION
(ii) state of organization: OHIO
(iii) d/b/a: N/A
(b) Tenant: Teksyn, Inc.:
(i) form of entity (corporation, partnership, joint venture,
etc): CORPORATION
(ii) state of organization: Indiana
(c) Building: a four (4)-story office building located at 9002 Purdue
Road, Indianapolis, Indiana, 46268, which Building, together with the real
estate owned or leased by Landlord on which the same is located, and all other
structures thereon as well as any landscaping, sidewalks, drives, parking areas
and other improvements from time to time appurtenant thereto, are hereinafter
sometimes referred to as the "Property".
(d) Leased: that portion or portions of the second (2nd) floor of the
Building as generally shown and outlined on the floor plan(s) attached hereto as
Exhibit A and made a part hereof, presently designated by Landlord as Suite 200,
having a total allocated (by Landlord) area of approximately 12,612 square feet
of floor space (it being understood that such floor plan does not constitute a
representation of the measurements or dimensions of the Leased Premises, but
only shows the approximate location thereof).
(e) Permitted Use of Leased Premises: GENERAL OFFICES
(f) Commencement Date: To be set by subsequent agreement of the parties
hereto. (subject to the provisions of the General Lease Provisions).
Furthermore, it is in the intent of the parties to have a Commencement Date of
January 1, 1995 or before, but in no event later than March 31, 1995.
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(g) Expiration Date: Seventy-six (76) months from the Commencement Date,
not including any partial month in which the Commencement Date occurs.
(h) Base Rent: For the term of the Lease, the Base Rent shall be payable
in equal monthly installments of One Thousand Fifty One and 00/100 Dollars
($1,051.00) each for months 1-4 inclusive, Seven Thousand Five Hundred Ninety
Four and 17/100 Dollars ($7,594.17) each for months 5-22 inclusive, Twelve
Thousand Nine Hundred Sixty Nine and 17/100 ($12,969.17) each for months 23-40
inclusive, Thirteen Thousand Two Hundred Thirty One and 17/100 ($13,231.17) each
for months 41-52 inclusive, and Fourteen Thousand Five Hundred Forty Five and
42/100 Dollars ($14,545.42) each for months 53-76 inclusive.
(i) Escalation Rent: Tenant's share of increases in Operating Expenses
and Taxes (commencing January 1, 1995) over the Base Year: 24.90% (such share
represents that percentage of the Building rentable area, as of the date hereof,
allocated to the Leased Premises. The Base Year for Operating Expenses shall be
1994, and the Base Year for Taxes shall be 1993 payable 1994).
(j) Security Deposit: $13,400.00, which shall be held by Landlord
(without interest thereon owing to Tenant) and applied as security for the
payment and performance of Tenant's obligations under this Lease. Whenever and
as often as the amount of the security held by Landlord shall be diminished by
Landlord's application thereof, Tenant shall, within ten (10) days after
Landlord's request therefor, deposit additional money with Landlord sufficient
to restore the security to its original amount.
(k) Insurance Coverage: Minimum Coverage Amounts of $1,000,000 for
personal injury and for property damage on the basis of a combined single limit
endorsement.
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(l) Work: Landlord and Tenant agree to perform improvements to and
construction of the Leased Premises in accordance with the provisions of Exhibit
B attached hereto and by this reference made a part hereof, and in accordance
with applicable laws and codes, to the extent any such improvements and
construction are expressly required under the provisions of Exhibit B attached
hereto.
(m) Landlord's Address for Notices, Demands, Communications and
Transmittals under the Lease: NATIONWIDE LIFE INSURANCE COMPANY, ONE NATIONWIDE
PLAZA, COLUMBUS, OHIO 43216 with a copy thereof to Hokanson Companies, Inc., 107
North Pennsylvania Street, Suite 800, Indianapolis, Indiana 46204.
(n) Landlord's Address for Payments under the Lease: HOKANSON COMPANIES,
INC., 107 NORTH PENNSYLVANIA STREET, SUITE 800, INDIANAPOLIS, INDIANA 46204,
ATTENTION: PROPERTY MANAGEMENT.
(o) Tenant's Address for Notices, Demands, Communications, Transmittals
and Payments under the Lease: 9002 Purdue Road, Suite 200, Indianapolis,
Indiana 46268 with a copy of any Notice to N/A.
(p) Guarantor(s), if any: N/A pursuant to a written guarantee
satisfactory in form and substance to Landlord.
GENERAL LEASE PROVISIONS
These General Lease Provisions constitute an integral part of the Lease.
1. PREMISES. Landlord leases to Tenant and Tenant rents from Landlord
the Leased Premises subject, however, to the terms and conditions of this Lease.
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2. USE. The Leased Premises shall be used and occupied only for the
Permitted Use (and only to the extent lawful) and for no other use or purpose
whatsoever. Landlord makes no representations or warranties as to the legality
or permissibility of the Permitted Use under applicable federal, state and local
laws.
3. TERM/POSSESSION. The term of this Lease shall commence on the
Commencement Date, and shall end on the Expiration Date, both inclusive.
The Commencement Date of this Lease shall be as defined in the Specific
Lease Provisions or, if earlier, on the date when possession of the Leased
Premises shall first be delivered to Tenant (such delivery to be conclusively
evidenced by notice in writing from Landlord indicating a tender of delivery),
if such date is earlier than that defined in the Specific Lease Provisions. In
either event the Expiration Date shall remain unchanged.
In the event of Landlord's inability to deliver possession of the Leased
Premises ready for occupancy on the Commencement Date as defined in the Specific
Lease Provisions, Landlord shall not be liable for any damage caused thereby,
nor shall this Lease be void or voidable by Tenant, but in such event no rental
shall be payable by Tenant to Landlord prior to actual delivery of possession of
the Leased Premises to Tenant
4. RENT. Tenant shall, during the term hereof, pay the following
amounts, in lawful money of the United States of America, at the following times
to Landlord, without offset or deduction, as and for rent under this Lease.
(a) BASE RENT. Tenant shall pay to Landlord during the term of this
Lease, at the address and to the payee as set forth in the Specific Lease
Provisions, or to such other person or such other place as directed from time to
time by notice to Tenant from Landlord, the annual Base Rent, in equal
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monthly installments of 1/12th of such amount each. Each monthly installment
shall be payable in advance promptly on the first day of every calendar month
during the term of this Lease and at a prorated rate for fractions of a month if
the term hereof shall commence and/or end on any day other than the first day of
any month or if this Lease shall be otherwise terminated on any day other than
the last day of any month.
(b) OPERATING EXPENSE TAX ESCALATION.
(i) It is understood that the Base Rent specified in subparagraph (a)
does not anticipate any increase in the amount of taxes on the Property of
which the Leased Premises are a part or in the cost of operations and
maintenance thereof. Therefore, in order that the rent payable throughout
the term of this Lease shall reflect any such increases, the parties agree
that Tenant shall pay as additional rent ("Escalation Rent") during the
first full calendar year commencing immediately after the Commencement Date
of this Lease, and during all subsequent calendar years during the term of
this Lease, an amount equal to the Tenant's share of the excess of (A) the
Taxes and Operating Expenses for the Property with respect to the calendar
year for which said Escalation Rent is being calculated over (B) the amount
of Taxes and Operating Expenses for the Property with respect to the Base
Year (and if the Base Year is less than a full calendar year, said amount
shall be annualized).
For purposes of calculating Escalation Rent herein provided for,
certain terms are defined as follows:
TAXES: "Taxes" shall mean the aggregate amount of real estate taxes
and assessments and governmental charges, whether federal, state, county,
city, district, or otherwise (exclusive of penalties, interest and discount
thereon or with respect to a refund thereof)
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imposed upon the Property including, without limitation (1) real estate
taxes upon any "air rights" or payable by Landlord to a ground lessor with
respect thereto and (2) any special assessments levied for public benefits
to the Property or any part thereof (excluding an amount equal to the
assessments payable in whole or in part during or for the Base Year), which
assessments, if payable in installments, shall be deemed payable in the
maximum number of permissible installments, in the manner in which such
taxes and assessments are imposed as of the date hereof; provided, that if
because of any change in the taxation of real estate, any other tax or
assessment (including, without limitation, any occupancy, gross receipts or
rental tax) is imposed upon Landlord or the owner of the Property or any
part thereof, or upon or with respect to the Property or any part thereof
or the occupancy, rents or income therefrom, in substitution for, or in
addition to, any of the foregoing Taxes, such other tax or assessments
shall be deemed part of the Taxes. With respect to any calendar year, all
expenses, including legal fees, experts' and other witnesses' fees,
incurred in contesting the validity or amount of any Taxes or in obtaining
a refund of Taxes, shall be considered as part of the Taxes for such year.
OPERATING EXPENSES: Those expenses incurred or paid on behalf of the
Landlord in respect of the operation and maintenance of the Property which,
in accordance with accepted principles of sound accounting practice used by
the Landlord, as applied to the operation and maintenance of first class
office buildings, are properly chargeable to the operation and maintenance
of the Property.
Operating Expenses of the Property are hereby defined to include, but
are not limited to, the following: (1) wages and salaries of all employees
engaged in the operation and maintenance
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of the Property, including employer's social security taxes and other taxes
which may be levied on such wages and salaries, and also including any other
fringe benefits; (2) all janitor and office supplies and material used in the
operation and maintenance of the Property; (3) all charges incurred for security
guard services, security equipment, and fire protection or prevention equipment;
(4) cost of all maintenance and service agreements on equipment, including
window cleaning and trash hauling; (5) insurance premiums (and uncompensated
losses or liabilities falling within policies' deductibles); (6) cost of repairs
and general maintenance, exclusive of expense of alterations of the Building for
the accommodation of a specific tenant; (7) cost of gas, water, steam and other
power, heating, lighting, ventilating and air conditioning, electricity, and
sewer charges of the Property and occupants; (8) cost of maintenance and upkeep
of the parking areas, landscaping and grounds of the Property; and (9) cost, as
reasonably amortized by the Landlord, with interest at the rate of 1% per annum
in excess of the publicly-announced prime rate of interest of Mercantile Trust
Company National Association as of the first day of the relevant year on the
unamortized amount, of any capital improvements made after the Base Year which
reduces or is meant to reduce other Operating Expenses or at least, which
reduces or is meant to reduce the increases in Operating Expenses or which
improves the quality or quantity of building services.
(ii) in determining the amount of Operating Expenses for the Base
Year or for any subsequent year, (i) if less than 100% of the Building
rentable area shall have been occupied by tenants of fully used by them at
any time during the relevant year. Operating Expenses shall be deemed to
be increased to an amount equal to the like Operating Expenses which would
normally be expected to be incurred, had such occupancy been 100% and had
such full utilization been made during the entire period, or (ii) if
Landlord is not furnishing any
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particular work or service (the cost of which, if performed by Landlord,
would constitute Operating Expense) to a tenant who has undertaken to
perform such work or service in lieu of the performance thereof by
Landlord, Operating Expenses shall be deemed to be increased by an amount
equal to the additional Operating Expenses which would reasonably have been
incurred during such period by Landlord if it had at its own expense
furnished such work or service to such tenant.
(iii) Landlord shall deliver to Tenant a statement of estimated
Escalation Rent for each calendar year during which Escalation Rent may be
payable. One-twelfth (1/12) of such estimated Escalation Rent shall be due
and payable with the payment of each month's Base Rent for such calendar
year.
(iv) At the end of each calendar year or within one hundred fifty
(150) days thereafter Landlord shall submit to Tenant a statement of actual
Escalation Rent due with respect to said calendar year, and either Landlord
shall promptly refund to Tenant any excess of estimated Escalation Rent
actually paid over actual Escalation Rent, or Tenant shall within ten (10)
days thereafter pay any excess of actual Escalation Rent over estimated
Escalation Rent actually paid to Landlord.
(v) If during any calendar year or part thereof, Landlord shall
not have delivered to Tenant the statement of estimated Escalation Rent
hereinabove referred to for such calendar year, Tenant shall continue to
pay Landlord the monthly amount of estimated Escalation Rent payable with
respect to the immediately preceding calendar year until the statement of
estimated Escalation Rent for the then current calendar year shall be
delivered,
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at which time the monthly payments by Tenant shall be adjusted
retroactively (and Tenant shall pay the adjusted amount on demand).
(vi) Landlord shall maintain or cause to be maintained complete
and accurate records and accounts in such manner and detail as to provide a
proper basis for analysis of the statements to be furnished by Landlord to
Tenant pursuant to this subparagraph (b). Tenant shall have the right to
have a certified public accountant examine said accounts and records for
the purpose of verifying the information set forth in any such statement,
at the Tenant's cost, one time for each calendar year, provided such
examination is made during regular business hours, and provided that a
written request for such inspection is made by Tenant within ten (10) days
after receipt of a statement. Such examination, however, shall not extend
the due date for payment. In the event of any dispute under this
provision, the determination of the certified public accountant then
servicing the Landlord's books relating to the Property shall be binding on
all parties.
(c) ADDITIONAL RENT. In addition to all Base Rent and Escalation Rent
payable under this Lease, any and all other payments to be made by Tenant
hereunder, including, without limitation payments to be made pursuant to
paragraph 6 of the General Lease Provisions, and any amounts or costs expended
or incurred by Landlord in curing or by reason of any default of Tenant, shall
be deemed for the purpose of securing the collection thereof to be additional
rent hereunder, whether or not the same be designated as such, and shall be due
and payable at the time provided in this Lease, and if no such time is provided
they shall nevertheless be collectible as additional rent on demand or together
with the next succeeding installment of Base Rent, whichever shall first occur;
and Landlord shall have the same rights and remedies upon Tenant's failure to
pay the same as for the non-payment
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of the Base Rent. Landlord, at its election, shall have the right (but not the
obligation) to pay for or perform any act which requires the expenditure of any
sums of money by reason of the failure or neglect of Tenant to perform any of
the provisions of this Lease within the grace period, if any, applicable
thereto, and in the event Landlord shall at its election pay such sums or
perform such acts requiring the expenditure of monies. Tenant agrees to
reimburse and pay Landlord, upon demand, all such sums, which shall be deemed to
be additional rent hereunder and be payable by Tenant as such.
(d) PAST DUE RENT. If Tenant shall fail to pay, when the same is due and
payable, any Base Rent or Escalation Rent, or any additional rent, or amounts or
charges of the character described in subparagraph (c) hereof, all such unpaid
amounts shall bear interest at the rate of 2% per month or, if less, the maximum
rate permitted by applicable law, from the date due to the date of payment. In
addition to such interest, if Tenant shall fail to pay any monthly installment
of Base Rent by the fifth (5th) day of the month such installment is due, in
order to compensate Landlord for a portion of its administrative charges
attendant thereupon a late charge equal to 1/30th of the monthly installment of
Base Rent shall be assessed and shall accrue for each day beyond the expiration
of said five (5) day period until such rental, including the late charge, is
paid in full. The interest and late charge provision contained herein are in
addition to and do not diminish or represent a substitute for any or all of
Landlord's rights or remedies elsewhere herein.
(e) SURVIVAL. Any liability of Tenant for the payment of any money under
this Lease shall survive the Expiration Date or earlier termination of this
Lease.
(f) NO REDUCTION IN BASE RENT. In no event shall the Base Rent hereunder
be reduced, even in the event of a decrease in Operating Expenses and/or Taxes.
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(g) ALLOCATION. All rent payable under this Lease shall be the amount of
rent allocable to the period for which payment is made for purposes of Section
467 of the Internal Revenue Code of 1954, as amended.
5. SERVICE. The Landlord shall provide the following services:
(a) Janitor service and customary cleaning in and about the Leased
Premises (Saturdays, Sundays and Holidays excepted).
(b) Heating and air conditioning during, respectively, the seasons when
such services shall be necessary for the use and occupancy of the Leased
Premises, during normal business hours of the Property as designated by
Landlord.
(c) Water from the public water mains for public drinking, lavatory and
toilet purposes, drawn through fixtures installed by Landlord.
(d) Operatorless elevator service (where applicable) in common with other
tenants at all times.
Landlord does not warrant that any of the foregoing services or any other
utilities provided to or on the Leased Premises will be free from interruptions
caused by repairs, renewals, improvements, alterations, strikes, lockouts,
accidents, inability of Landlord to obtain fuel or supplies, or any other cause
or causes beyond the reasonable control of Landlord. Any such interruption of
service shall never be deemed an eviction or disturbance of Tenant's use and
possession of the Leased Premises or any part thereof, or render Landlord liable
to Tenant or liable for the performance of Tenant's obligations under this
Lease; provided, however, that Landlord will at all times use reasonable efforts
promptly to remedy any situation which might interrupt such services.
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6. ELECTRICITY. Landlord will furnish all electric power for normal
lighting and normal operation of small office machines, such as typewriters and
photocopiers, and for air conditioning and heating as may be required for
comfortable occupancy of the Leased Premises during normal business hours of the
Property, as determined from time to time by Landlord (the cost of which, as
well as the costs of similar electrical consumption by other occupants of the
Building for their respective premises, shall constitute "Operating Expenses"
under paragraph 4 of these General Lease Provisions). Landlord reserves the
right, however, if Landlord shall from time to time determine that consumption
of electricity within the Leased premises exceeds that required for normal
business use during normal business hours, to charge Tenant for such excess
consumption, which charge shall be based on the average cost per unit of
electricity for the Building applied to the excess use as determined by a
utility consultant selected by Landlord or shall, at Landlord's option, be based
upon a submeter for electrical utilities exceeding normal business office use
standards, as determined by Landlord. If at Landlord's option, a submeter is to
be installed for any electrical utilities, Tenant shall pay the cost of
installation of the same and thereafter Tenant shall pay Landlord monthly for
the electrical utility services so submetered at the same rates which Tenant
would pay to the utility company supplying such service if such service were
supplied by direct meter.
7. CONDITION OF THE LEASED PREMISES. During the continuance of this
Lease, Tenant shall keep the Leased Premises and appurtenances in good order and
repair, furnishing its own routine maintenance to furnishings and fixtures
thereon and any snack or dining areas therein, and replacing all glass broken
through misuse or negligence of Tenant with glass of same size and quality as
that broken; shall keep the said Leased Premises and appurtenances in a
wholesome condition without charge or expense to Landlord; shall not allow any
waste or misuse of the water; shall pay all
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damages to the Building as well as damages to the occupants thereof caused by
any waste, misuse or neglect of the Leased Premises, its apparatus or
appurtenances; shall not make nor allow to be made any change, alteration or
addition in, upon or to the Leased Premises without the written consent of
Landlord for that purpose first had and obtained; and at the expiration of the
time mentioned in this Lease, or at an earlier termination hereof by forfeiture
or otherwise, shall yield up the Leased Premises together with all its apparatus
and appurtenances to Landlord in the same condition as when leased, reasonable
and ordinary wear and tear excepted, and will surrender all original and
duplicate keys of the several doors and such other things as appertain to the
Leased Premises, and will remove all its signs or other like items installed and
restore or repair the Leased Premises to their original condition.
8. ALTERATIONS. Tenant may not make alterations in or additions to the
Leased Premises unless Tenant has first obtained from Landlord written
permission to do so, and Tenant shall, if requested by Landlord, furnish
Landlord with plans and specifications, names and addresses of the contractors
who will perform the work, copies of the contracts, all necessary permits and
indemnification in form and amount satisfactory to Landlord against any and all
claims, costs, damages, liabilities and expenses which may arise in connection
with the alterations or additions. Whether Tenant shall have furnished Landlord
the foregoing or not, Tenant hereby agrees to hold Landlord harmless from any
and all liabilities of every kind and description which may arise out of or be
connected with the alterations or additions. Tenant shall bay the cost of all
such alterations and additions and also the cost of decorating the Leased
Premises occasioned by such alterations and/or additions. Tenant shall not
overload, damage or deface the Leased Premises, the Building or the Property or
do any act or thing or bring or keep anything thereon which may make void or
voidable
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any insurance on the Leased Premises or the Building or which may render an
increase or extra premiums payable for insurance. Tenant shall not move any
heavy equipment into the Leased Premises except with prior written consent of
Landlord and upon such terms as Landlord may specify. Upon completion of any
alterations or additions, Tenant shall furnish Landlord with contractors'
affidavits and full waivers of liens and receipted bills covering all labor,
materials and subcontractors expended and used. All alterations and/or
additions must be completely finished in a good and neat workmanlike manner and
comply in all respects with all insurance requirements and with all applicable
federal, state, or municipal statutes, laws, ordinances and regulations, or any
department or agency thereof, or any department thereof, and including, without
limitation, the standards and regulations of O.S.H.A. and environmental laws and
regulations applicable to such alterations, and/or additions. Only good grades
of materials shall be used in the alterations and/or additions. All additions
shall become Landlords's property and shall remain upon the Leased Premises at
the termination of this Lease by lapse of time or otherwise, without
compensation or allowance or credit to Tenant. All changes made by Tenant shall
be restored to their original condition at Tenant's expense, if Landlord so
requests. Any alterations, additions or repairs shall be performed by labor
which is compatible with the union or unions representing the service employees
of Landlord in the Building.
9. CERTAIN RIGHTS RESERVED TO LANDLORD. Landlord reserves the following
rights:
(a) Access to mail chutes. To have access for Tenant and the other
tenants of the Building to any mail chute located on the premises according to
the rules and regulations of the United States Post Office.
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(b) Occupancy. During the last ninety (90) days of the term of this
Lease, if during or prior to that time Tenant vacates the Leased Premises, the
Landlord may decorate, remodel, repair, alter or otherwise prepare the Leased
Premises for re-occupancy.
(c) Pass Keys. To have pass keys to the Leased Premises, in order to gain
access to the Leased Premises herein.
(d) Access for Repairs, etc. To have access to the Leased Premises at all
reasonable times upon prior notice to Tenant, and at any time in the event of
emergency, to make periodic inspections thereof and to make repairs,
alterations, additions, and improvements to the Leased Premises or the Building,
as may be necessary or desirable in the operation of the Building.
(e) Show Premises. To show the Leased Premises to prospective tenants or
brokers during the last year of the term of this Lease or as extended, and to
prospective purchasers at all reasonable times, provided prior notice is given
to Tenant in each case and the Tenant's use and occupancy of the Leased Premises
is not materially inconvenienced by any such action of Landlord.
(f) Service Contracts. To designate all suppliers of signs, drinking
water, beverages, foods, towels or toilet supplies, or other utilities or
services used or consumed in the Building or the Leased Premises.
(g) Heavy Equipment. To approve the weight, size and location of safes or
other heavy equipment or articles, and the time and manner that they may be
moved in, about or out of the Building (in all events, however, at Tenant's sole
risk and responsibility, and subject to such reasonable preconditions and
requirements, including engineering analysis and insurance, as Landlord may
specify).
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(h) Close Building. To clone the Building after regular working hours and
on legal holidays, subject, however, to the Tenant's right to admittance, under
such reasonable regulations as Landlord may prescribe from time to time, which
may include by way of example but not of limitation, that persons entering or
leaving the Building identify themselves and display the contents of their
clothing, cases and boxes to a security guard by registration or otherwise and
that said persons establish their right to enter or leave the Building.
(i) Repairs. To make repairs, alterations or improvements to the Building
or any part thereof, and during such operations close the corridors, elevators
and other facilities.
(j) Name and Address of Property. To alter or change the name of the
Property or the Building or to change the street address for the Building or the
Leased Premises.
(k) Signage. To control the sign program for the Property and the
Building in every respect. In connection therewith, Tenant agrees that Tenant
shall not, without Landlord's prior written consent, install or permit to be
installed any sign within, on or about the Leased Premises; and Tenant further
agrees that Tenant shall not install or operate or permit to be installed or
operated any flashing, moving, flickering or blinking illuminations, animations,
moving lights or floodlights, or any loudspeakers or other amplified sounds, in,
on or about the Leased Premises, which may be heard, seen or experienced outside
the Leased Premises.
Landlord may enter upon the Leased Premises as specified above (Landlord
having or reserving such easements, rights of access or licenses as may be
reasonably necessary therefor) and may exercise any or all of the foregoing
rights hereby reserved without being deemed guilty of any interference with
Tenant's use, occupancy or enjoyment of the Leased Premises or an eviction or
disturbance of the Tenant's use or possession, and without being liable in any
manner to the Tenant.
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Landlord hereby further reserves, and Tenant hereby grants to Landlord,
such licenses or easements in, under or over the Leased Premises or any portion
or portions thereof as shall be reasonably required for the installation or
maintenance of mains, conduits, pipes, or other facilities to serve the Building
or any part thereof, including but not by way of limitation, the premises of any
other occupant thereof; provided, however, that Landlord shall pay for any
alteration required on the Leased Premises as a result of any such exercise,
occupancy under, or enjoyment of, any such license or easement; and no exercise,
occupancy under, or enjoyment of any such license or easement shall be deemed an
interference with Tenant's use, occupancy, or enjoyment of the Leased Premises
or an eviction or disturbance of Tenant's use or possession.
10. RULES AND REGULATIONS. Tenant, its employees and guests, shall abide
by the attached rules and regulations and all reasonable rules and regulations
from time to time adopted by Landlord pertaining to the security, protection,
operations, replacement, repair, maintenance and management of the Building.
Landlord shall have no liability for violation by any other occupant of any
rules or regulations, nor shall violation thereof by any other occupant excuse
Tenant from compliance. If any rules and regulations are contrary to the
express terms of this Lease, the terms of this Lease shall govern.
11. ASSIGNMENT/SUBLETTING. Tenant shall not sublet the Leased Premises or
any part thereof, nor allow the same to be used or occupied by any other person
or for any other use than that herein specified, nor assign, mortgage, encumber
or otherwise transfer this Lease or any interest therein, without the written
consent of Landlord (and as a condition to such consent, which in any event may
be withheld by Landlord, in its sole discretion. Landlord may require (a) that
Tenant pay Landlord all or any portion of the consideration for assignment or
the rental under sublease in excess
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of the rental under this Lease, and/or (b) that the assignee expressly assume
this Lease or that the subtenant expressly agree to attorn to Landlord; and
Tenant shall not suffer or permit any assignment or other transfer by operation
of law or otherwise, of the estate or interest of Tenant in the Leased Premises
acquired in, by or through this Lease. Any request for the consent of Landlord
to an assignment, mortgage, encumbrance, or transfer of this Lease, or a
subletting of the Leased Premises shall be accompanied by a payment in the
amount of $250.00 representing a reasonable estimate of Landlord's costs of
processing and administration in reviewing Tenant's request and the information
pertaining thereto. Landlord shall not be required to respond to any such
request without payment, as aforesaid. Any consent which Landlord may give to
any assignment, mortgage, encumbrance or other transfer of this Lease or to any
sublease or co-tenancy of the Leased Premises shall be restricted to the
particular assignment, mortgage, encumbrance or transfer of this Lease or to the
particular sublease or co-tenancy, and the agreement herein not to assign or
sublet shall remain in effect against Tenant and Tenant's assign(s). Any
consent to assignment, transfer or sublease which may be given by Landlord shall
not constitute a release of Tenant or any guarantor from the covenants herein
contained, it being understood that Tenant and any guarantor of this Lease shall
remain fully liable for the payment and performance hereof.
12. CASUALTY. If the Leased Premises or any other part of the Building or
the Property are damaged by fire or other casualty, the damage shall be repaired
by and at the expense of Landlord, unless this Lease is terminated as herein
after provided. Until such repairs are completed, the Base Rent shall be abated
in proportion to the part of the Leased Premises which is unusable by Tenant in
the conduct of its business and for the length of time that such condition
persists; provided however, there shall be no abatement of Base Rent (a) if the
Leased Premises (or any portion thereof) are
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unusable for a period of fifteen (15) days or less, (b) if the damage is due to
the fault or neglect of Tenant or any subtenant, or any agents, employees,
servants, invitees, permittees or licensees thereof; nor shall there be any
abatement of Base Rent on account of damage to the Building or any other part of
the Property unless such damage includes damage to the Leased Premises or
prevents access to the Leased Premises.
In the event of fire or other casualty to the Leased Premises or the
Building, if said fire or other casualty results in the total destruction of the
Building, this Lease shall automatically terminate as of the date of said
destruction. If the Leased Premises are damaged and made untenantable by fire
or other casualty, and if a registered architect selected by Landlord should
certify that repair and rehabilitation of the Leased Premises cannot be
accomplished by using standard working methods, procedures and materials so as
to make the Leased Premises tenantable within one hundred twenty (120) days from
the date rehabilitation is started, either party shall have the right to
terminate this Lease by giving to the other party notice of such election within
fifteen (15) days after receipt of the architect's certificate of decision. If
the common areas and facilities, if any, within the Building are damaged by fire
or other casualty, and if a registered architect selected by Landlord should
certify that repair and rehabilitation of such common areas and facilities
cannot be accomplished by using standard working methods, procedures and
materials so as to restore such common areas and facilities within one hundred
twenty (120) days from the date rehabilitation is started, Landlord shall have
the right to terminate this Lease by giving to Tenant notice of such election
within fifteen (15) days after receipt of the architect's certificate of
decision. If any material portion of the Building is damaged by fire or other
casualty, and if the casualty results from an uninsured risk under standard
broad form of fire and extended coverage insurance policies then Landlord may,
by written notice to
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Tenant within sixty (60) days of such damage, elect to terminate this Lease. In
any case of termination of this Lease, all rent and other charges shall be
apportioned on a per diem basis and be paid to the date of termination.
Nothing herein shall be construed as a limitation of Tenant's liability for
any damage to the Leased Premises, to the Building, or to any other part of the
Property, should such liability otherwise exist.
13. INSURANCE. At all times during the term of this Lease, Tenant shall,
at Tenant's sole cost and expense, keep Tenant's furniture, furnishings, trade
fixtures and equipment insured against loss or damage by fire, lightning,
windstorm, cyclone, tornado, hail, explosion, riot, aircraft, vehicles, smoke,
civil commotion, glass breakage, sprinkler leakage, vandalism, malicious
mischief, flood, earthquake, and such other casualties and events as may be
insured against under the broad form of uniform fire and extended coverage
clause in effect from time to time in the State in which the property is
situated with endorsement for coverage of "all risk" perils and the aforesaid
specific perils, for not less than their full insurable replacement value. At
all times during the term of this Lease, Tenant shall, at its sole cost and
expense, maintain or cause to be maintained: (a) general public liability
insurance against claims for bodily injury or death occurring on, in, or about
the Leased Premises; and (b) comprehensive property damage insurance covering
liability for damage to all property, such insurance to be in at least the
Minimum Coverage Amounts set forth in the Specific Lease Provisions.
Policies of insurance provided for herein shall be with companies
acceptable to Landlord, shall name Landlord and by endorsement, Landlord's
mortgagees and/or ground lessors, if any, as insureds as their respective
interests may appear, and Tenant shall provide Landlord with certificates
thereof
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at least thirty (30) days prior to the expiration of such policies (and Tenant
agrees to pay, on demand, a Fifty and No/100 Dollars ($50.00) processing charge
in the event Tenant fails to provide such certificates at the times so
required). Such policies of insurance shall include, to the extent available, a
waiver of subrogation clause in form satisfactory to Landlord.
Tenant hereby releases Landlord from and against any and all claims,
demands, liabilities or obligations whatsoever for damage to property or loss of
subrents or profits of Tenant resulting from or in any way connected with any
fire or accident or other casualty whether or not such fire, accident or other
casualty shall have been caused by either Landlord or by any agent, associate or
employee of Landlord, to the extent that such damage or loss is reimbursed under
any insurance policy which at the time of such damage or loss permits waiver of
subrogation rights prior to a loss under such policy.
14. RELEASE AND INDEMNIFICATION. Landlord shall not be liable for any
damage occasioned by failure to keep the Leased Premises in repair, and shall
not be liable for any damage done or occasioned by or from electric current,
plumbing, gas, water, steam, or sewage, or the bursting, leaking, running or
failure of operation of any radiator, tank, water closet, wash stand, waste
pipe, air conditioning or any other apparatus in, above, upon or about the
Building or other portions of the Leased Premises, nor for damage occasioned by
water, snow, or ice being upon any sidewalk or entrance way, or being upon or
coming through the roof, skylight, trap door or any other opening in the
Building or other portions of the Leased Premises, unless occasioned by the
willful misconduct of Landlord nor shall Landlord be liable, in any event, for
any damage arising from the action or negligence of Tenant, co-tenants or other
occupants thereof or of any owners or occupants of adjacent or contiguous
property.
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Tenant hereby releases, discharges and agrees to indemnify, protect and
save harmless Landlord of and from any and all claims, demands and liability for
any loss, damage, injury or other casualty to property, whether it be that of
either of the parties hereto or of third persons, whether they be third persons
of Tenant or agents or employees of Tenant, caused by growing out of or
happening in connection with Tenant's use or occupancy of the Leased Premises or
Tenant's use of any equipment, facilities or property in, or adjacent to the
Building. Landlord shall not be liable in any manner for mail deposited in the
mail chute nor any damage sustained to mail so deposited.
Landlord agrees that it will at all times during the term of this Lease
indemnify, protect, defend and save harmless Tenant from and against any and all
claims, costs, charge, liability or attorneys' fees arising from damage or
injury, actual or claimed, of whatsoever kind or character resulting from
Landlord's use of the Building or any part thereof, or Landlord's use of any
equipment, facilities or property in, on or adjacent to the Building.
15. CONDEMNATION. In the event that the whole of the Building or the
whole of the Leased Premises shall be taken by the exercise of the power of
eminent domain or proceedings in lieu thereof (hereafter referred to as
"condemnation proceeding"), then in such case, this Lease shall terminate as of
the date of the taking of possession by or the vesting of title in the
condemning authority (said date being hereinafter referred to as the "taking
date"). If less than the whole of the Building or the whole of the Leased
Premises shall be taken in a condemnation proceeding, Landlord may, at its
option, terminate this Lease as of the taking date, by giving written notice of
its exercise of such option within sixty (60) days after the taking date. If
less than the whole of the Leased Premises shall be taken in a condemnation
proceeding, Tenant may, at its option, terminate this Lease as of the taking
date, by giving written notice of its exercise of such option within sixty (60)
days after the
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taking date, provided that as a result of such taking, the Leased Premises (or
the remaining portion thereof) may no longer be adequately used for the purpose
so contemplated by this Lease and hereinbefore set forth. In the event of any
such termination, all rent and other charges shall be paid to and on the date of
termination (or, if later, the date Tenant exercises its election to so
terminate). If a portion of the Leased Premises shall be so taken and Tenant
shall not exercise its option to terminate this Lease or if such taking shall
not give rise to such an option to terminate, as aforesaid, then this Lease
shall terminate on the taking date only as to that portion of the Leased
Premises so taken but this Lease shall remain in force and effect with respect
to that portion of the Leased Premises not so taken and the Base Rent payable by
Tenant to Landlord hereunder shall be abated in proportion to the diminution in
the total floor space of the Leased Premises following such condemnation
proceeding (as compared with the total floor space thereof immediately prior to
such condemnation proceeding). All income, rent, interest, compensation and
award derived from any such taking under the power of eminent domain or
proceedings in lieu thereof with respect to the Property or any portion thereof
shall belong to and be the sole property of Landlord, Tenant waiving any right
or claim to the same (but Tenant may file a claim for its moving expenses).
16. COMPLIANCE WITH LAW. Tenant shall, at Tenant's sole cost and expense,
obtain any occupancy permit and similar licenses required in connection with the
occupancy and use of the Leased Premises, and conform with all ordinances, laws,
statutes, and requirements of municipal, state and federal authorities now in
force, or which may hereafter be in force, pertaining to the Leased Premises,
and shall faithfully observe in the use of the Leased Premises, all municipal,
state and federal ordinances, laws, statutes, and requirements now in force or
which may hereafter be in force. The judgment of any court of competent
jurisdiction, or the admission of Tenant in any action or
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proceeding against Tenant, whether Landlord be a party thereto or not, that
Tenant has violated any such ordinance, law, statute, or requirement in the use
of the Leased Premises, shall be conclusive of the fact as between Landlord and
Tenant.
17. DEFAULT AND REMEDIES. If Tenant shall default in the payment of rent
reserved, breach any other covenant or agreement of this Lease, or move out of,
abandon, or vacate the Leased Premises, then unless Tenant shall cure such
default, breach, abandonment, or vacating or moving out of the Leased Premises
within thirty (30) days of written notice, unless such breach cannot be cured in
thirty (30) days, in which event Tenant shall have a reasonable time to cure
such breach, Landlord may, at any time thereafter, without further demand or
notice of any kind, including, but without begin limited to, demand for payment
of rent, or for possession of the Leased Premises, either
(a) terminate this Lease, and with or without process of law, expel and
remove Tenant, or any other person or persons in occupancy from the Leased
Premises, together with their goods and chattels, using such force as may be
necessary in the judgment of Landlord or its agents in so doing, and repossess
the Leased Premises, provided that in the event of termination pursuant hereto
Landlord shall, nevertheless, be entitled to damages provided by law, just as if
Tenant repudiated this Lease; or
(b) terminate Tenant's right to possession only, without terminating this
Lease, and with or without process of law, expel and remove Tenant, or any other
person or persons in occupancy from the Leased Premises, together with their
goods and chattels, using such force as may be necessary in the judgement of
Landlord or its agents in so doing, and repossess the Leased Premises without
such entry and possession terminating this Lease or releasing Tenant in whole or
in part from Tenant's obligation to pay rent hereunder for the full term hereof.
Upon and after entry into
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possession without termination of this Lease, Landlord shall use its best
efforts to relet the Leased Premises or any part thereof for the account of the
Tenant, to any person, firm, or corporation, for such rent, for such term,
(including a term beyond the term hereof, but the part of any such term which is
beyond the term hereof shall not be chargeable to Tenant's account), and upon
such terms and conditions as Landlord, in Landlord's sole discretion, shall
determine, and Landlord shall apply all rents received upon such a reletting as
follows:
(i) first to the payment of such expenses as Landlord may have
incurred in recovering possession of the Leased Premises (including legal
expenses and attorneys' fees), and in putting the same into good order or
condition or preparing or altering the same for rental and reletting and
all other expenses, commissions and charges paid, assumed or incurred by
Landlord in or about reletting the Leased Premises; and
(ii) then to the fulfillment of covenants of Tenant hereunder.
If the consideration collected by Landlord upon any such reletting is not
sufficient to pay in full the amount of rent reserved in this Lease together
with the items and expenses enumerated in subparagraphs (i) and (ii) above, then
Tenant shall pay to Landlord the amount of each monthly deficiency upon demand,
as additional rent.
Landlord shall have a lien on all of the property, fixtures and furniture
of Tenant situated on the Leased Premises during the term of this Lease as
security for the payment of the rent reserved and the performance of the
agreements of this Lease by Tenant, which lien Landlord may enforce by distress
or attachment, and Tenant hereby waives all exemptions. If the rent reserved
herein shall at any time be in arrears or Tenant shall breach any of the
agreements of this Lease, Landlord shall thereupon be entitled to the immediate
possession of all of the property, fixtures and furniture of
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Tenant situated on the Leased Premises and may enter said Leased Premises and
take possession thereof. If at the end of thirty (30) days Tenant shall not
have fulfilled its obligations hereunder then Landlord, at its option may sell
the same at a public or private sale, and if such property is sold Landlords
shall apply the proceeds, first, to the cost and expense of such sale, second,
to the satisfaction of any sums owing to it from Tenant for nonpayment of rent
accrued or to accrue under the terms hereof or breaches of other obligations of
the Lease, and the balance, if any, it shall pay over to Tenant. Any property,
furniture, or fixtures belonging to Tenant which Landlord may store shall be at
Tenant's sole risk and Landlord shall not have held responsible for any breakage
or damage occasioned by such storing.
If this Lease is terminated at the election of Landlord, as herein
provided, or in any other way, Tenant shall, without demand, surrender and
deliver up said Leased Premises and property peaceably to Landlord immediately
upon such termination, and if Tenant shall remain in possession of the Leased
Premises, or any part thereof, one day after the termination of this Lease in
any of the ways above named, Tenant shall be deemed guilty of forcible detainer
of the Leased Premises under the statutes of the State in which the property is
situated and shall be subject to all the conditions and provisions above named
and to eviction and removal forcibly or otherwise with or without process of law
as above stated. After the commencement of a suit, or after final judgment, for
possession of the Leased Premises Landlord may receive and collect any rent due
from Tenant, and the payment of said rent shall not waive or affect said suit or
said judgment. Any property, furniture or fixtures belonging to Tenant may be
stored by Landlord, at Tenant's expense, and at Tenant's sole risk, and if not
removed by Tenant within thirty (30) days of a request by Landlord, the same
shall conclusively be abandoned by Tenant.
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All rights of Landlord in the event of default herein enumerated shall be
in addition to and without prejudice to any remedy or remedies which Landlord
may have at law or in equity for nonpayment of rent or for breaches of the
covenants and agreements hereof.
18. BANKRUPTCY AND INSOLVENCY. Tenant agrees that if at any time a
petition under the federal bankruptcy Code, as amended from time to time
hereafter (hereinafter referred to as the "Bankruptcy Code"), or any state
bankruptcy or insolvency statutes, be filed by or on behalf of Tenant, or shall
be filed against Tenant and shall remain undismissed for a period of sixty (60)
days after filing, such event shall constitute a default under this Lease and
Landlord shall be entitled to immediately exercise such rights and remedies it
may elect under this Lease without regard to the cure periods provided
hereunder. Tenant further agrees that, in such an event, Tenant (or its
successors in interest) shall appropriately assume or reject this Lease, for
purposes of the Bankruptcy Code, on or within sixty (60) days of such event. If
Tenant (or its successor in interest) fails or neglects to take such action
within sixty (60) days of such event, this Lease shall be deemed rejected for
purposes of the Bankruptcy Code.
In addition to the foregoing, the occurrence of any of the following shall
constitute a default under this Lease and Landlord shall be entitled to
immediately exercise such rights and remedies it may elect under this Lease
without regard to the cure periods provided thereunder: (a) general assignment
by Tenant for the benefit of creditors; (b) the appointment under applicable
state law of a trustee or receiver to take possession of substantially all of
Tenant's assets or of Tenant's interest in this Lease; or (c) the attachment, or
other judicial seizure, of substantially all of Tenant's assets or of Tenant's
interest in this Lease.
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As used herein above the term "Tenant" shall include the Tenant named
herein, as well as any surety or other guarantor of this Lease, or any assignee
or subtenant of Tenant.
19. LIENS. Tenant covenants and agrees that it shall not incur any
indebtedness giving a right to a lien of any kind or character upon the right,
title, or interest of Landlord in and to the Leased Premises and the Property of
which the Leased Premises is a part, and that no person shall ever be entitled
to any lien superior to the interest in this Lease reserved to Landlord upon the
Leased Premises directly or indirectly derived through or under Tenant, or its
agents or servants, or on account of any act or omission of Tenant. Should any
such lien be filed, Tenant shall cause to be discharged of record such lien by
paying it, or by filing a bond or otherwise, as permitted by law, within fifteen
(15) days after the filing of any such lien. If Tenant fails to discharge said
lien within such period, then in addition to any other right or remedy of
Landlord, Landlord may, but shall not be obligated to, procure its discharge by
paying the amount claimed to be due or by deposit in court or by bonding, and in
any such event Landlord shall be entitled, if Landlord so elects, to compel the
prosecution of an action for the foreclosure of such lien by lienor and to pay
the amount of the judgment, if an, in favor of lienor with interest, costs, and
allowances. Any amount paid by Landlord for any of the aforesaid purposes, and
all legal and other expenses of Landlord, including attorneys' fees, in
defending any such action or in or about procuring the discharge of such lien,
with all necessary disbursements in connection herewith, shall be additional
rent to be paid by Tenant to Landlord immediately on demand.
20. QUIET POSSESSION. So long as Tenant shall observe and perform the
covenants and agreements binding on it hereunder, Tenant shall at all times
during the term herein peacefully and
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quietly have and enjoy possession of the Leased Premises without any
unreasonable interference, encumbrance or hindrance by, from or through
Landlord, its successors and assigns.
21. SURRENDER AND HOLDOVER. Upon the expiration or earlier termination of
the term of this Lease. Tenant agrees to quit and surrender the Leased
Premises, restoring the same to its original condition and repair as of the
delivery of the same to Tenant, together with all keys and combinations to
locks, safes and vaults and together with all improvements, alterations,
additions, fixtures and equipment at any time made or installed in, upon or to
the Leased Premises (except personal property and other unattached movable trade
fixtures put in at Tenant's expense), all of which shall thereupon become the
property of Landlord without any claim by Tenant therefor, but the surrender of
such property to Landlord shall not be deemed to be a payment of rent or in lieu
of any rent reserved hereunder. Tenant shall completely repair at its own cost
and expense any and all damage to the Leased Premises resulting from or caused
by such removal by restoring the Leased Premises to the condition which existed
prior to the installation of the articles so removed. In the event that Tenant
shall hold over the Leased Premises after the expiration of the term hereof (and
in addition to other rights and remedies in favor of Landlord set forth
elsewhere in this Lease), then during the period of such holding over Tenant
shall pay to Landlord monthly rental computed on the basis of 1/6th of the total
sums payable by Tenant to Landlord for the preceding twelve (12) month period,
including all charges provided by this Lease. If Tenant fails to surrender the
Leased Premises in a timely manner upon the termination of this Lease, in
addition to any other liabilities to Landlord accruing therefrom, Tenant shall
indemnify and hold Landlord harmless from loss or liability resulting from such
failure, including, without limiting the generality of the foregoing, any
consequential damages suffered by
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Landlord and any claims made by a succeeding occupant or by a purchaser or
mortgagee founded on such failure.
22. SUBORDINATION. This Lease shall, at the option of Landlord, be
subject and subordinate to any mortgages or deeds of trust now of record
affecting the Building or the Leased Premises or hereafter placed of record on
the Building or the Leased Premises by Landlord. Landlord may exercise the
aforesaid option to subordinate this Lease by notifying Tenant thereof at any
time in writing, and if so requested by Landlord, Tenant shall execute and
deliver to Landlord, within ten (10) days of a written request therefor, a
subordination agreement in form satisfactory to Landlord. In the event Landlord
exercises its option to subordinate the Lease to any deed of trust or mortgage
pursuant hereto, Tenant shall, at the option of the holder of said deed of trust
or mortgage or of any purchaser at any foreclosure sale thereunder, agree to
attorn to said holder of any such deed of trust or mortgage or to any purchaser
at any foreclosure sale thereunder.
23. ESTOPPEL CERTIFICATES. Tenant agrees that from time to time upon not
less than ten (10) days prior request by Landlord, Tenant will deliver to
Landlord a statement in writing certifying (a) this Lease is unmodified and in
full force and effect (or if there have been modifications that the same is in
full force and effect as modified, identifying the modifications), (b) the dates
to which the rent and other charges have been paid, and (c) that Landlord is not
in default under any provisions of this Lease (or specifying the particulars in
which Tenant claims Landlord is not in compliance). Failure to deliver such a
certificate within ten (10) days of written request therefor by Landlord shall
be conclusively deemed to indicate Landlord is in full compliance with the terms
of this Lease, and Tenant shall be estopped from thereafter asserting any
deficiencies about which Tenant should have known.
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24. RELOCATION. Landlord shall have the right, at any time prior to
delivery of possession of the Leased Premises to Tenant under this Lease, to
relocate the Leased Premises to another location in the Building (and in such
event, Tenant shall, at the request of Landlord, enter into a modification
agreement reflecting the relocation), provided: (i) the new premises shall be
substantially equivalent in size and dimensions to the existing Leased Premises;
and (ii) there shall be no increase in rent due to such relocation.
In addition, subsequent to delivery of possession of the Leased Premises to
Tenant under this Lease and only during renewal option periods, not during the
original term. Landlord shall have the right, from time to time during the term
of this Lease, to relocate the Leased Premises to another location in the
Building, provided: (a) Landlord shall give Tenant at least three (3) months'
notice prior to the effective date of such relocation; (b) the new premises
shall be substantially equivalent in size and dimensions to the existing Leased
Premises; (c) there shall be no increase in rent due to such relocation; (d) all
reasonable costs of physically relocating Tenant to the new premises shall be
paid by Landlord; and (e) Tenant shall, at the request of Landlord, enter into a
modification agreement reflecting the relocation. The parties will execute an
amendment to this Lease reflecting the relocation of the Leased Premises.
25. NOTICES. Any notice, demand, request, consent, approval, or other
communication which ether party hereto is required or desires to give or make or
communicate upon or to the other shall be in writing and shall be given or made
or communicated by United States registered or certified mail, addressed to
Landlord or Tenant as set forth in the Specific Lease Provisions hereinabove,
subject to the right of either party to designate a different address by notice
similarly given. Any notice, demand, request, consent, approval, or other
communication so sent shall be
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deemed to have been given, made, or communicated, as the case may be, on the
date the same was deposited in the United States mail as registered or certified
matter with postage thereon fully prepaid.
26. REMEDIES CUMULATIVE. All of the remedies herein are cumulative, and
given without impairing any other rights or remedies of Landlord, and Tenant
shall pay and discharge all costs, expenses and attorneys' fees that shall arise
from enforcing the covenants of this Lease by Landlord. The fact that Landlord
does not exercise its rights hereunder in the event of breach of covenants
herein by Tenant shall not be deemed a waiver of such rights as to subsequent
breaches of covenants herein by Tenant.
27. REPRESENTATIONS. Tenant acknowledges that no representations as to
the title to or condition of the Property, the Building or the Leased Premises
or as to any other matters relating to the Property, its other occupants, or
this Lease, have been made by Landlord to Tenant either directly or indirectly
prior to or at the execution of this Lease that are not herein expressed.
28. RECORDATION. Tenant shall not record this Lease or any memorandum or
other evidence hereof.
29. LIMITED LIABILITY OF LANDLORD. Anything contained in this Lease to
the contrary notwithstanding, Tenant agrees that Tenant and all those claiming
by, through or under Tenant shall look solely to the estate and interest of
Landlord in the land and buildings comprising the Property of which the Leased
Premises form a part for the collection of any judgment (or other judicial
process) requiring the payment of money by Landlord in the event of any default
or breach by Landlord with respect to any of the terms and provisions of this
lease to be observed and/or performed by Landlord, subject, however, to the
prior rights of any ground or underlying lessors or
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of the holders of any deed of trust or mortgage covering the Property or any
part thereof, and no other assets of Landlord (or of any partners, venturers,
shareholders, officers or directors of Landlord) shall be subject to levy,
execution or other judicial process for the satisfaction of Tenant's claim.
This provision shall not be deemed, construed or interpreted, however, to be or
constitute an agreement, expressed or implied, between Landlord and Tenant that
Landlord's interest hereunder and in the Property shall be subject to
impressment of an equitable lien or otherwise.
30. BINDING OBLIGATIONS. All the terms of this Lease shall extend to and
be binding (subject to the provisions of paragraph 28 of these General Lease
Provisions) upon the heirs, devisees, legatees, personal representatives,
executors, administrators, successors and assigns of respective parties hereto.
Each individual executing this Lease on behalf of a corporation, partnership or
other entity represents, by his or her execution hereof, that such individual
has been authorized to do so by said corporation, partnership or other entity.
31. AGENCY. If this Lease shall be signed on behalf of Landlord by an
agent, the person or entity signing this Lease as agent for Landlord is acting
only in his/her/its capacity as agent and represents only that he/she/it is
authorized to sign this Lease on behalf of Landlord, and Tenant expressly
recognizes in dealing with the agents and any trustees of Landlord (including,
without limitation, the person or entity signing this Lease as agent for
Landlord) that such agents and trustees are acting in their respective
capacities as such, and such agents and trustees shall have no personal
liability for payment of any claim or performances of any obligation of Landlord
to Tenant or those claiming by, through or under Tenant, nor shall resort be had
to the private property of such agents or trustees for satisfaction of any such
claim or obligation.
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<PAGE>
32. ENTIRE AGREEMENT. This Lease, including the exhibits, the appendices
thereto, if any, and addenda incorporated herein by reference, sets forth the
entire agreement between the parties. All prior conversations, negotiations or
writing between the parties or their respective agents are merged into and
superseded by this Lease. No amendment or modification of this Lease shall be
binding or effective unless in writing and signed by the parties hereto.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the
day and year first above written, although as a matter of convenience it may be
actually signed by the parties on another day.
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<PAGE>
"Landlord"
NATIONWIDE LIFE INSURANCE COMPANY
Attest: By:/s/ Robert H. McNaghten
--------------------------------
Robert H. McNaghten
illegible Vice President, Real Estate
- -------------------------------- Investments
"Tenant"
Teksyn, Inc.,
Attest: By:/s/ David B. Wortman
--------------------------------
Title:President
-----------------------------
- --------------------------------
THE SUBMISSION BY LANDLORD OF THIS LEASE FOR EXECUTION BY TENANT AND THE ACTUAL
EXECUTION AND DELIVERY THEREOF BY TENANT TO LANDLORD SHALL HAVE NO BINDING FORCE
AND EFFECT UNLESS AND UNTIL LANDLORD SHALL HAVE EXECUTED THIS LEASE: AND IN NO
EVENT SHALL THE SUBMISSION BY LANDLORD OF THIS LEASE FOR EXAMINATION BE
CONSIDERED AN OPTION TO LEASE THE LEASED PREMISES OR ANY PART OF THE BUILDING.
-36-
<PAGE>
Addendum To Office Lease
dated as of November 2, 1994, by and between NATIONWIDE LIFE INSURANCE COMPANY,
as Landlord, and TEKSYN, INC. as Tenant, for Leased Premises in 9002 Purdue
Road, Indianapolis, Indiana 46268.
SUPPLEMENTS AND AMENDMENTS
1. Rules and Regulations
2. Addendum to Lease Agreement
3. Attachment "1"
Initialed for Initialed for
identification identification
by Landlord: by Tenant:
- ---------- ---------
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<PAGE>
RULES AND REGULATIONS
---------------------
1. The sidewalks, entrances, passages, courts, elevators, lobbies,
stairwells, corridors or halls shall not be obstructed by any Tenant or used for
any purpose other than ingress and egress to and from the Premises.
2. No awnings or other projections shall be attached to the outside walls
of the building. No curtains, blinds, shades, or screens shall be attached to
or hung in, or used in connection with, any window or door or the Premises
without the prior written consent of Landlord.
3. No sign, advertisement, notice or other lettering shall be exhibited,
inscribed, painted or affixed by any Tenant on any part of the outside or inside
of the Premises or Building without the prior written consent of the Landlord.
In the event of the violation of the foregoing by any Tenant, Landlord may
remove same without any liability, and may charge the expense incurred by such
removal to the Tenant violating this rule. Interior signs or common area doors
and directory tablet shall be inscribed, painted or affixed for each Tenant by
the Landlord at the expense of Landlord and shall be of a size, color and style
acceptable to the Landlord.
4. No showcases shall be placed in the halls, corridors, or lobbies
without the prior written consent of Landlord.
5. The water and wash closets and other plumbing fixtures shall not be
used for any purposes other than those for which they were constructed, and no
rubbish, rags or other substances shall be thrown therein. All damages
resulting from any misuse of the fixtures shall be borne by Tenant who, or whose
servants, employees, or agents shall have caused the same.
6. No Tenant shall mark, paint, drill into, or in any way deface any part
of the Premises or the building of which they form a part. No boring, cutting
or stringing of wires shall be permitted, except with the prior written consent
of Landlord, and as Landlord may direct.
7. No bicycles, vehicles or animals of any kind shall be brought into or
kept in or about the Premises, and no cooking shall be done by any Tenant on
said Premises. No Tenant shall cause or permit any unusual or objectionable
odors to be produced upon the Premises.
8. No Tenant shall make, or permit to be made, any unseemly or disturbing
noises or disturb or interfere with occupants or those having business with
them.
9. No Tenant, nor any of Tenant's servants, employees, agents, visitors
or licensees, shall at an time bring or keep upon the Premises any inflammable,
combustible or explosive fluid, chemical or substance.
10. No additional locks or bolts of any kind shall be placed upon any of
the doors by any Tenant, nor shall any changes be made in existing locks or the
mechanism thereof. Each Tenant must,
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<PAGE>
upon the termination of tenancy, restore to the Landlord all keys for the
Premises and in the event of the loss of any keys so furnished, such Tenant
shall pay to the Landlord the cost thereof.
11. The carrying in or out of any safes or freight, furniture or bulky
matter of any description must take place in a manner and during the hours which
the Landlord or its Agent may determine. The Landlord reserves the right to
inspect all freight to be brought into the building and to exclude from the
building all freight which violates any of these Rules and Regulations or the
Lease of which these Rules and Regulations are a part.
12. Landlord shall have the right to prohibit any advertising by any
Tenant which, in Landlord's opinion, tends to impair the reputation of the
building or its desirability as a building for offices, and upon written notice
from Landlord, Tenant shall refrain from or discontinue such advertising.
13. Landlord shall have the right to exclude any person other than a
Tenant or one entering with Tenant's permission from the building between the
hours of 6:00 p.m. and 8:00 a.m. on week days and from 1:00 p.m. Saturday to
8:00 a.m. Monday.
14. The premises shall not be used for lodging.
15. Canvassing, soliciting and peddling in the building is prohibited and
each Tenant shall cooperate to prevent the same.
16. There shall not be used in any space, or in the public halls of the
building, either by any Tenant or by jobbers or others, in the delivery or
receipt of merchandise including office furniture and related fixtures and
equipment any hand trucks, except those equipped with rubber tires and side
guards.
17. Window coverings on exterior walls shall be white on the exterior side
and materials shall be approved by Landlord.
Initialed for identification:
Landlord:
--------------
Tenant:
---------------
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<PAGE>
ADDENDUM TO LEASE AGREEMENT
This Addendum is by and between NATIONWIDE LIFE INSURANCE COMPANY, as
Landlord ("Landlord"), and TEKSYN, INC., as Tenant ("Tenant"), and is made by
the parties to be part of that certain Office Lease dated November 2, 1994 (the
"Lease"); to the extent that the Lease conflicts with the terms of this
Addendum, the terms and provisions of this Addendum shall govern. Therefore,
the parties hereby agree as follows:
1. Notwithstanding subsection (i) of the Specific Lease Provisions
concerning Escalation Rent and Section 4(b) of the General Lease Provisions,
Tenant's share of increases in Operating Expenses and Taxes shall not commence
until January 1, 1996, and "Base Year" Operating Expenses shall be based upon
the 1995 year end Operating Expenses (assuming 100% occupancy)incurred by the
Landlord, and the Base Year for Taxes shall be 1994 real estate taxes payable in
1995. Further, at no time during the initial term of the Lease shall Escalation
Rent (other than Taxes, insurance premiums and utility charges) increase by more
than five percent (5%) per year. Notwithstanding the definition of Operating
Expenses, the Landlord shall not pass through to Tenant any costs incurred for
pure aesthetic value, structural or improvements to the property other than the
normal cost of upkeep and landscaping consistent with a Class "A" office
building. In addition, Operating Expenses shall be subject to the limitations
in Attachment "1" attached hereto. Further, Taxes and Operating Expenses on the
other buildings on the Property shall be excluded from Tenant's share, and the
costs of landscaping, sidewalks, drives, parking areas and other improvements in
common with Landlord's other buildings shall be allocated among such buildings
based upon the rentable area of each building.
2. The security deposit shall be reduced to Ten Thousand Dollars
($10,000), payable upon acceptance of the Lease to be applied toward the first
monthly installments of Base Rent on
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<PAGE>
a renewal or extension of Lease, provided Tenant is not in default.
3. Tenant finish allowance shall be Ten and 40/100 Dollars ($10.40) per
square foot or One Hundred Thirty One Thousand Two Hundred Three and 30/100
Dollars ($131,203.30) including the cost of providing professional space
planning services and the cost of obtaining the necessary permits required for
the build-out. Upon the parties' approval of the construction drawing and final
budget, Landlord shall be deemed to have agreed to a fixed cost construction
contract, subject to change orders executed by the parties. Tenant shall pay
Landlord for any interior finish costs that exceed Ten and 40/100 Dollars
($10.40) per square foot and Landlord shall credit Tenant to rent abatement of
the first monthly installments of Base Rent any money saved below the Ten and
40/100 Dollars ($10.40) per square foot allowance.
4. Tenant shall have two (2) options to extend its Lease term for three
(3) years each, provided Tenant is not in default of the Lease. The Base Rent,
Operating Expense and Tax applied to the Landlord and Tenant, shall be adjusted
to the then current market rate being quoted at the Quads of which the Building
is a part, not to exceed the Consumer Price Index for All Urban Consumers in All
U.S. Cities as published by the Bureau of Labor Statistics, U.S. Department of
Labor ("CPI-U"). The CPI-U increase shall be based upon the difference between
the commencement date of the expiring term and twelve (12) months prior to the
expiring term. In the event Tenant renews or extends its Lease, Landlord shall
provide up to Three Dollars ($3.00) per square foot interior finish allowance
for retrofit costs and improvements.
5. Landlord acknowledges that Tenant's general office use of the premises
will include light storage of associated computer supplies, such as scanner
wands. Landlord represents and warrants that it has received no notice
concerning zoning violations or title restrictions which would prohibit such
general office use or Tenant's peaceful possession as set
-41-
<PAGE>
forth in the Lease.
6. Notwithstanding the last paragraph in Section 3 of the Lease, in the
event that the Landlord is unable, subject to acts of God, military
insurrection, labor disputes or other force majeure conditions outside of
Landlord's control, to complete Tenant's build-out and deliver possession of the
Leased Premises within ten (10) weeks after Tenant's approval of the
construction drawings, the Tenant shall receive a two (2) day abatement of rent
for each day the build-out and possession is delayed after such deadline. Prior
to the commencement date, Tenant shall have the right to deliver or install its
trade fixtures, without any interference to Landlord's work, without the rental
commencing.
7. At the end of each calendar year or within one hundred fifty (150)
days thereafter, Landlord shall submit to Tenant a statement of actual
Escalation Rent due with respect to said calendar year, and either Landlord
shall promptly refund to Tenant any excess of estimated Escalation Rent actually
paid over the actual Escalation Rent, or Tenant shall promptly remit to Landlord
any excess of actual Escalation Rent over estimated Escalation Rent actually
paid to Landlord, but in any event within thirty (30) days after notice of the
same. In the event that Tenant's audit of Landlord's statement, which must be
conducted upon prior written notice to Landlord within thirty (30) days of
receipt of the statement by Tenant and at Tenant's sole cost, except as provided
herein, shows an overcharge of Escalation Rent in excess of the cost of Tenant's
audit, the Landlord shall pay the reasonable cost of Tenant's audit.
8. The interest rate on past due rent under Section 4(d) shall be one and
one-half percent (1 1/2%) per month, rather than two percent (2%) per month.
The late charge equal to 1/30th of the monthly installment of Base Rent shall be
limited to the maximum amount of ten percent (10%) of such monthly installment
of Base Rent.
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<PAGE>
9. Under Section 4(f) in the event of a decrease in Operating Expenses
and/or Taxes, after the 1995 Base Year, Tenant shall receive a credit applied to
future Escalation Rent, if any, but in no event shall Landlord be required to
remit such credit nor shall it act to reduce Base Rent. To the extent that any
Operating Expenses are decreased pursuant to this section, the reductions shall
not be considered in calculating the 5% escalation cap provided for in section
one of this Addendum.
10. Landlord's normal business hours under Section 5(b) are 6:30 A.M. to
7:00 P.M., Monday through Friday and 7:00 A.M. to 3:00 P.M. on Saturdays.
11. Notwithstanding the first sentence in Section 7 of the Lease, the
Tenant shall not be liable for any casualty to the Leased Premises to the extent
that the Landlord has insurance proceeds for the same unless caused by the
willful misconduct or negligence of Tenant, its agents and employees.
12. Notwithstanding Section 12(b) there shall be abatement of rent from
the date of casualty if the Leased Premises (or any portion thereof) is unusable
for a period of five (5) consecutive business days or seven (7) days, and shall
abate for any casualty covered by Landlord's insurance regardless of cause,
unless caused by the willful misconduct or negligence of Tenant, its agents and
employees.
13. The words "release, discharge and agrees to" shall be inserted in the
last sentence of Section 14 of the Lease immediately before the word
"indemnify".
14. Under Section 15, Tenant may file a claim for its moving expenses and
any loss of personal property, provided such expenses do not reduce Landlord's
award, and separate application is made by Tenant therefore.
15. Under Section 16 of the Lease, Tenant shall not be responsible for any
certificate
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<PAGE>
of occupancy permit.
16. Notwithstanding Section 17 of the Lease, the Tenant shall not be in
default if it merely vacates the Leased Premises so long as it continues to pay
rent and abide by all other terms and conditions of the Lease.
17. The words "unattached movable" are deleted from the second sentence of
Section 21 of the Lease. In the event that the Tenant holds over with the
consent of the Landlord, the monthly rental shall be one hundred fifty percent
(150%) of the Base Rent.
18. Any subordination of the Tenant's interest under Section 22 of the
Lease, shall contain a non-disturbance provision in which the Lender shall not
interfere with the Tenant's peaceful possession pursuant to the Lease, so long
as Tenant is not in default hereunder.
19. The last sentence in Section 23 of the Lease is deleted, provided
however, that if Tenant fails to deliver a certificate within thirty (30) days
of any request by Landlord, Tenant shall be in default under the terms of the
Lease.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Addendum as of
the below referenced date.
-44-
<PAGE>
NATIONWIDE LIFE INSURANCE COMPANY
Dated:11/2/94 By:/s/ Robert H. McNaghten
----------------------------- --------------------------------
Robert H. McNaghten
Vice President Real Estate
Investments
TEKSYN, INC.
Dated:1/2/94 By:/s/ David B. Wortman
----------------------------- --------------------------------
Printed:David B. Wortman
---------------------------
Title:President
-----------------------------
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<PAGE>
ATTACHMENT "1"
E. Notwithstanding the above, operating expenses and common area
maintenance shall not include marketing fees and rental commissions, costs and
legal fees in connection with Landlord's financing of the Premises, negotiation
and preparation of Leases, and any disputes with tenants, franchise or income
taxes imposed upon Landlord, accounting fees associated with the operation of
the business of the partnership or entity as the same are distinguished from the
accounting fees attributable to the operation of the Premises, the cost of
painting, repainting, decorating or redecorating for any tenant including
Tenant, any work required in the Work Letter (or repairs to any work not
completed in a good and workmanlike manner free from defects), any penalties or
fines assessed against Landlord, unless caused by Tenant, interest, base rent or
any other payment required under the terms of any mortgage, ground lease or deed
of trust now or hereafter constituting a lien against the Premises, costs of
services or labor provided solely and directly to specific tenants at the
Building, overhead costs, wages, salaries, benefits or fees paid to
administrative or executive personnel of Landlord (except for the property
management fees hereinafter permitted), general or special assessments levied
against the Landlord for public improvements which are not currently due,
depreciation costs, costs associated with the transfer of all or part of the
Building, any expenses for which Landlord receives payment from another source,
the costs for complying with environmental laws unless resulting from the use of
Tenant, its agents or employees of the Leased Premises, expenses for the
maintenance of the structure, foundation and roof of the Building (other than
routine cleaning) and capital improvements (except as hereinafter permitted).
Landlord may charge as Additional Rent (i) capital improvements required by
governmental law, ordinance, rule or regulation which was not applicable to the
Building or Premises on the Commencement Date, (ii) capital
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<PAGE>
improvements which are repairs or replacements of existing improvements for the
structure, foundation and roof of the Building, and (iii) capital improvements
which are reasonably intended to reduce any component costs included within
operating expenses but only to the extent of the estimated savings. Any
permitted capital expenditures shall be included in Additional Rent only to the
extent any such costs (excluding interest) are attributable, on a straight-line
amortization based upon the useful life of such capital improvement to the
remaining portion of the Term of the Lease, or any renewal thereof. For
purposes of calculating Additional Rent, property management fees may be charged
for compensation (but not bonuses or increases in pensions or profit sharing
plans) for a building manager in an amount not to exceed four percent (4%) of
Gross Rent
-47-
<PAGE>
Exhibit "A" to Office Lease
dated as of November 2, 1994, by and between NATIONWIDE LIFE INSURANCE COMPANY,
as Landlord, and TEKSYN, INC., as Tenant, for Leased Premises in 9002 Purdue
Road, Indianapolis, Indiana 46268.
BUILDING FLOOR PLAN(S) ATTACHED
Initialed for Initialed for
identification identification
by Landlord: by Tenant:
- ------------ ------------
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<PAGE>
Exhibit "B" to Office Lease
dated as of November 2, 1994, by and between NATIONWIDE LIFE INSURANCE COMPANY,
as Landlord, and TEKSYN, INC., as Tenant, for Leased Premises in 9002 Purdue
Road, Indianapolis, Indiana 46268.
Landlord agrees to do the work necessary to prepare Tenant's premises for
occupancy in accordance with the plans and/or specifications attached hereto and
by this reference incorporated herein as Exhibit B. Tenant agrees to pay
Landlord as its share of said work all costs over and above the sum of One
Hundred Thirty One Thousand Two Hundred Three and 30/100 Dollars ($131,203.30).
Such amount shall be paid by Tenant promptly after rendering of bills therefor
to Tenant by Landlord or its contractor and/or its architects, it being
understood and agreed that such bills may be rendered during the progress of the
performance of the work and/or the furnishing or installation of the materials
to which such bills relate.
Initialed for Initialed for
identification identification
by Landlord: by Tenant:
- ------------ ------------
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<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
SPECIFIC LEASE PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 1
(a) Landlord. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(b) Tenant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(c) Building. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(d) Leased Premises . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(e) Permitted Use of Leased Premises. . . . . . . . . . . . . . . . . . 2
(f) Commencement Date . . . . . . . . . . . . . . . . . . . . . . . . . 2
(g) Expiration Date . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(h) Base Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(i) Escalation Rent . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(j) Security Deposit. . . . . . . . . . . . . . . . . . . . . . . . . . 3
(k) Insurance Coverage. . . . . . . . . . . . . . . . . . . . . . . . . 3
(l) Work. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(m) Landlord's Address for Notices. . . . . . . . . . . . . . . . . . . 4
(n) Landlord's Address for Payments . . . . . . . . . . . . . . . . . . 4
(o) Tenant's Address for Notices. . . . . . . . . . . . . . . . . . . . 4
(p) Guarantor(s). . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
GENERAL LEASE PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1. Premises. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2. Use. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3. Term/Possession. . . . . . . . . . . . . . . . . . . . . . . . . . 5
4. Rent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5. Service. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
6. Electricity. . . . . . . . . . . . . . . . . . . . . . . . . . . .12
7. Condition of the Leased Premises. . . . . . . . . . . . . . . . .13
8. Alterations. . . . . . . . . . . . . . . . . . . . . . . . . . . .13
9. Certain Rights Reserved to Landlord. . . . . . . . . . . . . . . .15
10. Rules and Regulations. . . . . . . . . . . . . . . . . . . . . . .17
11. Assignment/Subletting. . . . . . . . . . . . . . . . . . . . . . .17
12. Casualty. . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
13. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
14. Release and Indemnification. . . . . . . . . . . . . . . . . . . .21
15. Condemnation. . . . . . . . . . . . . . . . . . . . . . . . . . .22
16. Compliance with Law. . . . . . . . . . . . . . . . . . . . . . . .23
17. Default and Remedies. . . . . . . . . . . . . . . . . . . . . . .24
18. Bankruptcy and Insolvency. . . . . . . . . . . . . . . . . . . . .27
-i-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
19. Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
20. Quiet Possession. . . . . . . . . . . . . . . . . . . . . . . . .28
21. Surrender and Holdover. . . . . . . . . . . . . . . . . . . . . .28
22. Subordination. . . . . . . . . . . . . . . . . . . . . . . . . . .29
23. Estoppel Certificates. . . . . . . . . . . . . . . . . . . . . . .30
24. Relocation. . . . . . . . . . . . . . . . . . . . . . . . . . . .30
25. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
26. Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . .31
27. Representations. . . . . . . . . . . . . . . . . . . . . . . . . .31
28. Recordation. . . . . . . . . . . . . . . . . . . . . . . . . . . .32
29. Limited Liability of Landlord. . . . . . . . . . . . . . . . . . .32
30. Binding Obligations. . . . . . . . . . . . . . . . . . . . . . . .32
31. Agency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
32. Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . .33
ADDENDUM
EXHIBITS
Building Floor Plans(s) Exhibit A
Work Exhibit B
THE FOREGOING TABLE OF CONTENTS IS FOR CONVENIENCE ONLY AND DOES NOT FORM A
PART OF THE LEASE. IN THE EVENT OF ANY CONFLICT BETWEEN THE FOREGOING TABLE OF
CONTENTS AND THE TERMS OF THE LEASE, THE TERMS OF THE LEASE SHALL CONTROL.
-ii-
<PAGE>
FIRST AMENDMENT TO LEASE
This FIRST AMENDMENT TO LEASE ("First Amendment") is made and entered into
this 21st day of January 1997, between Nationwide Life Insurance Company, an
Ohio corporation (hereinafter "Landlord), and Made2Manage Systems, Inc. formerly
known as TekSyn, Inc., an Indiana corporation (hereinafter "Tenant").
WITNESSETH:
WHEREAS, Landlord and Tenant entered into a certain Lease dated November 2,
1994 ("Lease"), for a term of seventy-six (76) months beginning on the 1st day
of March, 1995, and expiring on the 30th day of June, 2001, for the office space
designated as Suite 200 on the 2nd Floor in Landlord's four-story building known
as "Quad III" and located at 9002 Purdue Road, Indianapolis, Indiana 46268
("Building"), such office space having a total allocated area of approximately
twelve thousand six hundred twelve (12,612) rentable square feet of floor space
as shown on Exhibit "A" of the Lease ("Premises"); and
WHEREAS, Tenant desires to lease a different amount of space beginning
April 1, 1997 ("Revised Space"), and Landlord has agreed to lease such Revised
Space to Tenant April 1, 1997, and Landlord and Tenant have agreed to further
supplement, modify and amend the Lease to revise the space which shall
constitute the Leased Premises, and to include other modifications to the Lease
necessitated by reason of the revision of space constituting the Leased
Premises; and
WHEREAS, Tenant desires to extend the term of the Lease;
NOW THEREFORE, in consideration of the mutual covenants of the parties
hereto, it is mutually agreed as follows:
1. Effective April 1, 1997, the Leased Premises as defined in the Lease shall
include all of Suite 200 on the 2nd Floor and all of Suite 400 on the 4th
Floor of the Building, and effective June 1, 1997, the Leased Premises as
defined in the Lease shall also include Suite 100 on the 1st Floor of-the
Building. The Revised Space as of April 1, 1997, shall be deemed to
contain an area of approximately twenty-five thousand two hundred
twenty-seven (25,227), rentable square feet of space, and as of June l,
1997, the Leased Premises shall be deemed to contain and area of
approximately thirty-two thousand six hundred seven (32,607) rentable
square feet of space. The Revised Space is outlined in red on Exhibit "B",
Exhibit "B-1" and Exhibit "B-2" attached, hereto and made a part hereof.
Both Landlord and Tenant shall make all reasonable and diligent efforts to
make the 4th Floor available for occupancy on or around April 1, 1997, and
the 1st Floor space available on or around June 1, 1997.
2. Effective April 1, 1997, or upon the substantial completion of the intended
interior improvements, whichever is later, Tenant shall pay Landlord base
rent for the Revised Space according to the schedule on Exhibit "C"
attached hereto and made a part hereof. Effective June 1, 1997, or the
date Suite 100 on the 1st Floor of the Building is ready for occupancy
<PAGE>
by Tenant, whichever date is earlier. Tenant shall pay Landlord base rent
for the Revised space according to the schedule on Exhibit "C-1" attached
hereto and made a part hereof. Tenant shall incur their prorated share of
any increases in the operating expenses that are in excess of the 1997
actual operating expenses incurred for the 4th and 1st Floors, and the 1994
expenses established for the, 2nd Floor, which shall be adjusted to the
1997 expense stop beginning on July l, 2001. Operating expenses shall be
adjusted to 100% occupancy if the actual occupancy of the building is less
than ninety percent (90%). Tenants proportionate share of the forty-nine
thousand five hundred forty (49,540) square feet available in Quad III
shall be:
January 1, 1997 - June 30, 2001: 12,612 SF or 25.46% based on a 1994
expense stop
April 1, 1997 - May 31, 1997: 12,615 SF or 25.46% based on a 1997
expense stop
June 1, 1997 - June 30, 2001: 19,995 SF or 40.36% based on a 1997
expense stop
July 1, 2001 - March 31, 2003: 32,607 SF or 65.82% based on a 1997
expense stop
3. Landlord agrees to make certain leasehold improvements to the Revised Space
("Revised Work"), all in accordance with the basic plans and specifications
prepared by Tenant which final plans for the 4th Floor shall be submitted
within two (2) weeks after acceptance herein, and finalized floor plans for
the 1st Floor by March 7, 1997. The basic plans and specifications are
marked Exhibit "D" and are incorporated herein by reference. Upon
completion of all Revised Work, Landlord agrees to directly pay the
contractors, subcontractors and material suppliers, or to reimburse Tenant
upon proof of payment and receipt of waiver of lien documents, a sum not to
exceed Two Hundred Sixty-Six Thousand Nine Hundred Fifty-Five and 00/100
Dollars ($266,955.00) for the cost of the Revised Work. To the extent the
cost of the Revised Work exceeds Two Hundred Sixty-Six Thousand Nine
Hundred Fifty-Five and 00/100 Dollars ($266,955.00,), Tenant shall pay and
be solely liable for such excess. The Landlord shall credit Tenant or
reduce rent for an amount not to exceed five percent (5%) of the
$266,955.00 allowance budgeted but not incurred in the actual build-out.
4. The term of the Lease shall be extended for one.(i) additional twenty-one
(21) month period beginning immediately upon the expiration of the original
term of the Lease, and expiring at 5:00 p.m. local time on March 31, 2003
("First Extension Period"); except that Tenant shall have an option to
terminate the Lease as amended anytime after June 30, 2001 ("Option to
Terminate"). The Option to Terminate shall be exercised by Tenant, if at
all, provided (i) Landlord is not able, within three (3) months after
Tenant's written request for expansion space on a reasonable date specified
by Tenant, to commit to provide at least ninety percent (90%) of the
expansion space within "Quad I, Quad II, Quad III or Quad IV" in a
configuration that is reasonably useable to Tenant's operations; and (ii)
Tenant adheres to the following conditions: (a) Tenant is not in default of
the Lease or First Amendment to Lease; (b) Tenant shall not exercise the
Option to Terminate prior to June 30, 2001, although notice shall be given
six (6) months in advance of June 30, 2001, as provided herein; (c) Tenant
shall provide written notice to Landlord of the intent to terminate the
Lease not less than six (6)
- 2 -
<PAGE>
months after Landlord receives the written notice, unless so agreed upon by
both parties; and (d) Tenant shall vacate the Premises on or before the
termination date. On execution of a termination of Lease, Tenant shall pay
Landlord the remaining unamortized costs of the improvement allowance and
real estate brokerage fees paid by the Landlord, which shall be calculated
based on a six (6) year amortization schedule paid in arrears at ten
percent (10%) interest. In addition, Tenant shall pay Landlord through the
date of termination all additional rent due, or with respect to any charge
payable in arrears, accrued based on the reasonable estimates of Landlord,
with a final adjustment within ninety (90) days after the termination date.
Improvement Allowance: $266,955.00
Real Estate Brokerage Fees: $116,107.10
Total Cost: $383,062.10
The unamortized balance on June 30, 2001, based on an April 1, 1997
commencement is $136,197.51;
5. Tenant has deposited with Landlord the sum of Ten Thousand and 00/100
Dollars ($10,000.00) for a Security Deposit [not Thirteen Thousand Four
Hundred and 00/100 Dollars ($13,400.00) as stated in the Lease]. Tenant
and Landlord agree that on or about April 1, 1997, Five Thousand and 00/100
Dollars ($5,000.00) of the said Security Deposit shall be permanently
transferred to the account of Landlord as consideration for the
modifications set forth herein, and the remaining Five Thousand and 00/100
Dollars ($5,000.00) shall be applied by Landlord as a credit toward
Tenant's future base rent.
6. Tenant shall have the right to erect exterior signage ("Sign") on the east
and south facade of the Building as shown on attached Exhibit "E"
identifying Tenant as an occupant of the Building. Tenant shall be
responsible for all costs associated with the design, manufacture and
installation of the Sign, subject to the prior written approval of Landlord
as to design, size, color, placement and materials. Tenant shall also be
solely responsible for any costs, expenses or charges for maintaining,
repairing and replacing the Sign. Tenant may modify or alter the sign with
prior written approval of Landlord, which approval shall not be
unreasonably withheld. Tenant shall remove the Sign upon the final
expiration or earlier termination of the Lease as Amended at Tenant's sole
risk and expense, and shall, in a workmanlike manner, properly repair any
damage and close any holes caused by the removal of the Sign. Tenant shall
be solely responsible to insure that any signage complies with all
governmental laws, codes and regulations.
7. Section 11, Page 13 of the Lease shall be modified by inserting "which
consent shall not be unreasonably withheld" following the fifth word in the
fourth line; and the balance of that sentence, "(and as a condition to such
consent, which in any event may be withheld by landlord in it's sole
discretion)" shall be deleted.
- 3 -
<PAGE>
8. Tenant agrees to keep the provisions of the Lease as amended strictly
confidential, and agrees not to disclose to any person or entity not a
party to the Lease as amended the terms and contents of the Lease as
amended, including, but not limited to, the amount of rental agreed to
herein by Tenant, unless the proposed disclosure is authorized in advance
and in writing by Landlord.
9. All other terms and conditions of the aforesaid Lease as previously amended
shall remain in full force and effect, except as supplemented, modified or
amended herein.
IN WITNESS WHEREOF, Landlord and Tenant have executed this First Amendment as of
the day and year first above written, although as a matter of convenience it may
be actually signed by the parties on another day.
LANDLORD: TENANT:
Nationwide Lift Insurance Company Made2Manage
By:/s/ Robert H. McNaghten By:/s/ David B. Wortman
--------------------------- ---------------------------
Robert H. McNaghten David B. Wortman
Vice President President
Witness:/s/ Inez L. Bayes Witness:/s/ Stephen R. Head
---------------------- ----------------------
Witness:/s/ Debra Kuehn Witness:/s/ Amy M. Randolph
---------------------- ----------------------
- 4 -
<PAGE>
EXHIBIT "C"
Schedule of Rents from April 1, 1997 through May 31, 1997:
<TABLE>
<CAPTION>
SQUARE TIME
FEET LOCATION PERIOD DATES PER SQ. FT. PER MONTH
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
12,612 2nd floor 2 months April 1, 1997-May 31, 1997 @ $12.34 psf $12,969.17
12,615 4th floor @ $13.85 psf $14,559.81
----------------------------
$13.10 psf $27,528.98
</TABLE>
<PAGE>
EXHIBIT "C-1"
Schedule of Rents from June 1, 1997 through Lease Expiration:
<TABLE>
<CAPTION>
SQUARE TIME
FEET LOCATION PERIOD DATES PER SQ. FT. PER MONTH
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
12,612 2nd floor 7 months June 1, 1997-Dec. 31, 1997 @ $12.34 psf $ 12,969.17
12,615 4th floor @ $13.85 psf $ 14,559.81
7,380 1st floor* @ -0-
---------------------------
$10.13 psf $ 27,528.98
12,612 2nd floor 6 months Jan. 1, 1998-June 30, 1998 @ $12.34 psf $ 12,969.17
12,615 4th floor @ $13.85 psf $ 14,559.81
7,380 1st floor @ $14.25 psf $ 8,763.75
---------------------------
$13.36 psf $ 36,292.73
12,612 2nd floor 9 months July 1, 1998-Mar. 31, 1999 @ $12.59 psf $ 13,231.17
12,615 4th floor @ $13.85 psf $ 14,559.81
7,380 1st floor @ $14.25 psf $ 8,763.75
---------------------------
$13.45 psf $ 36,554.73
12,612 2nd floor 3 months Apr. 1, 1999-June 30, 1999 @ $12.59 psf $ 13,231.17
19,995 1st & 4th @ $14.25 psf $ 23,744.06
floor ---------------------------
$13.61 psf $ 36,975.23
12,612 2nd floor 24 months July 1, 1999-June 30, 2001 @ $13.84 psf $ 14,545.42
19,995 1st & 4th @ $14.25 psf $ 23,744.06
floor ---------------------------
$14.09 psf $ 38,289.48
32,607 1st, 2nd & 21 months July 1, 2001-Mar. 31, 2003 @ $14.25 psf $ 38,720.81
4th floors
Total Gross Rent paid over 72 months $2,637,519.99
Effective rental rate over 72 month period based on 32,607 sq. ft. $13.48 psf
</TABLE>
* Rental abatement period assumes June 1, 1997 occupancy. Tenant receives seven
(7) months of rent abatement on the 1st floor. This period shall be adjusted
based upon the completion of buildout to provide the Tenant with a full seven
month abatement period.
<PAGE>
ABRA CADABRA SOFTWARE RESELLER AGREEMENT
THIS AGREEMENT is entered into this 1st day of August, 1995, between Abra
Cadabra Software, Inc. (ACS) with offices at 888 Executive Center West, Suite
300, St. Petersburg, Florida, 33702 and Made2Manage Systems, Inc. (RESELLER)
maintaining its principal place of business at 9002 Purdue Road, Suite 200,
Indianapolis, Indiana 46268.
Whereas ACS publishes and distributes certain computer software and
hardware products including those ACS products ("ACS Products") and third party
products ("Other Products") listed on Schedule A hereto, as such Schedule may be
modified pursuant to the terms of this Agreement (collectively, the "Products").
Products which are now or may in the future be offered for distribution by ACS
but which are not listed on Schedule A or any amendment thereto are expressly
excluded from this Agreement.
ACS and RESELLER desire that RESELLER act as an independent, non-exclusive
reseller to distribute certain Products under ACS' standard Product License
Agreements to RESELLER's customers.
THEREFORE, the parties agree as follows:
1. APPOINTMENT
1.1 NON-EXCLUSIVE APPOINTMENT. ACS hereby appoints RESELLER, and RESELLER
hereby accepts such appointment, as an independent, non-exclusive
reseller of the Products for ACS. In the case of Other Products, ACS'
appointment of RESELLER shall be subject to the terms and conditions
applying to the sale of Other Products as supplied by the third party
vendors with the Other Products (the "Other Products Sales
Conditions").
1.2 LIMITATIONS. RESELLER's appointment only grants to RESELLER a
nontransferable, non-exclusive license to demonstrate, market, install
and distribute the Products to End-Users. "End-Users" are licensees
of the Products who license the Products for their own use in
accordance with ACS' standard license agreement and not for sub
license or distribution to others. This License does not transfer any
right, title or interest in any Product to RESELLER. RESELLER agrees
that any changes made to any ACS Product by RESELLER shall become part
of such Product and RESELLER hereby assigns all of its rights in such
changes to ACS. In addition, this license does not convey to RESELLER
the right to use any Product for its internal business purposes or to
process data for any third party unless approved in writing by ACS.
RESELLER understands and acknowledges that if it wants a license to
use any product for its internal business purposes, it shall be
required to purchase a standard End-User Product License from ACS.
<PAGE>
2. OBLIGATIONS AND REPRESENTATIONS OF RESELLER
2.1 PROMOTION EFFORTS. RESELLER, at its expense, will use all reasonable
efforts to promote the marketing and licensing of the Products to
End-Users by using commercially available and acceptable means of
marketing including, but not limited to, advertising, telemarketing,
other direct mail campaigns, seminars, personal solicitation,
demonstrations, and distribution of promotional materials, all in
accordance with this Agreement. Prior written approval of ACS must be
obtained on any media advertising not utilizing ACS prepared language.
If media advertising copy is deemed inappropriate by ACS, RESELLER
agrees to immediately stop publishing, utilizing or causing to be
printed any portion of the inappropriate material. Violation of this
paragraph could result in immediate termination.
2.2 TECHNICAL CAPABILITY. RESELLER will have the technical capability to
enable it to demonstrate and explain in detail to End-Users the
features and capabilities of the Products.
2.3 NO TAMPERING OR RELICENSING. RESELLER will distribute the Products
with all packaging and warranties, disclaimers and license agreements
intact and not obscured, as shipped from ACS. Resellers will advise
End Users as to the nature and terms of the License Agreements
applicable to the Products. All Product diskettes will be distributed
in sealed diskette envelopes as shipped from ACS. RESELLER may not
relicense any previously opened or used Product.
2.4 DISTRIBUTION RESTRICTION. RESELLER shall not distribute any Products
as a mail order business (mail order is defined as solicitation,
through advertising or otherwise, for orders by mail or telephone,
rather than through a physical location at which an End-User can
obtain personal customer service and/or Product demonstration from the
RESELLER).
2.5 FINANCIAL CONDITION. RESELLER represents that as of the effective
date of this Agreement, it is in good financial condition. RESELLER
will promptly notify ACS of any significant negative change and/or
reversal of its financial condition.
2.6 RECORDS. RESELLER will maintain full and complete records of all
licensees of the Products including such records as may be required
for the purpose of Product recall or correction. RESELLER will
maintain, for at least two years after termination of this Agreement,
its records and accounts relating to distribution of the Products. If
ACS has a bona fide concern, based on reliable evidence, that RESELLER
may not be reporting all sales of ACS Products, ACS' may request
RESELLER to provide ACS, by the fifth day of the following month or
otherwise in accordance with a schedule established by ACS, a complete
monthly record of all products licensed
- 2 -
<PAGE>
during the month, including but not limited to the names and addresses
of all End-Users and Products sold or licensed to such End-Users.
2.7 COVENANTS. RESELLER agrees: (a) to conduct business in a manner that
reflects favorably upon the Products and their high quality image and
reputation, and upon the reputation of ACS; (b)to avoid illegal or
misleading practices that are or might be detrimental to the Products,
ACS or the public; (c) to make no false or misleading representation
with regard to ACS or the Products; (d) not to publish or employ or
cooperate in the publication or employment of any misleading or
deceptive advertising material; (e) to make no representations,
warranties or guarantees to customers or the trade with respect to the
capabilities of the Products that are inconsistent with the literature
distributed by ACS, including all warranties and disclaimers contained
in such literature.
2.8 COMPLIANCE WITH LAW. RESELLER will comply with all applicable laws
and regulations in performing its duties hereunder and in any dealings
with respect to the Products.
2.9 STANDARD REQUIREMENTS. RESELLER agrees to maintain standard
requirements as set forth on Schedule A, which may include a minimum
sales volume and/or minimum marketing effort requirements, to remain
an ACS reseller. The standard requirements are subject to change by
ACS with 30 days prior written notice to RESELLER
3. ACS' RESERVED RIGHTS
3.1 ACS' RESERVED RIGHTS. ACS reserves the right, from time to time and
in its sole discretion: (a) to increase or decrease the number of
authorized distributors, resellers and/or dealers; (b) to distribute
Products directly to End Users and other customers, using its own
personnel or independent sales representatives; (c) to change, add or
delete from the list of Products; (d) to change or terminate the level
or type of service or support that ACS makes available; or (e) to
increase or decrease the RESELLER discounts or Products prices.
RESELLER's appointment as an authorized reseller does not constitute a
grant of any specific territory or geographic area.
3.2 TERMINATION OF LICENSING OR SALE OF OTHER PRODUCTS. RESELLER
acknowledges that ACS has entered into agreements with third parties
for the licensing and sale of the Other Products, and there is no
guarantee by ACS that these agreements will continue. RESELLER
acknowledges that ACS reserves the right, pursuant to Section 3.1, to
discontinue offering Other Products at any time.
3.3 ORDER CANCELLATION BY ACS. ACS may cancel any purchase orders placed
by RESELLER and accepted by ACS or refuse or delay shipment thereof:
(a) if RESELLER fails to make any payment as provided in this
Agreement; b) if
- 3 -
<PAGE>
RESELLER fails to comply with the terms and conditions of this
Agreement; or (c) if ACS discontinues distribution of any Product.
ACS will have the right to cancel any orders, for reasons set forth
in this paragraph, without liability of any kind to RESELLER or to
any other person.
3.4 SECURITY INTEREST. Until any Product has been paid for in lull, ACS
retains a purchase money security in such Product in RESELLER's
possession and in the proceeds therefrom. RESELLER grants ACS the
power of attorney to execute any and all financing statements on
behalf of the RESELLER with respect to ACS' security interest in all
such Product and proceeds therefrom and expressly authorizes ACS to
file the same with the appropriate authorities.
4. PRICE
4.1 ACS RETAIL PRICES; RESELLER DISCOUNTS. The price to be paid by
RESELLER for any Product shall be determined based on the ACS Retail
Price and applicable RESELLER Discount in effect as of the date the
order is received by ACS. The ACS Retail Prices and RESELLER
Discounts in effect as of the effective date are as set forth on
Schedule A. ACS may change the ACS Retail Prices and RESELLER
Discounts at any time; provided, however, that ACS may increase the
price paid by RESELLER only after giving RESELLER thirty days prior
notice. RESELLER shall be solely responsible for establishing the
price at which Products are licensed or sold to End-Users.
4.2 PAYMENT TERMS. Initial orders are C.O.D. If credit terms are
extended, full payment in U. S. dollars is due and payable by RESELLER
to ACS on or before the due date specified on the invoice. Any credit
terms extended to the RESELLER will be solely at the discretion of ACS
based on the financial strength and demonstrated ability to repay such
credit terms. Extension of credit terms does not guarantee continued
credit availability and credit terms may be withdrawn at any time
should RESELLER fail to pay invoices when due. ACS reserves the right
to charge interest on any delinquent amounts owed by RESELLER at the
lesser of 18% per annum or the maximum rate permitted by law. If in
ACS' sole discretion the financial condition of RESELLER does not
justify continuance of shipment on the above terms of payment, ACS may
require full payment in advance. In addition, ACS reserves the right
to charge an additional fee of TWENTY ($20) DOLLARS for any checks of
RESELLER that are dishonored.
4.3 TAXES, TARIFFS, FEES. Promptly after execution of this Agreement,
RESELLER agrees to provide ACS with appropriate documentation
satisfactory to the applicable tax authorities for any claim of
exemption from any sales, use, value added or other taxes, duties, or
similar fees which may be required to be paid or collected upon
delivery of the Products or upon collection of the price from
Reseller. The prices set forth in this
- 4 -
<PAGE>
Agreement do not include any such taxes and fees. Should RESELLER
fail to provide adequate exemption documentation as is legally
required, or should any tax or levy be assessed against ACS as a
result of RESELLER's marketing of Products, RESELLER agrees to pay
such tax or levy and indemnify ACS for any claim for such tax or levy.
5. ORDER PROCEDURE
5.1 ORDER ACCEPTANCE. Purchase orders may be submitted to ACS by RESELLER
in writing or by telephone. All purchase orders are subject to
acceptance by ACS and shall not be binding until the earlier of
acceptance or shipment, and, in the case of acceptance by shipment,
only as to the portion of the order actually shipped. Order
cancellations must be confirmed in writing. The terms and conditions
of this Agreement and of the applicable ACS invoice or confirmation
will apply to each order accepted or shipped by ACS hereunder. The
provisions of RESELLER's form of purchase order or other business
forms will not apply to any order notwithstanding ACS' acceptance of
such order.
5.2 ORDER INFORMATION. Except for Evaluation/Demo Products, at time of
order, RESELLER shall provide ACS with the following information:
a. Name of Products to be licensed and quantity of each.
b. Name and address of each client for whom Product licenses
are being purchased, including valid telephone number.
c. Billing address, including telephone number.
d. Shipping address, including telephone number.
e. Client name and contact name.
f. RESELLER named company name and contact name.
g. RESELLER purchase order number and any special instructions.
5.3 END-USER SUPPORT. ACS reserves the exclusive right to provide product
updates, enhancements and releases to End-Users. ACS shall also
supply telephone technical support via the Abra Cadabra Support
Program. At RESELLER's request, ACS will provide RESELLER with sales
and marketing materials for the support program. All membership
renewals in ACS' Support Program will be handled solely by ACS. ACS
will have no obligation to support any End-Users whose names have not
been provided to ACS pursuant to Section 5.2 above.
- 5 -
<PAGE>
6. SHIPMENT AND RISK OF LOSS
6.1 SHIPMENT. ACS will ship all Products ordered, in single or several
lots, F.O.B. ACS' point of shipment. ACS will select the carrier.
RESELLER will be responsible for and pay all shipping freight charges.
6.2 RISK OF LOSS. All risk of loss to, or damage to, the Products shipped
will pass to RESELLER upon delivery by ACS to the carrier, freight
forwarder or RESELLER, whichever comes first. RESELLER is solely
responsible for insuring the Products at and from the F.O.B. point.
7. RETURNS
7.1 PRODUCT RETURNS. During the Contract Period, RESELLER may return any
complete Product package, including all original materials provided by
ACS, to ACS within thirty days from delivery of such Product to
RESELLER and ACS will grant RESELLER a credit equal to the price paid
by RESELLER for such returned Product. In case of termination of this
Agreement, all credits will first be applied to any outstanding
balances of the RESELLER. If no balances exist, a refund will be
issued. Prior to returning any Product, RESELLER must obtain a return
authorization number from an ACS representative. RESELLER will be
responsible for and pay all shipping, freight and insurance charges
for all Products returned to ACS.
7.2 UNSHIPPED PRODUCT CREDIT. For any cancellations, by RESELLER or ACS,
of unshipped products that have been fully paid by the RESELLER, ACS
will grant the RESELLER a credit equal to the price paid by RESELLER
of such Products.
8. DURATION AND TERMINATION OF AGREEMENT
8.1 TERM. The term of this Agreement is from the effective date until the
first March 31st following the effective date (this initial period and
any renewal period, the "Contract Period"). Nothing contained herein
shall be interpreted as requiring either party to renew this
Agreement. This Agreement may be terminated prior to the expiration
of its stated terms as set forth below. This Agreement is renewable
for a period of one year at a time. This Agreement shall
automatically renew for subsequent one year Periods (April 1st through
March 31st) unless either party gives the other no less than 30 days
prior written notification of its intent to let this Agreement expire
on March 31st of that Contract Period.
- 6 -
<PAGE>
8.2 TERMINATION FOR CAUSE
a. Either party will have the right to terminate this Agreement at
any time if the other party is in breach of any material term
undertaken which such party fails to cure within fifteen days
after receiving notice of the breach and the party's intention to
terminate. Such termination will become effective upon the
nonterminating party's receipt of notice and automatically be in
effect upon expiration of the cure period in the absence of a
cure. Such termination will become effective upon the
nonterminating party's receipt of a notice of termination at any
time after the specified event.
b. Either party will have the right to terminate this Agreement at
any time if the other party (i) becomes insolvent; (ii)
discontinues its business; (iii) is merged, consolidated, sells
all or substantially all of it assets, or implements or suffers
any substantial change in management or control; (iv) fails to
pay its debts or perform its obligations in the ordinary course
of business as they mature; or (v) becomes the subject of any
voluntary or involuntary proceeding in bankruptcy, liquidation,
dissolution, receivership, attachment or composition for the
benefit of creditors. Such termination will become effective
upon the nonterminating party's receipt of a notice of
termination at any time after the specified event.
8.3 TERMINATION AT WILL. RESELLER or ACS may terminate this Agreement at
will, at any time during the Contract Period, with or without cause,
by written notice given to the other party not less than sixty (60)
days prior to the effective date of such termination.
8.4 EFFECT OF TERMINATION. Upon termination of this Agreement:
a. ACS may, at its option, (i) cancel any or all paid and/or unpaid
orders prior to shipment and apply all payments to any
outstanding balances of RESELLER. If no balances exist, a refund
will be made to RESELLER all payments made in connection
therewith. After termination notice, the due dates of all
outstanding invoices to RESELLER for the Products will be
accelerated so they become due and payable on the effective date
of termination or expiration, even if longer terms had been
provided previously. Notwithstanding any credit terms made
available to RESELLER prior to such notice, any Products shipped
thereafter shall be paid for by certified or cashier's check
prior to shipment.
b. Unless ACS agrees otherwise, RESELLER shall return to ACS any
unopened Products in its possession on the date of termination,
and ACS shall apply the amount originally paid by RESELLER for
such returned Products against any
- 7 -
<PAGE>
outstanding RESELLER account balance. After satisfaction of
RESELLER's account, ACS shall refund any remaining amounts to
RESELLER.
c. RESELLER shall cease using any ACS trademark, logo or trade name
and RESELLER's right to market and license any Products shall
automatically terminate.
8.5 NO DAMAGES FOR TERMINATION. RESELLER acknowledges and agrees that
RESELLER has no expectation and has received no assurances that its
business relationship with ACS will continue beyond the stated term of
this Agreement or its earlier termination in accordance with this
Section 8 and will make no claims against ACS for damages or expenses
(including damages which may arise from the loss of prospective
customers of RESELLER or expenses incurred or investments made in
connection with the establishment, development, or maintenance of
RESELLER's business as an ACS reseller) in connection with any
termination.
8.6 SURVIVAL. Either party's obligations to pay the other all amounts due
hereunder, as well as either party's obligations relating to
indemnification, warranties, disclaimers of warranty, protection of
proprietary rights and confidential information shall survive
termination of this Agreement.
9. TRADEMARKS, TRADENAMES AND COPYRIGHTS
9.1 USE DURING AGREEMENT. RESELLER agrees that any use of ACS'
trademarks, logos or tradenames will be in connection with the
advertising, promotion, and sale of the corresponding Product only;
and that RESELLER will not use such marks or names in any manner
likely to confuse, mislead, or deceive the public or which would be
injurious to ACS or ACS' rights in the marks. All use shall be
subject to the written approval of ACS, and rights to use such marks
and names shall terminate immediately upon termination of this
Agreement. RESELLER agrees not to attach any additional trademarks,
logos or trade designations to any Product.
9.2 COPYRIGHT AND TRADEMARK NOTICES. RESELLER will include on each copy
of ACS Products that it distributes and on all containers and storage
media thereof, all trademark, copyright and other notices of
proprietary rights included by ACS on such Products. RESELLER agrees
not to alter, erase, deface or overprint any such notice on anything
provided by ACS.
9.3 NO RESELLER RIGHTS IN TRADEMARKS OR COPYRIGHTS. Nothing contained in
this Agreement shall give RESELLER any interest in any of ACS'
trademarks, tradenames, copyrights or other proprietary rights.
RESELLER acknowledges that ACS owns or licenses all ACS Products, and
agrees that it will not at any time during or after this Agreement
assert or claim any interest in or do anything that may
- 8 -
<PAGE>
adversely affect the validity or enforceability of any trademark,
trade name, copyright or logo belonging to or licensed to ACS.
9.4 NO REPRODUCTION. Except for the Self Running Demonstration
Diskette, RESELLER shall not at any time, except at ACS' request,
print, copy or otherwise reproduce (except as permitted for back-up
purposes only), in whole or in part, any Products, components or
Products or related materials, or any promotional and marketing
materials provided to RESELLER by ACS.
9.5 OBLIGATION TO PROTECT AND NOTIFY. RESELLER agrees to protect ACS'
proprietary rights and to cooperate in ACS' efforts to protect its
proprietary rights. RESELLER agrees to notify ACS of any known or
suspected breach of ACS' proprietary rights that comes to RESELLER's
attention. RESELLER will notify ACS in writing of any claim or
proceeding involving the Products within ten (10) days after
RESELLER learns of such claim or proceeding.
10. ASSIGNMENT
RESELLER is appointed as an authorized ACS reseller and this assignment is
not transferable by RESELLER (including in the case of any change in
management or control of RESELLER or any transfer of more than 25% of
RESELLER's voting control or a transfer of substantially all of its assets
to a competitor of ACS) without the prior written consent of ACS. The
provisions hereof shall be binding upon and inure to the benefit of the
parties, their successors and permitted assigns.
11. RELATIONSHIP OF THE PARTIES
RESELLER's relationship with ACS during the Contract Period will be that of
an independent contractor. RESELLER will not have, and will not represent
that it has, any power to bind ACS, or to create any obligation on behalf
of ACS. Nothing stated in this Agreement shall be construed as
constituting RESELLER and ACS as partners or as creating the relationships
of employer/employee, franchisor/franchisee, or principal/agent between the
parties.
12. DISCLAIMER OF WARRANTIES; LIMITED LIABILITY
12.1 DISCLAIMER OF WARRANTIES. ACS MAKES NO WARRANTIES OR REPRESENTATIONS
AS TO PERFORMANCE OF THE ACS PRODUCTS. THE SOFTWARE IS PROVIDED "AS
IS" WITHOUT WARRANTY OF ANY KIND, EITHER EXPRESS OR IMPLIED,
INCLUDING WARRANTIES OF MERCHANTABILITY OR FITNESS FOR ANY
PARTICULAR PURPOSE OR ANY OTHER STATUTORY OR COMMON LAW WARRANTIES.
NO WARRANTY IS MADE REGARDING THE PERFORMANCE OF THE SOFTWARE OR THE
RESULTS THAT MAY BE OBTAINED BY USING
- 9 -
<PAGE>
THE SOFTWARE. THE ENTIRE RISK AS TO THE INSTALLATION, USE, QUALITY
AND PERFORMANCE OF THE SOFTWARE IS WITH END USER. This disclaimer
of warranties is restated in the License Agreement included with the
Products. ACS reserves the right to change its warranty policy.
This disclaimer of warranties and the limitation of liability below
will not be modified, diminished or affected by, and no obligation
or liability will arise or grow out of ACS' rendering of technical,
programming, or other advice or service or the provision of support
for the Products.
ACS MAKES NO WARRANTIES WHATSOEVER WITH RESPECT TO THE OTHER
PRODUCTS. If any such warranties are provided by third party
vendors, they are as set forth in the Other Products Sales
Conditions.
12.2 LIMITED LIABILITY. RESELLER's sole remedy for any defective Product
is return of the Product pursuant to Section 7 of this Agreement.
ACS SHALL NOT BE LIABLE TO RESELLER, ANY END-USER, OR ANY THIRD
PARTY FOR ANY DAMAGES ARISING FROM THIS AGREEMENT OR ANY PRODUCT
DISTRIBUTED HEREUNDER, INCLUDING BUT NOT LIMITED TO INCIDENTAL,
CONSEQUENTIAL, OR SPECIAL DAMAGES (SUCH AS LOSS OF DATA, LOSS OF
USE, LOSS OF REVENUES, LOSS OF PROFITS OR DELAY DAMAGES) EVEN IF ACS
WAS ADVISED OF THE POSSIBILITY OF SUCH DAMAGES OR LOSSES. IN NO
EVENT SHALL THE LIABILITY OF ACS FOR DAMAGES RELATING TO ANY PRODUCT
EXCEED THE ACTUAL AMOUNTS PAID BY RESELLER OR END-USER FOR THE
PRODUCT TO WHICH THE CLAIM RELATED, NOR SHALL THE LIABILITY OF ACS
FOR DAMAGES RELATING TO THIS AGREEMENT EXCEED $5,000.00.
12.3 NO RESELLER WARRANTY. RESELLER will make no warranty, guarantee or
representation, whether written or oral, on ACS' behalf RESELLER has
no rights or authority to make any distribution of the Products
other than under the terms of the License Agreement enclosed in each
Product package.
12.4 DELAYS. ACS shall not be responsible for any failure to perform due
to unforeseen circumstances or to causes beyond ACS' control,
including but not limited to acts of God, war, riot, embargoes, acts
of civil or military authorities, fire, floods, accidents, strikes,
or shortages of transportation, facilities, fuel, energy, labor or
materials. In the event of any such delay, ACS may defer the
delivery date of orders for the Products for a period equal to the
time of such delay. ACS SHALL NOT BE LIABLE FOR ANY DAMAGES,
DIRECT, CONSEQUENTIAL, SPECIAL OR OTHERWISE, TO RESELLER OR TO ANY
OTHER PERSON FOR FAILURE TO DELIVER OR FOR ANY DELAY OR ERROR IN
DELIVERY OF THE PRODUCTS FOR ANY REASON WHATSOEVER.
- 10 -
<PAGE>
13. INDEMNIFICATION
13.1 INDEMNIFICATION OF ACS. RESELLER agrees to indemnify ACS against
and hold ACS harmless from, any and all claims (including reasonable
attorneys' fees and costs of litigation or defense incurred by ACS
by any other party (including any End-User) resulting from
RESELLER's acts, omissions or misrepresentations (i) relating to
RESELLER's demonstration, marketing or distribution of the Products,
or (ii) arising out of any breach of the terms and conditions of
this Agreement by RESELLER, or (iii) arising from the termination of
any personnel employed by RESELLER as a result of termination of
this Agreement, or (iv) arising from the acts of RESELLER which give
rise to claims that such acts were committed by or on behalf of ACS
by RESELLER acting in the role of a gent or otherwise, or (v)
arising out of RESELLER's modification of the terms of the License
Agreement ACS includes with the ACS Products, regardless of the form
of action. RESELLER agrees to pay all indemnifiable amounts due to
ACS within thirty days alter ACS' request therefor.
13.2 INDEMNIFICATION OF RESELLER. ACS agrees to indemnity RESELLER
against and hold harmless from, any and all claims (including
reasonable attorneys' fees and costs of litigation or defense
incurred by RESELLER by any other party (including any End-User)
resulting from acts, omissions or misrepresentations (i) arising out
of any breach of the terms and conditions of this agreement by ACS,
or (ii) arising from the acts of ACS which give rise to claims that
such acts were committed by or on behalf of RESELLER by ACS acting
in the role of agent or otherwise.
14. CONFIDENTIALITY
RESELLER acknowledges that in the course of performing its obligations it
will receive information which is confidential and/or proprietary to ACS,
including, without limitation, information relating to End-Users, RESELLER
price lists, manner of operation, and fixture plans. RESELLER agrees not
to use such information except in performance of this Agreement and not to
disclose such information to third parties.
15. GENERAL
15.1 WAIVER. The waiver by either party of any default by the other
shall not waive subsequent defaults of the same or different kind.
15.2 NOTICES. Any notices required or permitted by this Agreement shall
be given to the ACS at 888 Executive Center West, Suite 300, St.
Petersburg, Florida 33702 to the attention of the Vice President of
Sales in writing. Notices to RESELLER shall be sent to the address
first above written. Such notice shall be deemed given upon
personal delivery to the appropriate address or three business days
alter sent by certified or registered mail or Federal Express (or
equivalent overnight carrier).
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<PAGE>
15.3 ATTORNEYS' FEES. If any action at law or in equity is necessary to
enforce the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and other expenses in
addition to any other relief to which such prevailing party may be
entitled.
15.4 GOVERNING LAW; VENUE: SEVERABILITY. This Agreement shall be
governed by and construed in accordance with the Laws of the State
of Florida (without regard to conflicts of law). Any suit hereunder
will be brought in the federal or state courts in Florida and
RESELLER hereby submits to the personal jurisdiction thereof. If
any provision of this Agreement is for any reason found by a court
of competent jurisdiction to be unenforceable, that provision will
be enforced to the maximum extent permissible, and the remainder of
this Agreement shall continue in full force and effect.
15.5 AUDIT VERIFICATION. If ACS has a bona fide concern, based on
reliable evidence, that RESELLER may be violating the terms of this
Agreement by mailing copies of any Product or otherwise using or
distributing any Product in violation of the terms of this
Agreement, RESELLER agrees that ACS shall have the right to retain
an independent certified public accountant for the purpose of
inspecting, during normal business hours, RESELLER's books,
financial accounts and income tax returns, with respect only to the
business relationship between RESELLER and ACS, in insure RESELLER's
compliance with the terms of this Agreement, ACS shall retain this
audit right for one year after termination of this Agreement. ACS
shall treat any records examined as RESELLER confidential
information and shall not disclose such information unless required
in any legal or other proceeding in order to protect its proprietary
rights or insure that all monies owed hereunder have been paid.
15.6 EXECUTION OF AGREEMENT. This Agreement shall become effective only
after it has been signed by RESELLER and has been accepted by ACS,
and its effective date shall be the date on which it is signed by
ACS.
15.7 SECTION HEADING. The section headings contained herein are for
reference only and shall be not considered substantive parts of this
Agreement.
15.8 EQUITABLE RELIEF. Both Parties acknowledges that any material
breach of its obligations under this Agreement with respect to the
proprietary rights or confidential information of the other party
will cause irreparable injury for which there are inadequate
remedies at law, and therefore the other party will be entitled to
equitable relief in addition to all other remedies provided by this
Agreement or available at law.
16. ENTIRE AGREEMENT
This Agreement and Schedule A represent the entire agreement between
RESELLER and ACS with respect to their subject matter, superseding all
previous oral or written
- 12 -
<PAGE>
communications, representations, or agreements regarding the such subject
matter. This Agreement may be modified only by a writing signed by the
parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date specified below.
Abra Cadabra Software, Inc. RESELLER: Made2Manage Systems, Inc.
I HAVE READ AND AGREE TO THE TERMS OF
THIS RESELLER AGREEMENT
By: James Greenhaus By: /s/ Katherine Macdonald
--------------------------- --------------------------------
Name: James Greenhaus Name: Katherine Macdonald
------------------------- ------------------------------
Title: VP - Sales & Marketing Title: Corporate Secretary
------------------------ -----------------------------
Date: 8/16/95 Date: August 1, 1995
------------------------- ------------------------------
(This is the effective date of
the Agreement)
State Resale No.: 002797291 001 0
------------------
Federal Tax I.D. No.: 35-1665080
------------------
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<PAGE>
SCHEDULE A
(EFFECTIVE 9-1-94)
PRODUCTS:
Abra 2000 Base System/unlimited employees and 150 employees
Abra 2000 Network Option
Abra 2000 Attendance
Abra 2000 Mufti-Company Consolidation
Upgrades from Abra 2000/150, Abra 2000/75
AbraChart
AbraTrak Base System
AbraTrak Network Option
AbraScan Resume Scanning Option
AbraPay Base System/unlimited employees and 75 employees
AbraPay Network Option
AbraPay Laser and Laser Signature
Upgrade from AbraPayBase System/75 to unlimited
AbraPCS Base System
AbraPCS Network Option
AbraPCS Custom Screen Option
AbraTrain Base System
AbraTrain Network Option
AbraBenefits Base System
AbraBeneflts/FSA Option
AbraBenefits Network Option
Envoy HR Base System/75, /150, /500, /1000, / and unlimited employee
versions
Envoy HR Network Seats Options
Envoy Applicant Base System
Envoy Applicant Network Seat Options
Envoy Pay Base System/75, /150, /500, /1000, / and unlimited employee
versions
Envoy Pay Network Seats Options
Envoy Pay Laser and Laser Signature
Envoy Organizer Seat Options
Envoy Analysis Seat Options
Envoy Multi-Site Consolidation
Evaluation Systems (Demos) Abra 2000, AbraTrak, AbraPay, AbraPCS,
AbraTrain, EnvoyHR, EnvoyAP, EnvoyPay
INTERFACES:
AbraPort, Abralink/SBT, Abra 2000 to SBT Payroll, Abralink to Service
Bureau, EnvoyLink, Envoy to Abra link
- 14 -
<PAGE>
SUPPORT AND UPDATE SERVICES
Abra 2000, AbraTrak, AbraTrain, AbraPCS, AbraPay, Multi-user,
Attendance, AbraScan, Multi-company, DOS Source Code, Envoy HR,
Envoy AP, EnvoyPay, Envoy HR/AP/Pay Network seats, Envoy Organizer,
EnvoyLink, Support Plus Gold
PRODUCT RETAIL PRICES
As stated in the then current ACS Price List, published by ACS from time to
time
PRODUCT DISCOUNTS
Gold Level 50%
Silver Level 40%
Bronze Level 30%
(Reseller level and discount eligibility are defined in the ProfitPlus
Reseller Benefit Plan. ACS reserves the right to change the ProfitPlus
Reseller Benefit Plan requirements from time to time.)
* All discounts are from the suggested retail price of the then
current ACS Price List
* Support and Update Services and ACS End-User training classes are
precluded from Product Discount
OTHER PRODUCTS
R & R Report Writer
- 15 -
<PAGE>
<TABLE>
<CAPTION>
RESELLER APPLICATION
<S><C>
(Please type or print) Date: July 3, 1995
--------------------------------------------------
Reseller Name: Kathy Macdonald Title: Manager, Finance & Administration
------------------------- ------------------------------------------------
Company Name: Made2Manage Systems, Inc.
------------------------------------------------------------------------------------------
Address: 9002 Purdue Road, Suite 200
------------------------------------------------------------------------------------------
City: Indianapolis State: IN Zip: 46268
-------------------------------------- -------- ---------------
Phone: ( 317 ) 875-9750 Fax: ( 317 ) 872-6454
------ ---------------------------- -------- ---------------
ProfitPlus Level Applying for: / /Gold / /Silver / /Bronze
Type of Business:
/ /Value Added Reseller / /HR Consultant / /System Integrator / /Accounting/CPA Firm
/ /Other (please specify):
------------------------
Business History:
Year Business Started: 1986 Number of Locations: 1
------ -----
Total Revenue Last Year: $4.5 million
------------
Revenue Breakdown:
Hardware 5 % Software 55 % Installation % Training 5 %
---- ----- --- ----
Consulting 5 % Support 25 % Customizing %
---- ----- ---
Market Focus:
Sell Other HR Products (List)
----------------------------------------------------------------------------
Sell Accounting Software Products (List)
-----------------------------------------------------------------
Sell Into Specific Vertical Market(s) (List Manufacturing
------------------------------------------------------------
Special Services:
/ /Customization / /Clipper or Dbase Programming x Training x Installation x Support
/ /Other (please specify)
--------------------------------------------------------------------------
Operational Organization: (Please show number of employees for the following, counting each employee only once.)
Total Employees: F/T 48 P/T 3
----- -----
Inside Sales 3 Outside Sales 8 Support 15 Programmers 14 Trainers 2 Admin 6
---- ----- ------ ------ ----- -----
Marketing Strategy:
What are your primary lead sources? Direct mail, Trade Advertising, Trade Shows
-----------------------------------------------------------------
Telemarketing (hours per week) 35
-------
Direct Mail (frequency & volume) 5-6 year (target audience) small to mid size manufacturers
-------- -------------------------------------
Yellow Pages -0- Vertical Publications(specify)
------- -------------------------------------------------------
Trade Shows (specify) Eastec, Westec
------------------------------------------------------------------------------------
Other Marketing Methods Referral
---------------------------------------------------------------------------------
(PLEASE FAX OR MAIL, ATT: RESELLER RECRUITING. ALL APPLICATIONS ARE SUBJECT TO APPROVAL BY ABRA CADABRA
SOFTWARE.)
</TABLE>
<PAGE>
LICENSE AGREEMENT
This Agreement made this 1st day of April, 1986, by and between TEKSYN
INC., hereinafter referred to as "TEK", an Indiana Corporation, of 9002 Purdue
Road, Suite 200, City of Indianapolis, State of Indiana and SOURCEMATE
INFORMATION Systems, INC., hereinafter referred to as "SIS" a California
Corporation, of 20 Sunnyside Avenue, City of Mill Valley, State of California.
TEK is presently developing a vertical market microcomputer program which
is known as "TEKSYN SYSTEMS", and which shall be referred to in this agreement
as "TEK SYSTEM", and which is further described on Attachment A.
SIS owns and has the right to grant licenses in certain computer software
and TEK desires to acquire a license to use and modify such programs, and
reproduce and distribute copies of such programs as an integral part of the TEK
SYSTEMS. This software, which is described on Attachment B, is known as and
shall be referred to in to this Agreement as "ACCOUNTMATE".
IT IS THEREFORE MUTUALLY AGREED AS FOLLOWS:
1. DEFINITIONS
(a) "SUPPORTING DOCUMENTATION" shall mean an instruction guide or manual
designed to teach the inexperienced user how to operate ACCOUNTMATE and
information describing the format, organization and content of machine readable
diskettes to be supplied to TEK under the term of this Agreement.
(b) "VAR PRICES" shall mean the current published price of ACCOUNTMATE
associated materials, and enhancements less the average discount allowed to
value added remarketers of such items for the same volume sales experienced by
TEK. The term "Value Added Remarketer" shall not be construed or interpreted to
include or imply any right to license any third party ACCOUNTMATE or subsequent
duplication, copying or publication.
2. ITEMS PROVIDED BY SIS
(a) SIS shall furnish TEK a current computer copiable version of
ACCOUNTMATE in source code form.
(b) SIS shall furnish TEK one copy of any supporting documentation
developed by SIS.
(c) Under a license, TEK shall be allowed to use ACCOUNTMATE and
supporting documents and enhancements from SIS for the royalties shown in
paragraph 6.
<PAGE>
3. MAINTENANCE AND MODIFICATION
(a) During the term of this Agreement, if TEK notifies SIS in writing of
program errors or SIS has other reasons to believe that errors exist in
ACCOUNTMATE, SIS shall use its best efforts to verify and fix the errors. SIS
shall notify TEK if an error cannot be verified within a reasonable time. Error
corrections shall be machine readable and shall be such that TEK can update
ACCOUNTMATE. Necessary changes in supporting documentation shall be provided to
TEK , at no charge to TEK, within four weeks after machine readable error
corrections are made.
(b) TEK shall have the right to receive all enhancements or modifications
to ACCOUNTMATE which are undertaken or completed at the initiative of SIS at the
license fee provided to VARs. TEK may accept or reject any such enhancements or
modifications.
(c) TEK has the right to modify ACCOUNTMATE programs in any way necessary
to meet the requirements of the TEK SYSTEM. SIS has no obligation to support or
correct faults or bugs in ACCOUNTMATE programs which arise from modifications
done by TEK.
4. NEW PROGRAM MODULES
(a) As SIS introduces new modules of ACCOUNTMATE, TEK shall have the same
right of license and use of such modules as defined within this agreement on
modules as described in attachment B. The royalty prices for the new modules
shall maintain the same relative percentage of the list price as the royalty
outlined under section 6a for the Modules described in Attachment B.
5. LICENSE
SIS hereby grants to TEK a nonexclusive worldwide license to use
ACCOUNTMATE in the TEK SYSTEM, to modify ACCOUNTMATE and to reproduce and
distribute copies of ACCOUNTMATE as a part of the TEK SYSTEM.
6. INITIAL ROYALTY SCHEDULE
(a) In consideration for the rights and license granted herein, and
subject to the conditions set forth elsewhere in this agreement, TEK shall pay
SIS on sales or transfers of ACCOUNTMATE as follows:
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<PAGE>
UNITS SOLD PER UNIT ROYALTY PAID TO SIS
Single User Multi-User
Version
1-10 $870.00 $1,131.00
11-50 $761.25 $ 989.63
51-100 $652.50 $ 848.25
101-200 $587.25 $ 763.43
201-350 $522.00 $ 678.60
351 & more $435.00 $ 565.50
(b) After sale or transfer of 500 units, the parties shall negotiate in
good faith the royalty payments due to SIS for all future sales or transfers of
ACCOUNTMATE. For all sales of ACCOUNTMATE during such negotiation period until
the parties agree on a mutually satisfactory royalty payment, TEK shall pay SIS
a royalty of $435.00 per unit for a single user version and allow indefinitely
$565.50 for a multi-user version. As long as TEK continues to pay such
royalties as described above, this agreement shall continue, unless terminated
for causes described elsewhere in this agreement.
(c) After 1 year from the date of this agreement, SIS may increase the
above royalties in direct proportion to the percent increases of the VAR PRICES
during that one year period.
(d) Payments shall be made to SIS within ten (10) days of each month
during the term of this agreement, for the units sold and delivered during the
preceding month.
7. ACCOUNTING
(a) TEK shall keep accurate records covering all transactions relating to
ACCOUNTMATE sales and transfers. At the time each payment is due SIS, TEK shall
furnish SIS with a statement setting forth the number of programs sold. SIS
and/or SIS's agent upon giving ten (10) calendar days written notice, shall have
the right to inspect these records during normal business hours at TEK's place
of business. If any difference between TEK payments and TEK's records of
ACCOUNTMATE transaction is found to be greater than 10% of the TEK payments for
any 3 month period, TEK shall pay any expense reasonably incurred in conducting
the audit.
8. WARRANTIES
(a) SIS warrants that SIS has the legal right to grant TEK the license set
forth in this agreement and that such license does not infringe on any third
party's property or proprietary rights.
(b) OTHER THAN THE WARRANTIES SET FORTH IN PARAGRAPH a. ABOVE, SIS MAKES
NO WARRANTIES, EXPRESS OR IMPLIED, CONCERNING THE PROGRAMS
-3-
<PAGE>
INCLUDING, BUT NOT LIMITED TO, IMPLIED WARRANTIES OF MERCHANTABILITY AND OR
FITNESS FOR A PARTICULAR PURPOSE.
9. COPYRIGHT NOTICES
(a) SIS's copyright notice shall be placed on the software source code
documents as follows: Copyright (c) 1984 Sourcemate Information Systems, all
rights reserved.
(b) Should TEK incorporate complete pages of SIS's supporting
documentation or user guide into TEK's end user material or supporting
documentation, all copies of such end user material shall contain an appropriate
copyright notice in the name of SIS.
(c) TEK shall have the right to place it's own copyright notice on CRT
display screens and user documents as long as such notices are related to TEK
Systems. Nothing in this paragraph shall be construed to imply an assignment
of copyright or waiver of any proprietary interests of SIS, other than that
granted in Section 5 above.
10. PROPRIETARY INFORMATION
(a) TEK acknowledges that the ACCOUNTMATE program, which is described in
Attachment B to this Agreement and all related materials, manuals and other
documentation, constitute valuable property of SIS and that all trade secrets,
copyrights, trademarks and other ownership rights in ACCOUNTMATE remain
exclusively in SIS.
(b) SIS acknowledges that the TEK SYSTEM, which is described in Attachment
A to this Agreement and all related materials, manuals and other documentation,
included any modifications of ACCOUNTMATE made by or paid for by TEK, constitute
valuable property of TEK and that all trade secrets, copyrights, trademarks and
other ownership rights in the TEK SYSTEM remain exclusively in TEK.
(c) TEK acknowledges that SIS reserves all rights with respect to
ACCOUNTMATE under all applicable laws for the protection of proprietary
information, including, but not limited to trade secrets, copyrights, trademarks
and patents.
(d) SIS acknowledges that TEK reserves all rights with respect to TEK
SYSTEMS under all applicable laws for the protection of proprietary information,
including, but not limited to trade secrets, copyrights, trademarks and patents.
(e) TEK shall not enuse or permit any unauthorized distribution, copying,
reproduction or disclosure of ACCOUNTMATE.
-4-
<PAGE>
11. INDEMNIFICATION
(a) Provided that TEK promptly notifies SIS of all claims, SIS shall
defend TEK against claims that ACCOUNTMATE infringed the patent, copyright,
trade secret of other proprietary right of any third party and shall pay all
court costs, legal fees, and any damages finally awarded.
(b) Provided that SIS promptly notifies TEK of all claims, TEK shall
defend SIS against claims that arise from or concern TEK's marketing,
manufacturing, or distribution of TEK SYSTEM other than a claim regarding
performance of ACCOUNTMATE and shall pay all court costs, legal fees, and any
damages finally awarded.
12. TERM AND TERMINATION
(a) The initial term of this agreement shall be for one year. At the
expiration of the initial term, this Agreement shall automatically renew for
successive one year periods.
(b) Either party shall have the right to terminate this agreement in the
event that the other party commits a material breach of its obligations.
Termination shall be made by written notice, sent by certified mail to the
breaching party, which sets forth the details of the breach. Termination shall
become effective thirty (30) days from the date the notification of intent to
terminate is mailed, unless the breaching party has corrected the breach prior
to that thirty (30) day period.
(c) Notwithstanding clause a above, termination shall be effective
immediately if one or more of the following events occur:
(1) A petition of bankruptcy is filed by or against TEK.
(2) TEK ceases through no fault of SIS to make ACCOUNTMATE available
to buyers for more than forty-five days, unless such cessation is caused by
delays in the initial development of the TEK SYSTEM field problems with the
TEK SYSTEM requires cessation of marketing until these problems are
actively resolved.
(3) TEK announces that it intends to cease publishing the TEK SYSTEM.
(4) Major defect in ACCOUNTMATE which renders it unmarketable, for
the use intended by SIS, occurs for more than forty-five days which is not
cured by SIS.
(d) Notwithstanding termination of this agreement, the following
obligations and rights shall continue in full force and effect;
(1) All obligations under sections concerning Proprietary Rights,
Payment and Indemnification of this Agreement shall survive and continue to
bind the parties for two years after the date of termination.
-5-
<PAGE>
(2) Persons in companies who obtained ACCOUNTMATE prior to
termination shall continue to have the right to use ACCOUNTMATE.
13. ATTORNEY'S FEES
If any legal action, including arbitration, arises under this agreement or
by reason of any asserted breach of it, the prevailing party shall be entitled
to recover all costs and expenses, including reasonable attorney's fees,
incurred as a result of such a legal action.
14. GENERAL PROVISIONS
(a) TEK may not sell, transfer, assign, allocate or subcontract any rights
of this agreement without the prior written consent of SIS.
(b) The provisions of this agreement are severable, and if any one or more
provisions may be determined to be judicially unenforceable, in whole or in
part, the remaining provisions shall nevertheless be binding and enforceable.
(c) Either party's failure to enforce any provision of this agreement
shall not in any way be construed as a waiver of any such provision or
provisions, or prevent that party thereafter from enforcing the other provisions
of this agreement.
(d) Any notice from one party to the other required by this agreement
shall be deemed made on the date of mailing, if sent by certified mail and
addressed to the address specified below:
SOURCEMATE INFORMATION Systems, INC.
20 Sunnyside Avenue
Mill Valley, California 94941
U.S.A.
TEKSYN, Inc.
9002 Purdue Road, Suite 200
Indianapolis, Indiana 46268
U.S.A.
(e) This contract shall be construed under the laws of the State of
California.
(f) This Agreement sets forth the entire agreement of the parties; it may
be changed or modified only in a writing signed by both parties.
-6-
<PAGE>
(g) This contract is binding upon and shall inure to the benefit of the
legal successors and assigned to the parties.
Dated: 6/18/86 SOURCEMATE INFORMATION Systems, INC.
By:/s/ Ben Tse
-------------------------------
Ben Tse, President
Dated: 6/12/86 TEKSYN, INC.
By:/s/ Gerald V. Roch
-------------------------------
Gerald V. Roch, President
-7-
<PAGE>
ATTACHMENT A
DESCRIPTION OF TEK SYSTEM
The TEK SYSTEM is an integrated package of software ranging from word processing
thru order entry, material control, production control, job costing, accounting
and human resources. This package is specifically designed to improve the
decision making ability and operating efficiency of small businesses typically
employing less than 200 people.
-8-
<PAGE>
ATTACHMENT B
DESCRIPTION OF ACCOUNTMATE PROGRAM MODULES
General Ledger
Accounts Payable
Sales Order
Manufacturing Inventory Control
Payroll
-9-
<PAGE>
TERM LOAN AGREEMENT
NBD Bank, N.A, a national banking association (the "Bank"), whose address
is One Indiana Square, Indianapolis, IN 46266, agrees to extend the term
loan(s) described below (whether one or more, the "Loans") to TEKSYN, Inc.
(the "Borrower"), whose address is 9002 Purdue Road, Suite 200, Indianapolis,
IN 46268 under the terms and conditions set forth in this agreement.
1. TERM LOANS. The Bank agrees to extend the following Loans to the
Borrower:
A. A loan in the amount of $112,500.00 maturing April 1, 1998 the
proceeds of which will be used for the following purpose: Purchase
Equipment.
Each loan shall be evidenced by an Installment Business Loan Note or a Term
Note executed concurrently with this agreement (referred to in this agreement
both singularly and together with any other promissory notes referenced in
this Section l, and all extensions, renewals and amendments to these notes,
as the "Notes").
2. Fees and Expenses
2.1 FEES. Upon execution of this agreement the Borrower shall pay the Bank
the following fees, all of which the Borrower acknowledges have been
earned by the Bank: Documentation Fee of $1,125.00
2.2 OUT-OF-POCKET EXPENSES. In addition to any fee set forth in
Section 2.1 above, the Borrower shall reimburse the Bank for its
out-of-pocket expenses, including reasonable attorney fees allocated
to the Loans.
3. Security
3.1 Payment of the borrowings under the Loans shall be secured by a first
security interest and/or real estate mortgage, as the case may be, of
first priority, or other priority to which the Bank consents in
writing, covering the following property and all its additions,
substitutions, increments, proceeds and products, whether now owned or
later acquired (the "Collateral"):
A. ACCOUNTS RECEIVABLE. All of the Borrower's accounts, chattel
paper, general intangibles, instruments, and documents (as those
terms are defined in the Indiana Uniform Commercial Code), rights
to refunds of taxes paid at any time to any governmental entity,
and any letters of credit and drafts under them given in support
of the foregoing, wherever located. The Borrower shall deliver to
the Bank executed security agreements and financing statements in
form and substance satisfactory to the Bank.
B. INVENTORY. All of the Borrower's inventory, wherever located.
The Borrower
<PAGE>
shall deliver to the Bank executed security agreements and
financing statements in form and substance satisfactory to
the Bank.
C. EQUIPMENT. All of the Borrower's equipment, wherever located.
The Borrower shall deliver to the Bank executed security
agreements and financing statements in form and substance
satisfactory to the Bank.
D. CERTIFICATE OF DEPOSIT. NBD Certificate of Deposit in the
amount of $56,250.00.
3.2 No forbearance nor extension of time granted any subsequent owner of
the Collateral shall release the Borrower from liability.
3.3 ADDITIONAL COLLATERAL/SETOFF. To further secure payment of the
borrowings under the Loans and all of the Borrower's other liabilities
to the Bank, the Borrower grants to the Bank a continuing security
interest in: (i) all securities and other property of the Borrower in
the custody, possession or control of the Bank (other than property
held by the Bank solely in a fiduciary capacity) and (ii) all balances
of deposit accounts of the Borrower with the Bank. The Bank shall have
the right at any time to apply its own debt or liability to the
Borrower, or to any other party liable for payment of the Loans, in
whole or partial payment of such loans or other present or future
liabilities, without any requirement of mutual maturity.
3.4 CROSS-LIEN. Any of the Borrower's other property in which the Bank has
a security interest to secure payment of any other debt, whether
absolute, contingent, direct or indirect, including the Borrower's
guaranties of the debts of others, shall also secure payment of and be
part of the Collateral for the Loans.
4. AFFIRMATIVE COVENANTS. So long as any Loan remains outstanding, the
Borrower, and each of its subsidiaries, will:
4.1 INSURANCE. Maintain insurance with financially sound and reputable
insurers covering its properties and business against those casualties
and contingencies and in the types and amounts as shall be in
accordance with sound business and industry practices.
4.2 EXISTENCE. Maintain its existence and business operations as presently
in effect in accordance with all applicable laws and regulations, pay
its debts and obligations when due under normal terms, and pay on or
before their due date all taxes, assessments, fees and other
governmental monetary obligations, except as they may be contested in
good faith if they have been properly reflected on its books and, at
the Bank's request, adequate funds or security has been pledged to
insure payment.
4.3 FINANCIAL RECORDS. Maintain proper books and records of account, in
accordance with generally accepted accounting principles where
applicable, and consistent with financial statements previously
submitted to the Bank.
<PAGE>
4.4 COLLATERAL AUDITS. Permit the Bank or its agents to perform annual
audits of the Collateral. The Borrower shall compensate the Bank for
such audits in accordance with the Bank's schedule of fees as may be
amended from time to time. The Bank shall retain the right to inspect
the Collateral and business records related to it at such times and at
such intervals as the Bank may reasonably require.
4.5 MANAGEMENT. Maintain current management specifically Dave Wortman.
a. FINANCIAL REPORTS. Furnish to the Bank whatever information, books,
and records the Bank may reasonably request, including at a minimum:
If the Borrower has, subsidiaries, all financial statements required
will be provided on a consolidated and on a separate basis.
A. Within 30 days after each quarterly period, a balance sheet as of
the end of that period and a statement of profit, loss and
surplus, from the beginning of that fiscal year to the end of that
period, certified as correct, subject to year-end adjustments, by
one of its authorized agents.
B. Within 120 days after, and as of the end of, each of its fiscal
years, a detailed audit statement including a balance sheet and
statement of profit, loss and surplus, certified by an independent
certified public accountant of recognized standing.
5. DEPOSITS. Maintain its corporate primary demand deposit relationship
with the Bank.
6. NEGATIVE COVENANTS.
6.1 DEFINITIONS. As used in this agreement, the following terms shall have
the following respective meanings:
A. "Subordinated Debt" shall mean debt subordinated to the Bank in
manner and by agreement satisfactory to the Bank.
B. "Tangible Net Worth" shall mean total assets less the sum of
intangible assets, due from Affiliates, and total liabilities.
Intangible assets include goodwill, patents, copyrights, mailing
lists, catalogs, trademarks, bond discount and underwriting
expenses, organization expenses, and all other intangibles.
C. "Working Capital" shall mean current assets less the sum of
(i) current liabilities and (ii) amounts due from Affiliates.
D. "Affiliate" shall mean shareholders, partners, owners, and
subsidiaries, and entities owned or controlled by such parties.
E. "Cash Flow Coverage" shall mean (net income after taxes plus
interest
<PAGE>
expense, depreciation & amortization expense minus unfunded
capital expenditures and dividends) divided by total debt service.
6.2 Unless otherwise noted, the financial requirements set forth in this
Section 6 shall be computed in accordance with generally accepted
accounting principles applied on a basis consistent with financial
statements previously submitted by the Borrower to the Bank.
6.3 Without the written consent of the Bank, so long as any debt remains
outstanding under the Credit Facilities, the Borrower will not: (where
appropriate, covenants shall apply on a consolidated basis)
A. TANGIBLE NET WORTH. Permit its Tangible Net Worth to be negative,
tested quarterly.
B. DEBT. Incur, or permit to remain outstanding, BANK debt for
borrowed money, capital leases obligations, installment
obligations from any financial institution other than Bank, other
than (i) debt reflected in the latest financial statement of the
Borrower furnished to the, Bank prior to execution of this
agreement (ii) debt for any purpose not to exceed $30,000.00 in
the aggregate in any fiscal year. For purposes of this covenant,
non-capitalized leases and the sale of any accounts receivable
shall be deemed the incurring of debt for borrowed money.
C. GUARANTIES. Guarantee or otherwise become or remain secondarily
liable on the undertaking of another, except for endorsement of
drafts for deposit and collection in the ordinary course of
business.
D. LIENS. Create or permit to exist any lien on any of its property,
real or personal, except: existing liens known to the Bank; liens
to the Bank; liens incurred in the ordinary course of business
securing current nondelinquent liabilities for taxes, worker's
compensation, unemployment insurance, social security and pension
liabilities; and liens for taxes being contested in good faith.
E. ADVANCES AND INVESTMENTS. Purchase or acquire any securities of,
or make any loans or advances to, or investments in, any person,
firm or corporation, except obligations of the United States
Government, open market commercial paper rated one of the top two
ratings by a rating agency of recognized standing, or certificates
of deposit in insured financial institutions.
F. CASH FLOW COVERAGE RATIO. Permit the ratio of its cash flow
coverage to be less than 1.50 to 1.00.
7. REPRESENTATIONS BY BORROWER. Each Borrower represents: (a) that the
execution and delivery
<PAGE>
of this agreement and the Notes and the performance of the obligations they
impose do not violate any law, conflict with any agreement by which it is
bound, or require the consent or approval of any governmental authority or
other third party; (b) that this agreement and the Notes are valid and
binding agreements, enforceable according to their terms; and (c) that all
balance sheets, profit and loss statements, and other financial statements
furnished to the Bank are accurate and fairly reflect the financial condition
of the organizations and persons to which they apply on their effective
dates, including contingent liabilities of every type, which financial
condition has not changed materially and adversely since those dates. Each
Borrower, other than a natural person, further represents: (a) that it is
duly organized, existing and in good standing pursuant to the laws under
which it is organized; and (b) the execution and delivery of this agreement
and the Notes and the performance of the obligations they impose (i) are
within its powers and have been duly authorized by all necessary action of
its governing body, and (ii) do not contravene the terms of its articles of
incorporation or organization, its by-laws, or any partnership, operating or
other agreement governing its affairs.
8. ACCELERATION.
8.1 EVENTS OF DEFAULT/ACCELERATION. If any of the following events occurs:
A. The Borrower or any guarantor of any of the Loans ("Guarantor")
fails to pay when due any amount payable under the Loans or under
any agreement or instrument evidencing debt to any creditor;
B. The Borrower or any Guarantor (a) fails to observe or perform any
other term of this agreement or the Notes; (b) makes any
materially incorrect or misleading representation, warranty, or
certificate to the Bank; (c) makes any materially incorrect or
misleading representation in any financial statement or other
information delivered to the Bank; or (d) defaults under the terms
of any agreement or instrument relating to any debt for borrowed
money (other than the Loans) such that the creditor declares the
debt due before its maturity;
C. There is a default under the terms of any loan agreement,
mortgage, security agreement or any other document executed in
connection with the Loans, or any guaranty of the Loans becomes
unenforceable in whole or in part, or any Guarantor fails to
promptly perform under such a guaranty;
D. A "reportable event" (as defined in the Employee Retirement Income
Security Act of 1974 as amended) occurs that would permit the
Pension Benefit Guaranty Corporation to terminate any employee
benefit plan of the Borrower or any affiliate of the Borrower;
E. The Borrower or any Guarantor becomes insolvent or unable to pay
its debts as they become due;
F. The Borrower or any Guarantor (a) makes an assignment for the
benefit of creditors; (b) consents to the appointment of a
custodian, receiver or trustee
<PAGE>
for it or a substantial part of its assets; or (c) commences any
proceeding under any bankruptcy, reorganization, liquidation or
similar laws of any jurisdiction;
G. A custodian, receiver or trustee is appointed for the Borrower or
any Guarantor or for a substantial part of its assets without its
consent and is not removed within 60 days after such appointment;
H. Proceedings are commenced against the Borrower or any Guarantor
under any bankruptcy, reorganization, liquidation, or similar laws
of any jurisdiction, and such proceedings remain undismissed for
60 days after commencement; or the Borrower or Guarantor consents
to the commencement of such proceedings;
I. Any judgment is entered against the Borrower or any Guarantor, or
any attachment, levy or garnishment is issued against any property
of the Borrower or any Guarantor;
J. The Borrower or any Guarantor dies;
K. The Borrower or any Guarantor, without the Bank's written consent,
(a) is dissolved, (b) merges or consolidates with any third party,
(c) leases, sells or otherwise conveys a material part of its
assets or business outside the ordinary course of business,
(d) leases, purchases, or otherwise acquires a material part of
the assets of any other corporation or business entity, except in
the ordinary course of business, (e) engages in any share exchange
to the same effect, or (f) agrees to do any of the foregoing,
(notwithstanding the foregoing, any subsidiary may merge or
consolidate with any other subsidiary, or with the Borrower, so
long as the Borrower is the survivor);
L. There is a substantial change in the management or ownership, or
the existing or prospective financial condition, of the Borrower
or any Guarantor which the Bank in good faith determines to be
materially adverse; or
M. The Bank in good faith shall deem itself insecure;
then, whether or not the Bank has made demand, the Loans shall become due
immediately, without notice, at the Bank's option.
8.2 REMEDIES. If the Loans are not paid at maturity, whether by
acceleration or otherwise, the Bank shall have all of the rights and
remedies provided by any law or agreement. Any requirement of
reasonable notice shall be met if the Bank sends the notice to the
Borrower at least seven (7) days prior to the date of sale,
disposition or other event giving rise to the required notice. The
Bank is authorized to cause all or any part of the Collateral to be
transferred to or registered in its name or in the name
<PAGE>
of any other person, firm or corporation, with or without designation
of the capacity of such nominee. The Borrower shall be liable for any
deficiency remaining after disposition of any Collateral, and waives
all valuation and appraisement laws. The Borrower is liable to the
Bank for all reasonable costs and expenses of every kind incurred in
the making or collection of the Loans, including, without limitation,
reasonable attorneys' fees and court costs. These costs and expenses
shall include, without limitation, any costs or expenses incurred by
the Bank in any bankruptcy, reorganization, insolvency or other similar
proceeding.
9. Miscellaneous
9.1 Notice from one party to another relating to this agreement shall be
deemed effective if made in writing (including telecommunications) and
delivered to the recipient's address, telex number or facsimile number
set forth under its name below by any of the following means: (a) hand
delivery, (b) registered or certified mail, postage prepaid, with
return receipt requested, (c) first class or express mail, postage
prepaid, (d) Federal Express, Purolator Courier or like overnight
courier service or (e) facsimile, telex or other wire transmission with
request for assurance of receipt in a manner typical with respect to
communication of that type. Notice made in accordance with this
section shall be deemed delivered upon receipt if delivered by hand or
wire transmission, 3 business days after mailing if mailed by first
class, registered or certified mail, or one business day after mailing
or deposit with an overnight courier service if delivered by express
mail or overnight courier.
9.2 No delay on the part of the Bank in the exercise of any right or
remedy shall operate as a waiver. No single or partial exercise by the
Bank of any right or remedy shall preclude any other future exercise of
it or the exercise of any other right or remedy. No waiver or
indulgence by the Bank of any default shall be effective unless in
writing and signed by the Bank, nor shall a waiver on one occasion be
construed as a bar to or waiver of that right on any future occasion.
9.3 This agreement, the Notes, and any related loan documents embody the
entire agreement and understanding between the Borrower and the Bank
and supersede all prior agreements and understandings relating to their
subject matter. If any one or more of the obligations of the Borrower
under this agreement or the Notes shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining obligations of the Borrower shall not
in any way be affected or impaired, and such validity, illegality or
unenforceability in one jurisdiction shall not affect the validity,
legality or enforceability of the obligations of the Borrower under
this agreement or the Notes in any other jurisdiction.
a. The Borrower, if more than one, shall be jointly and severally liable.
b. This agreement is delivered in the State of Indiana and governed by
Indiana law. This agreement is binding on the Borrower and its
successors, and shall inure to the benefit
<PAGE>
of the Bank, its successors and assigns.
c. Section headings are for convenience of reference only and shall not
affect the interpretation of this agreement.
10. WAIVER OF JURY TRIAL BY BANK AND BORROWER. The Bank and the Borrower,
after consulting or having had the opportunity to consult with counsel,
knowingly, voluntarily and intentionally waive any right either of them may
have to a trial by jury in any litigation based upon or arising out of this
agreement or any related instrument or agreement or any of the transactions
contemplated by this agreement or any course of conduct, dealing, statements
(whether oral or written), or actions of either of them. Neither the Bank
nor the Borrower shall seek to consolidate, by counterclaim or otherwise, any
action in which a jury trial has been waived with any other action in which a
jury trial cannot be or has not been waived. These provisions shall not be
deemed to have been modified in any respect or relinquished by either the
Bank or the Borrower except by a written instrument executed by both of them.
Executed by the parties as of: March 20, 1995.
"BANK" "BORROWER":
NBD Bank, N.A. TEKSYN, INC.
By: /s/ Amy Beard, AVP By: /s/ David B. Wortman
------------------------------- -----------------------------------
Amy J. Beard, Assistant
Vice President David B. Wortman President
----------------------------------------
Printed Name Title
ADDRESS FOR NOTICES: ADDRESS FOR NOTICES:
NBD Bank, N.A. TEKSYN, INC.
One Indiana Square 9002 Purdue Road, Suite 200
Indianapolis, IN 46266 Indianapolis, IN 46268
Facsimile/Telex No Facsimile/Telex No
----------------- ----------------------
<PAGE>
INSTALLMENT BUSINESS LOAN NOTE
Due April 1, 1998 $112,500.00
Note No. Date: March 20, 1995
Account No. Indianapolis, Indiana
Promise to Pay: For value received, TEKSYN, Inc. (the "Borrower") promises
to pay to NBD Bank, N.A., a national banking association (the "Bank") or order,
at any office of the Bank in the State of Indiana, the sum of One Hundred Twelve
Thousand Five Hundred and 00/100 Dollars ($112,500.00 plus interest computed on
the basis of the actual number of days elapsed in a year of 360 days at the rate
of:
2.00% per annum above the rate announced from time to time by the Bank as
its "prime" rate (the "Note Rate"), which rate may not be the
lowest rate charged by the Bank to any of its customers, until
maturity, whether by acceleration or otherwise, and at the rate of
3% per annum above the Note Rate on overdue principal from the date
when due until paid. Each change in the "prime" rate will
immediately change the Note Rate.
In no event shall the interest rate exceed the maximum rate allowed by law; any
interest payment which would for any reason be deemed unlawful under applicable
law shall be applied to principal.
The Borrower will pay this sum in 35 consecutive monthly installments of
$3,125.00 plus interest, commencing May 1, 1995 until April 1, 1998 at which
time the balance plus accrued interest then unpaid shall be due and payable
immediately. Payments may, at the option of the Bank, be applied first to
charges, then to interest and then to principal. Acceptance by the Bank of any
payment which is less than payment in full of all amounts due and owing at such
time shall not constitute a waiver of the Bank's right to receive payment in
full at such or any other time.
LATE FEE: If any payment due is not received by the Bank within fifteen (15)
days after its due date, the Bank may assess and the Borrower agrees to pay to
the Bank a late fee equal to the lesser of: (i) five percent (5%) of the past
due amount; or (ii) One Hundred and 00/100 Dollars ($100.00).
AGREEMENT: This note evidences a debt which is subject to the additional terms
and conditions of a Term Loan Agreement between the Bank and the Borrower dated
as of March 20, 1995, and any amendments.
SECURITY: To secure the payment of this note and any other present or future
liability of the Borrower, whether several, joint, or joint and several, the
Borrower pledges and grants to the Bank a continuing security interest in the
following described property and all of its additions, substitutions,
increments, proceeds and products, whether now owned or later acquired
("Collateral"):
(1) All securities and other property of the Borrower in the custody,
possession or control of the Bank (other than property held by the Bank
solely in a fiduciary capacity);
<PAGE>
(2) All property or securities declared or acknowledged to constitute security
for any past, present or future liability of the Borrower to the Bank;
(3) All balances of deposit accounts of the Borrower with the Bank.
(4) The following additional property: All Accounts, Inventory, Equipment, and
a NBD Certificate of Deposit In the amount of $56,250.00.
SETOFF: The Bank shall have the right at any time to apply its own debt or
liability to the Borrower or to any other party liable on this note in whole or
partial payment of this note or other present or future liabilities, without any
requirement of mutual maturity.
RELATED DOCUMENTS: The terms of any other document executed as part of the loan
evidenced by this note are incorporated by reference.
REPRESENTATIONS BY BORROWER: Each Borrower represents: (a) that the execution
and delivery of this note and the performance of the obligations it imposes does
not violate any law, conflict with any agreement by which it is bound, or
require the consent or approval of any governmental authority or other third
party; (b) that this note is valid and binding, enforceable according to its
terms; and (c) that all balance sheets, profit and loss statements, and other
financial statements furnished to the Bank are accurate and fairly reflect the
financial condition of the organizations and persons to which they apply on
their effective dates, including contingent liabilities of every type, which
financial condition has not changed materially and adversely since those dates.
Each Borrower, other than a natural person, further represents: (a) that it is
duly organized, existing and in good standing pursuant to the laws under which
it is organized; and (b) the execution and delivery of this note and the
performance of the obligations it imposes (i) are within its powers and have
been duly authorized by all necessary action of its governing body, and (ii) do
not contravene the terms of its articles of incorporation or organization, its
by-laws, or any partnership, operating or other agreement governing its affairs.
EVENTS OF DEFAULT/ACCELERATION: If any of the following events occurs:
(1) The Borrower or any guarantor of this note ("Guarantor") fails to pay
when due any amount payable under this note or under any agreement or
instrument evidencing debt to any creditor;
(2) The Borrower or any Guarantor (a) fails to observe or perform any other
term of this note; (b) makes any materially incorrect or misleading
representation, warranty, or certificate to the Bank; (c) makes any
materially incorrect or misleading representation in any financial
statement or other information delivered to the Bank; or (d) defaults
under the terms of any agreement or instrument relating to any debt for
borrowed money (other than the debt evidenced by this note) such that the
creditor declares the debt due before its maturity;
(3) There is a default under the terms of any loan agreement, mortgage,
security agreement, or any other document executed as part of the loan
evidenced by this note, or any guaranty of the loan evidenced by this
note becomes unenforceable in whole or in part, or any Guarantor
<PAGE>
fails to promptly perform under its guaranty;
(4) A "reportable event" (as defined in the Employee Retirement Income
Security Act of 1974 as amended) occurs that would permit the Pension
Benefit Guaranty Corporation to terminate any employee benefit plan of
the Borrower of any affiliate of the Borrower;
(5) The Borrower or any Guarantor becomes insolvent or unable to pay its
debts as they become due;
(6) The Borrower or any Guarantor (a) makes an assignment for the benefit of
creditors; (b) consents to the appointment of a custodian, receiver, or
trustee for itself or for a substantial part of its assets; or (c)
commences any proceeding under any bankruptcy, reorganization,
liquidation, insolvency or similar laws of any jurisdiction;
(7) A custodian, receiver, or trustee is appointed for the Borrower or any
Guarantor or for a substantial part of its assets without its consent and
is not removed within 60 days after such appointment;
(8) Proceedings are commenced against the Borrower or any Guarantor under any
bankruptcy, reorganization, liquidation, or similar laws of any
jurisdiction, and such proceedings remain undismissed for 60 days after
commencement; or the Borrower or Guarantor consents to such proceedings;
(9) Any judgment is entered against the Borrower or any Guarantor, or any
attachment, levy, or garnishment is issued against any property of the
Borrower or any Guarantor;
(10) The Borrower or any Guarantor dies;
(11) The Borrower or any Guarantor, without the Bank's written consent, (a) is
dissolved, (b) merges or consolidates with any third party, (c) sells a
material part of its assets or business outside the ordinary course of
its business, (d) engages in any share exchange to the same effect, or
(e) agrees to do any of the foregoing;
(12) There is a substantial change in the management or ownership or the
existing or prospective financial condition, of the Borrower or any
Guarantor which the Bank in good faith determines to be materially
adverse;
(13) The Bank in good faith deems itself insecure;
then this note shall become due immediately, without notice, at the Bank's
option.
REMEDIES: If this note is not paid at maturity, whether by acceleration or
otherwise, the Bank shall have all of the rights and remedies provided by any
law or agreement. Any requirement of reasonable notice shall be met if the Bank
sends the notice to the Borrower at least seven (7) days prior to the date of
sale, disposition or other event giving rise to the required notice. The Bank
is authorized to cause all or any part of the Collateral to be transferred to or
registered in its name or in the name of
<PAGE>
any other person, firm or corporation, with or without designation of the
capacity of such nominee. The Borrower shall be liable for any deficiency
remaining after disposition of any Collateral and waives all valuation and
appraisement laws. The Borrower is liable to the Bank for all reasonable costs
and expenses of every kind incurred in the making or collection of this note,
including, without limitation, reasonable attorneys' fees and court costs.
These costs and expenses shall include, without limitation, any costs or
expenses incurred by the Bank in any bankruptcy, reorganization, insolvency or
other similar proceeding.
WAIVER: Each endorser and any other party liable on this note severally waives
demand, presentment, notice of dishonor and protest, and consents to any
extension or postponement of time of its payment without limit as to the number
or period, to any substitution, exchange or release of all or part of the
Collateral, to the addition of any party, and to the release or discharge of, or
suspension of any rights and remedies against, any person who may be liable for
the payment of this note. No delay on the part of the Bank in the exercise of
any right or remedy shall operate as a waiver. No single or partial exercise by
the Bank of any right or remedy shall preclude any other future exercise of it
or the exercise of any other right or remedy. No waiver or indulgence by the
Bank of any default shall be effective unless in writing and signed by the Bank,
nor shall a waiver on one occasion be construed as a bar to or waiver of that
right on any future occasion.
MISCELLANEOUS: The Borrower, if more than one, shall be jointly and severally
liable, and the term "Borrower" shall mean any one or more of them, and the
receipt of value by any one of them shall constitute receipt of value by all of
them. This note shall be binding on the Borrower and its successors, and shall
inure to the benefit of the Bank, its successors and assigns. Any reference to
the Bank shall include any holder of this note. This note is delivered in the
State of Indiana and governed by Indiana law. Section headings are for
convenience of reference only and shall not affect the interpretation of this
note. This note and all related loan documents embody the entire agreement
between the Borrower and the Bank regarding the terms of the loan evidenced by
this note, and supersede all oral statements and prior writings relating to that
loan.
WAIVER OF JURY TRIAL BY BANK AND BORROWER: The Bank and the Borrower, after
consulting or having had the opportunity to consult with counsel, knowingly,
voluntarily and intentionally waive any right either of them may have to a trial
by jury in any litigation based upon or arising out of this note or any related
instrument or agreement or any of the transactions contemplated by this note or
any course of conduct, dealing, statements (whether oral or written), or actions
of either of them. Neither the Bank nor the Borrower shall seek to consolidate,
by counterclaim or otherwise, any action in which a jury trial has been waived
with any other action in which a jury trial cannot be or has not been waived.
These provisions shall not be deemed to have been modified in any respect or
relinquished by either the Bank or the Borrower except by a written instrument
executed by both of them.
Address: Borrower:
9002 Purdue Road, Suite 200 TEKSYN, INC.
Indianapolis, IN 46268
<PAGE>
By: /s/ David B. Wortman
-------------------------------------
David B. Wortman President
-------------------------------------
Printed Name Title
By:
-------------------------------------
-------------------------------------
Printed Name Title
Tax I.D. Number: 35-1665080
- -----------------------------------------
FOR OFFICE USE ONLY:
- -----------------------------------------
Auth #: Note #:
- -----------------------------------------
OFFICER INITIALS OFFICER INITIALS
- -----------------------------------------
Officer # 30057 Officer # 30094
- -----------------------------------------
<PAGE>
WAIVER OF JURY TRIAL BY BANK AND DEBTOR: The Bank and the Debtor, after
consulting or having had the opportunity to consult with counsel, knowingly,
voluntarily and intentionally waive any right either of them may have to a trial
by jury in any litigation based upon or arising out of this agreement or any
related instrument or agreement, or any of the transactions contemplated by this
agreement, or any course of conduct, dealing, statements (whether oral or
written), or actions of either of them. Neither the Bank nor the Debtor shall
seek to consolidate, by counterclaim or otherwise, any action in which a jury
trial has been waived with any other action in which a jury trail cannot be or
has not been waived. These provisions shall not be deemed to have been modified
in any respect or relinquished by either the Bank or the Debtor except by a
written instrument executed by both of them.
TEKSYN, INC.
Indianapolis, IN 46268
Dated: March 20, 1995 Debtor:
By: /s/ David B. Wortman
--------------------------------
David B. Wortman President
--------------------------------
Printed Name Title
By:
--------------------------------
--------------------------------
Printed Name Title
<PAGE>
ASSIGNMENT OF DEPOSIT ACCOUNT
Teksyn, Inc. d/b/a Made2Manage Systems, Inc. ("Assignor") assigns and
transfers to NBD Bank, N.A., a national banking association, and any of its
affiliates (the "Bank") whose address is One Indiana Square, Indianapolis, IN
46266, account number(s) 48845630 ("Account") and any interest, additions and
proceeds due or to become due on the Account and any substitutions, which
Account is held at NBD Bank, N.A.
This assignment secures the payment of all Assignor's debt to the Bank.
Debt shall include each and every debt, liability and obligation of every
type and description now owed or arising at a later time, whether they are
direct or indirect, joint, several, or joint and several and whether or not
of the same type or class as presently outstanding, which shall collectively
be referred to as "Liabilities". Liabilities shall also include all
interest, costs, expenses and reasonable attorney's fees accruing to or
incurred by the Bank in collecting the Liabilities or in the protection,
maintenance or liquidation of any Collateral.
WARRANTIES: Assignor represents and warrants that it will not withdraw
any monies from the Account and that it has not previously assigned the
Account or any part of it. The passbook, certificate or other evidence of
the Account has been delivered to the Bank.
DEFAULT/REMEDIES: If the Assignor fails to pay any of the Liabilities
when due, or otherwise defaults under the terms of any agreement related to
any of the Liabilities, or if the Assignor fails to observe or perform any
term of this Assignment, or if any representation or warranty of the Assignor
contained in this Assignment is untrue in any material respect, then the Bank
shall have the right immediately, without notice, at the Bank's option, to
withdraw all or any portion of the Account and apply those monies to the
Liabilities whether or not the Liabilities have been declared to be due and
owing; provided that, to the extent any Liabilities consist of extensions of
credit by the issuance of letters of credit or other like obligations of the
Bank to third parties which have not then expired, those proceeds shall be
held by the Bank in a cash collateral account as security for the Liabilities.
WAIVERS: The Assignor waives any right it may have to receive notice of
any of the following matters before the Bank enforces any of its rights: (a)
the Bank's acceptance of this Assignment, (b) any credit that the Bank
extends to the Assignor, (c) the Assignor's default, (d) any demand, or (e)
any action that the Bank takes regarding the Assignor, anyone else, any
collateral, or any Liability, which it might be entitled to by law or under
any other agreement. No modification or waiver of this Assignment shall be
effective unless it is in writing and signed by the party against whom the
waiver is being enforced. No delay or failure by the Bank to exercise any
right or remedy it might have shall operate as a waiver. Any waiver shall
affect only the specific terms and time period stated in the waiver. The
Bank shall not be obligated to take any action in connection with any
conversion, call, redemption, retirement or any other event relating to the
Account or any collateral. <PAGE>
MISCELLANEOUS: The Assignor consents to any extension, postponement or
renewal of any Liabilities, the release or discharge of all or any part of
the security for any Liability, and the release or discharge or suspension of
any rights and remedies against any person who may be liable for the
Liability. The Bank does not have to look to any other right, any other
collateral, or any other person for payment before it exercises its rights
under this Assignment. The Assignor's obligations to the Bank under this
Assignment are not subject to any condition, precedent or subsequent. If
this Assignment is signed by more than one person, all shall be jointly and
severally bound. This Assignment is binding on the Assignor and its heirs,
successors and assigns, and is for the benefit of the Bank and its successors
and assigns. This Assignment is governed by Indiana law. The use of section
headings shall not limit the provisions of this Assignment.
WAIVER OF JURY TRIAL BY BANK AND ASSIGNOR: The Bank and the Assignor,
after consulting or having had the opportunity to consult with counsel,
knowingly, voluntarily and intentionally waive any right either of them may
have to a trial by jury in any litigation based upon or arising out of this
Assignment or any related instrument, agreement, etc., or any of the
transactions contemplated by this Assignment, or any course of conduct,
dealing, statements (whether oral or written), or actions of either of them.
Neither the Bank nor the Assignor shall seek to consolidate, by counterclaim
or otherwise, any action in which a jury trial has been waived with any other
action in which a jury trial cannot be or has not been waived. These
provisions shall not be deemed to have been modified in any respect or
relinquished by either the Bank or the Assignor except by a written
instrument executed by both of them.
Dated: March 20, 1995
Address: ASSIGNOR: Teksyn, Inc. k/n/a
Made2Manage Systems, Inc.
9002 Purdue Road, Suite 200
Indianapolis, IN 46268
/s/ David B. Wortman
----------------------------
<PAGE>
BUSINESS CREDIT NOTE
Due July 1, 1999 $112,500.00
Note No. ______________________ Date: June 9, 1995
Account No. ___________________ Indianapolis, Indiana
Promise to Pay: For value received, Made2Manage, Inc. f/n/a TEKSYN, INC.
(the "Borrower") promises to pay to NBD BANK, N.A., a national banking
association (the "Bank") or order, at any office of the Bank in the State of
Indiana, the sum of ONE HUNDRED TWELVE THOUSAND FIVE HUNDRED DOLLARS
($112,500.00) or such lesser sum as indicated on Bank records as having been
disbursed by the Bank to or for the benefit of Borrower, plus interest computed
on the basis of the actual number of days elapsed in a year of 360 days at the
rate of:
2.0% per annum above the rate announced from time to time by the Bank as
its "prime" rate (the "Note Rate"), which rate may not be the lowest
rate charged by the Bank to any of its customers, until maturity,
whether by acceleration or otherwise, and at the rate of 3% per
annum above the Note Rate on overdue principal from the date when
due until paid. Each change in the "prime" rate will immediately
change the Note Rate.
In no event shall the interest rate exceed the maximum rate allowed by law; any
interest payment which would for any reason be deemed unlawful under applicable
law shall be applied to principal. Payments may, at the option of the Bank, be
applied first to charges, then to interest and then to principal. Acceptance by
the Bank of any payment which is less than payment in full of all amounts due
and owing at such time shall not constitute a waiver of the Bank's right to
receive payment in full at such or any other time.
Interest shall be due and payable in arrears on the first day of each month.
Commencing August 1, 1996 and continuing on the first day of each month
thereafter until July 1, 1999, the Borrower shall, in addition to interest make
monthly payments of principal each in the amount of 1/36th of the principal
outstanding hereunder on July 1, 1996. In any and all events, the entire
remaining unpaid principal balance of this Note, together with any remaining
accrued but unpaid interest thereon, shall be due and payable not later than
July 1, 1999.
LATE FEE: If any payment due is not received by the Bank within fifteen (15)
days after its due date, the Bank may assess and the Borrower agrees to pay to
the Bank a late fee equal to the lesser of: (i) five percent (5%) of the past
due amount; or (ii) One Hundred and 00/100 Dollars ($100.00).
AGREEMENT: This note evidences a debt which is subject to the additional terms
and conditions of a Letter Agreement between the Bank and the Borrower dated
_______________, 1995, and any amendments.
SECURITY: To secure the payment of this note and any other present or future
liability of the Borrower, whether several, joint, or joint and several, the
Borrower pledges and grants to the Bank
<PAGE>
a continuing security interest in the following described property and all of
its additions, substitutions, increments, proceeds and products, whether now
owned or later acquired ("Collateral"):
(1) All securities and other property of the Borrower in the custody,
possession or control of the Bank (other than property held by the Bank
solely in a fiduciary capacity);
(2) All property or securities declared or acknowledged to constitute security
for any past, present or future liability of the Borrower to the Bank;
(3) All balances of deposit accounts of the Borrower with the Bank.
(4) All of Borrower's now owned and hereinafter acquired accounts, inventory,
equipment, goods, instruments, documents, chattel paper, and general
intangibles.
SETOFF: The Bank shall have the right at any time after default to apply its own
debt or liability to the Borrower or to any other party liable on this note in
whole or partial payment of this note or other present or future liabilities,
without any requirement of mutual maturity.
RELATED DOCUMENTS: The terms of any other document executed as part of the loan
evidenced by this note are incorporated by reference.
EVENTS OF DEFAULT/ACCELERATION: If any event of default, as described in the
Credit Agreement, occurs then this note shall become due immediately, without
notice, at the Bank's option.
REMEDIES: If this note is not paid at maturity, whether by acceleration or
otherwise, the Bank shall have all of the rights and remedies provided by any
law or agreement. Any requirement of reasonable notice shall be met if the Bank
sends the notice to the Borrower at least seven (7) days prior to the date of
sale, disposition or other event giving rise to the required notice. The Bank
is authorized to cause all or any part of the Collateral to be transferred to or
registered in its name or in the name of any other person, firm or corporation,
with or without designation of the capacity of such nominee. The Borrower shall
be liable for any deficiency remaining after disposition of any Collateral and
waives all valuation and appraisement laws. The Borrower is liable to the Bank
for all reasonable costs and expenses of every kind incurred in the making or
collection of this note, including, without limitation, reasonable attorneys'
fees and court costs. These costs and expenses shall include, without
limitation, any costs or expenses incurred by the Bank in any bankruptcy,
reorganization, insolvency or other similar proceeding.
WAIVER: Each endorser and any other party liable on this note severally waives
demand, presentment, notice of dishonor and protest, and consents to any
extension or postponement of time of its payment without limit as to the number
or period, to any substitution, exchange or release of all or part of the
Collateral, to the addition of any party, and to the release or discharge of, or
suspension of any rights and remedies against, any person who may be liable for
the payment of this note. No delay on the part of the bank in the exercise of
any right or remedy shall operate as a waiver. No single or partial exercise by
the Bank of any right or remedy shall preclude any other future exercise of it
or the exercise of any other right or remedy. No waiver or indulgence by the
<PAGE>
Bank of any default shall be effective unless in writing and signed by the Bank,
nor shall a waiver on one occasion be construed as a bar to or waiver of that
right on any future occasion.
MISCELLANEOUS: This note shall be binding on the Borrower and its successors,
and shall inure to the benefit of the Bank, its successors and assigns. Any
reference to the Bank shall include any holder of this note. This note is
delivered in the State of Indiana and governed by Indiana law. Section headings
are for convenience of reference only and shall not affect the interpretation of
this note. This note and all related loan documents embody the entire agreement
between the Borrower and the Bank regarding the terms of the loan evidenced by
this note, and supersede all oral statements and prior writings relating to that
loan.
WAIVER OF JURY TRIAL: The Bank and the Borrower, after consulting or having had
the opportunity to consult with counsel, knowingly, voluntarily and
intentionally waive any right either of them may have to a trial by jury in any
litigation based upon or arising out of this note or any related instrument or
agreement or any of the transactions contemplated by this note or any course of
conduct, dealing, statements (whether oral or written), or actions of either of
them. Neither the Bank nor the Borrower shall seek to consolidate, by
counterclaim or otherwise, any action in which a jury trial has been waived with
any other action in which a jury trial cannot be or has not been waived. These
provisions shall not be deemed to have been modified in any respect or
relinquished by either the Bank or the Borrower except by a written instrument
executed by both of them.
TEKSYN, INC.
By: /s/ David B. Wortman
----------------------------------------
David B. Wortman President & CEO
---------------------------------------------
Printed Name Title
Address: 9002 Purdue Road
Suite 200
Indianapolis, Indiana 46268
<PAGE>
BUSINESS CREDIT NOTE
Due July 1, 1999 $212,500.00
Note No. 0101 Date: September 27, 1995
Account No. 0026624 Indianapolis, Indiana
Promise to Pay: For value received, MADE2MANAGE SYSTEMS, INC. (the
"Borrower") promises to pay to NBD Bank, N.A., a national banking association
(the "Bank") or order, at any office of the Bank in the State of Indiana, the
sum of Two Hundred Twelve Thousand Five Hundred and 00/100 Dollars ($212,500.00)
plus interest computed on the basis of the actual number of days elapsed in a
year of 360 days at the rate of:
2.00% per annum above the rate announced from time to time by the Bank as
its "prime" rate (the "Note Rate"), which rate may not be the
lowest rate charged by the Bank to any of its customers, until
maturity, whether by acceleration or otherwise, and at the rate of
3% per annum above the Note Rate on overdue principal from the date
when due until paid. Each change in the "prime" rate will
immediately change the Note Rate.
In no event shall the interest rate exceed the maximum rate allowed by law; any
interest payment which would for any reason be deemed unlawful under applicable
law shall be applied to principal.
The Borrower will pay this sum in 9 consecutive monthly installments of interest
only on the 1st day of each month, commencing November 1, 1995, and 35
consecutive monthly installments equal to one/thirty-sixth of the outstanding
principal balance as of July 1, 1996 plus interest, commencing August 1, 1996
until July 1, 1999 at which time the balance plus accrued interest then unpaid
shall be due and payable immediately. Payments may, at the option of the Bank,
be applied first to charges, then to interest and then to principal. Acceptance
by the Bank of any payment which is less than payment in full of all amounts due
and owing at such time shall not constitute a waiver of the Bank's right to
receive payment in full at such or any other time.
LATE FEE: if any payment due is not received by the Bank within fifteen (15)
days after its due date, the Bank may assess and the Borrower agrees to pay to
the Bank a late fee equal to the lesser of: (i) five percent (5%) of the past
due amount; or (ii) One Hundred and 00/100 Dollars ($100.00).
AGREEMENT: This note evidences a debt which is subject to the additional terms
and conditions of a Credit Agreement between the Bank and the Borrower dated as
of June 9, 1995, and any amendments.
SECURITY: To secure the payment of this note and any other present or future
liability of the Borrower, whether several, joint, or joint and several, the
Borrower pledges and grants to the Bank a continuing security interest in the
following described property and all of its additions,
<PAGE>
substitutions, increments, proceeds and products, whether now owned or later
acquired ("Collateral"):
(1) All securities and other property of the Borrower in the custody,
possession or control of the Bank (other than property held by the Bank
solely in a fiduciary capacity);
(2) All property or securities declared or acknowledged to constitute
security for any past, present or future liability of the Borrower to the
Bank;
(3) All balances of deposit accounts of the Borrower with the Bank.
(4) The following additional property: All Accounts, Equipment, and
Inventory.
SETOFF: The Bank shall have the right at any time to apply its own debt or
liability to the Borrower or to any other party liable on this note in whole or
partial payment of this note or other present or future liabilities, without any
requirement of mutual maturity.
RELATED DOCUMENTS: The terms of any other document executed as part of the loan
evidenced by this note are incorporated by reference.
REPRESENTATIONS BY BORROWER: Each Borrower represents: (a) that the execution
and delivery of this note and the performance of the obligations it imposes does
not violate any law, conflict with any agreement by which it is bound, or
require the consent or approval of any governmental authority or other third
party; (b) that this note is valid and binding, enforceable according to its
terms; and (c) that all balance sheets, profit and loss statements, and other
financial statements furnished to the Bank are accurate and fairly reflect the
financial condition of the organizations and persons to which they apply on
their effective dates, including contingent liabilities of every type, which
financial condition has not changed materially and adversely since those dates.
Each Borrower also represents that this note evidences a business loan exempt
from the Federal Truth In Lending Act (15 USC 1601, et seq), the Federal Reserve
Bank's Regulation Z (12 CFR 226, et seq), and the Indiana Uniform Consumer
Credit Code (IC 24-4.5-1-101, et seq). Each Borrower, other than a natural
person, further represents: (a) that it is duly organized, existing and in good
standing pursuant to the laws under which it is organized; and (b) the execution
and delivery of this note and the performance of the obligations it imposes (i)
are within its powers and have been duly authorized by all necessary action of
its governing body, and (ii) do not contravene the terms of its articles of
incorporation or organization, its by-laws, or any partnership, operating or
other agreement governing its affairs.
EVENTS OF DEFAULT/ACCELERATION: If any of the following events occurs:
(1) The Borrower or any guarantor of this note ("Guarantor") fails to pay
when due any amount payable under this note or under any agreement or
instrument evidencing debt to any creditor;
(2) The Borrower or any Guarantor (a) fails to observe or, perform any other
term of this
<PAGE>
note; (b) makes any materially incorrect or misleading representation,
warranty, or certificate to the Bank; (c) makes any materially incorrect
or misleading representation in any financial statement or other
information delivered to the Bank; or (d) defaults under the terms of any
agreement or instrument relating to any debt for borrowed money (other
than the debt evidenced by this note) such that the creditor declares the
debt due before its maturity;
(3) There is a default under the terms of any loan agreement, mortgage,
security agreement, or any other document executed as part of the loan
evidenced by this note, or any guaranty of the loan evidenced by this
note becomes unenforceable in whole or in part, or any Guarantor fails to
promptly perform under its guaranty;
(4) A "reportable event" (as defined in the Employee Retirement Income
Security Act of 1974 as amended) occurs that would permit the Pension
Benefit Guaranty Corporation to terminate any employee benefit plan of
the Borrower or any affiliate of the Borrower;
(5) The Borrower or any Guarantor becomes insolvent or unable to pay its
debts as they become due;
(6) The Borrower or any Guarantor (a) makes an assignment for the benefit of
creditors; (b) consents to the appointment of a custodian, receiver, or
trustee for itself or for a substantial part of its assets; or (c)
commences any proceeding under any bankruptcy, reorganization,
liquidation, insolvency or similar laws of any jurisdiction;
(7) A custodian, receiver, or trustee is appointed for the Borrower or any
Guarantor or for a substantial part of its assets without its consent and
is not removed within 60 days after such appointment;
(8) Proceedings are commenced against the Borrower or any Guarantor under any
bankruptcy, reorganization, liquidation, or similar laws of any
jurisdiction, and such proceedings remain undismissed for 60 days after
commencement; or the Borrower or Guarantor consents to such proceedings;
(9) Any judgment is entered against the Borrower or any Guarantor, or any
attachment, levy, or garnishment is issued against any property of the
Borrower or any Guarantor;
(10) The Borrower or any Guarantor dies;
(11) The Borrower or any Guarantor, without the Bank's written consent, (a) is
dissolved, (b) merges or consolidates with any third party, (c) sells a
material part of its assets or business outside the ordinary course of
its business, (d) engages in any share exchange to the same effect, or
(e) agrees to do any of the foregoing;
(12) There is a substantial change in the management or ownership or the
existing or prospective financial condition, of the Borrower or any
Guarantor which the Bank in good
<PAGE>
faith determines to be materially adverse;
(13) The Bank in good faith deems itself insecure;
then this note shall become due immediately, without notice, at the Bank's
option.
REMEDIES: If this note is not paid at maturity, whether by acceleration or
otherwise, the Bank shall have all of the rights and remedies provided by any
law or agreement. Any requirement of reasonable notice shall be met if the Bank
sends the notice to the Borrower at least seven (7) days prior to the date of
sale, disposition or other event giving rise to the required notice. The Bank
is authorized to cause all or any part of the Collateral to be transferred to or
registered in its name or in the name of any other person, firm or corporation,
with or without designation of the capacity of such nominee. The Borrower shall
be liable for any deficiency remaining after disposition of any Collateral and
waives all valuation and appraisement laws. The Borrower is liable to the Bank
for all reasonable costs and expenses of every kind incurred in the making or
collection of this note, including, without limitation, reasonable attorneys'
fees and court costs. These costs and expenses shall include, without
limitation, any costs or expenses incurred by the Bank in any bankruptcy,
reorganization, insolvency or other similar proceeding.
WAIVER: Each endorser and any other party liable on this note severally waives
demand, presentment, notice of dishonor and protest, and consents to any
extension or postponement of time of its payment without limit as to the number
or period, to any substitution, exchange or release of all or part of the
Collateral, to the addition of any patty, and to the release or discharge of, or
suspension of any rights and remedies against, any person who may be liable for
the payment of this note. No delay on the part of the Bank in the exercise of
any right or remedy shall operate as a waiver. No single or partial exercise by
the Bank of any right or remedy shall preclude any other future exercise of it
or the exercise of any other right or remedy. No waiver or indulgence by the
Bank of any default shall be effective unless in writing and signed by the Bank,
nor shall a waiver on one occasion be construed as a bar to or waiver of that
right on any future occasion.
MISCELLANEOUS: The Borrower, if more than one, shall be jointly and severally
liable, and the term "Borrower" shall mean any one or more of them, and the
receipt of value by any one of them shall constitute receipt of value by all of
them. This note shall be binding on the Borrower and its successors, and shall
inure to the benefit of the Bank, its successors and assigns. Any reference to
the Bank shall include any holder of this note. This note is delivered in the
State of Indiana and governed by Indiana law. Section headings are for
convenience of reference only and shall not affect the interpretation of this
note. This note and all related loan documents embody the entire agreement
between the Borrower and the Bank regarding the terms of the loan evidenced by
this note, and supersede all oral statements and prior writings relating to that
loan. This note is a renewal of a prior note in the name of MADE2MANAGE
SYSTEMS, INC. f/k/a TEKSYN, INC. and represents a continuation and increase of
the indebtedness described in such prior note and a continuation of the
obligation to pay advances made under such prior note.
WAIVER OF JURY TRIAL BY BANK AND BORROWER: The Bank and the Borrower, after
<PAGE>
consulting or having had the opportunity to consult with counsel, knowingly,
voluntarily and intentionally waive any right either of them may have to a trial
by jury in any litigation based upon or arising out of this note or any related
instrument or agreement or any of the transactions contemplated by this note or
any course of conduct, dealing, statements (whether oral or written), or actions
of either of them. Neither the Bank nor the Borrower shall seek to consolidate,
by counterclaim or otherwise, any action in which a jury trial has been waived
with any other action in which a jury trial cannot be or has not been waived.
These provisions shall not be deemed to have been modified in any respect or
relinquished by either the Bank or the Borrower except by a written instrument
executed by both of them.
Address: Borrower:
9002 Purdue Rd., Suite 200 MADE2MANAGE SYSTEMS, INC.
Indianapolis, IN 46268
By: /s/ David B. Wortman
------------------------------------
David B. Wortman President
------------------------------------
Printed Name Title
Tax I.D. Number: 35-1665080
- -----------------------------------------
FOR OFFICE USE ONLY:
- -----------------------------------------
Auth #: Note #: 0101
- -----------------------------------------
OFFICER INITIALS OFFICER INITIALS
- -----------------------------------------
Officer # 37103 Officer #
- -----------------------------------------
<PAGE>
BUSINESS CREDIT NOTE
Due December 1, 1999 $510,000.00
Note No. ___________ Date: March 27, 1996
Account No. 0026624 Indianapolis, Indiana
Promise to Pay: On or before December 31, 1999 for value received, the
undersigned MADE2MANAGE SYSTEMS, INC. (the "Borrower") promises to pay to NBD
Bank, N.A., a national banking association (the "Bank") or order, at any office
of the Bank in the State of Indiana the sum of Five Hundred Ten Thousand and
00/100 Dollars ($510,000.00) plus interest computed on the basis of the actual
number of days elapsed in a year of 360 days at:
a per annum rate equal to the rate announced from time to time by the Bank
as its "prime" rate (the "Note Rate"), which rate may not be the lowest
rate charged by the Bank to any of its customers, plus;
(i) 1.50% from the date hereof until June 30, 1996, and;
from and after July 1, 1996, a per annum rate equal to the rate announced
from time to time by the Bank as its "prime" rate (the "Note Rate"), which
rate may not be the lowest rate charged by the Bank to any of its
customers, plus;
(i) 1.50% if the "Leverage Ratio" as defined in the Credit Agreement is
greater than or equal to 2.51 to 1.00;
(ii) 1.25% if the "Leverage Ratio" as defined in the Credit Agreement is
between 2.11 to 1.00 and 2.50 to 1.00;
(iii) 1.00% if the "Leverage Ratio" as defined in the Credit Agreement is
less than or equal to 2.10 to 1.00;
until maturity, whether by acceleration or otherwise, and at the rate of 3%
per annum above the Note Rate on overdue principal from the date when due
until paid. Each change in the "prime" rate will immediately change the
Note Rate.
In no event shall the interest rate exceed the maximum rate allowed by law; any
interest payment which would for any reason be unlawful under applicable law
shall be applied to principal. Payments may, at the option of the Bank, be
applied first to charges, then to interest and then to principal. Acceptance by
the Bank of any payment which is less than payment in full of all amounts due
and owing at such time shall not constitute a waiver of the Bank's right to
receive payment in full at such or any other time.
The Borrower will pay this sum in 8 consecutive monthly installments of interest
only on the 1st day of each month, commencing May 1, 1996, and 35 consecutive
monthly installments equal to
<PAGE>
one/thirty-sixth of the outstanding principal balance as of December 31, 1996,
plus interest, commencing January 1, 1997 until December 1, 1999 at which time
the balance plus accrued interest then unpaid shall be due and payable
immediately.
LATE FEE: If any payment is not received by the Bank within fifteen (15) days
after its due date, the Bank may assess and the Borrower agrees to pay a late
fee equal to the lesser of five percent (5%) of the past due amount or One
Hundred and 00/100 Dollars ($100.00).
PREPAYMENT: All prepayments shall be applied to installments of principal in
their inverse order of maturity, and no prepayments shall reduce the dollar
amount of fixed principal installments required to be paid, until this Note is
paid in full.
AGREEMENT: This Note evidences a debt which is subject to the additional terms
and conditions of a Credit Agreement between the Borrower and the Bank dated as
of June 9, 1995, and any amendments.
SECURITY: To secure the payment of this Note and any other present or future
liability of the Borrower to the Bank, whether several, joint, or joint and
several, the Borrower pledges and grants to the Bank a continuing security
interest in the following described property and all of its additions,
substitutions, increments, proceeds and products, whether now owned or later
acquired (the "Collateral"):
1. All securities and other property of the Borrower in the custody,
possession or control of the Bank (other than property held by the Bank
solely in a fiduciary capacity);
2. All property or securities declared or acknowledged to constitute security
for any past, present or future liability of the Borrower to the Bank;
3. All balances of deposit accounts of the Borrower with the Bank.
4. The following additional property: All equipment.
SETOFF: The Bank has the right at any time to apply its own debt or liability to
the Borrower or to any other party liable on this Note in whole or partial
payment of this Note or other present or future liabilities of the Borrower to
the Bank, without any requirement of mutual maturity.
RELATED DOCUMENTS: The terms and provisions of any loan agreement, mortgage,
security agreement or any other document executed as part of the loans evidenced
by this Note are incorporated by reference and made part of this Note.
REPRESENTATIONS BY BORROWER: Each Borrower represents that: (a) the execution
and delivery of this Note and the performance of the obligations it imposes do
not violate any law, conflict with any agreement by which it is bound, or
require the consent or approval of any governmental authority or other third
party; (b) this Note is a valid and binding agreement, enforceable according to
its terms; and (c) all balance sheets, profit and loss statements, and other
<PAGE>
financial statements furnished to the Bank are accurate and fairly reflect the
financial condition of the organizations and persons to which they apply on
their effective dates, including contingent liabilities of every type, which
financial condition has not changed materially and adversely since those dates.
Each Borrower also represents that this note evidences a business loan exempt
from the Federal Truth In Lending Act (15 USC 1601, et seq.), the Federal
Reserve Bank's Regulation Z (12 CFR 226, et seq.), and the Indiana Uniform
Consumer Credit Code (IC 24-4.5-1-101, et seq.). Each Borrower, other than a
natural person, further represents that: (a) it is duly organized, existing and
in good standing pursuant to the laws under which it is organized, and (b) the
execution and delivery of this Note and the performance of the obligations it
imposes (i) are within its powers and have been duly authorized by all necessary
action of its governing body, and (ii) do not contravene the terms of its
articles of incorporation or organization, its by-laws, or any partnership,
operating or other agreement governing its affairs.
EVENTS OF DEFAULT/ACCELERATION: This Note shall become due immediately, without
notice, at the Banks option, if any of the following events occurs:
(1) The Borrower or any guarantor of this Note ("Guarantor") fails to pay
when due any amount payable under this Note or under any agreement or
instrument evidencing debt to any creditor.
(2) The Borrower or any Guarantor (a) fails to observe or perform any other
term of this Note; (b) makes any materially incorrect or misleading
representation, warranty, or certificate to the Bank; (c) makes any
materially incorrect or misleading representation in any financial
statement or other information delivered to the Bank; or (d) defaults
under the terms of any agreement or instrument relating to any debt for
borrowed money (other than the debt evidenced by this Note) such that the
creditor declares the debt due before its maturity.
(3) There is a default under the terms of any loan agreement, mortgage,
security agreement, or any other document executed as part of the loan
evidenced by this Note or any guaranty of the loan evidenced by this Note
becomes unenforceable in whole or in part, or any Guarantor fails to
promptly perform under its guaranty.
(4) A "reportable event" (as defined in the Employee Retirement Income
Security Act of 1974 as amended) occurs that would permit the Pension
Benefit Guaranty Corporation to terminate any employee benefit plan of
the Borrower or any affiliate of the Borrower.
(5) The Borrower or any Guarantor becomes insolvent or unable to pay its
debts as they become due.
(6) The Borrower or any Guarantor (a) makes an assignment for the benefit of
creditors; (b) consents to the appointment of a custodian, receiver, or
trustee for itself or for a substantial part of its assets; or (c)
commences any proceeding under any bankruptcy, reorganization,
liquidation, insolvency or similar laws of any jurisdiction.
<PAGE>
(7) A custodian, receiver, or trustee is appointed for the Borrower or any
Guarantor or for a substantial part of its assets without its consent and
is not removed within 60 days after the appointment.
(8) Proceedings are commenced against the Borrower or any Guarantor under any
bankruptcy, reorganization, liquidation, or similar laws of any
jurisdiction, and they remain undismissed for 60 days after commencement;
or the Borrower or Guarantor consents to such proceedings.
(9) Any judgment is entered against the Borrower or any Guarantor, or any
attachment, levy, or garnishment is issued against any property of the
Borrower or any Guarantor.
(10) The Borrower or any Guarantor dies.
(11) The Borrower or any Guarantor, without the Bank's written consent, (a) is
dissolved, (b) merges or consolidates with any third party, (c) leases,
sells or otherwise conveys a material part of its assets or business
outside the ordinary course of its business, (d) leases, purchases, or
otherwise acquires a material part of the assets of any other corporation
or business entity, except in the ordinary course of its business, or (e)
agrees to do any of the foregoing (notwithstanding the foregoing, any
subsidiary may merge or consolidate with any other subsidiary, or with
the Borrower, so long as the Borrower is the survivor).
(12) There is a substantial change in the management or ownership or the
existing or prospective financial condition of the Borrower or any
Guarantor which the Bank in good faith determines to be materially
adverse.
(13) The Bank in good faith deems itself insecure.
REMEDIES: If this Note is not paid at maturity by demand, whether by
acceleration or otherwise, the Bank shall have all of the rights and remedies
provided by any law or agreement. Any requirement of reasonable notice shall be
met if the Bank sends the notice to the Borrower at least seven (7) days prior
to the date of sale, disposition or other event giving rise to the required
notice. The Bank is authorized to cause all or any part of the Collateral to be
transferred to or registered in its name or in the name of any other person, or
business entity, with or without designation of the capacity of such nominee.
The Borrower is liable for any deficiency remaining after disposition of any
Collateral. The Borrower is liable to the Bank for all reasonable costs and
expenses of every kind incurred in the making or collection of this Note,
including, without limitation, reasonable attorneys' fees and court costs.
These costs and expenses include without limitation any costs or expenses
incurred by the Bank in any bankruptcy, reorganization, insolvency or other
similar proceeding.
WAIVER: Each endorser and any other party liable on this Note severally waives
demand, presentment, notice of dishonor and protest, and consents to any
extension or postponement of time of its payment without limit as to the number
or period, to any substitution, exchange or release of all or part of the
Collateral, to the addition of any party, and to the release or discharge
<PAGE>
of, or suspension of any rights and remedies against, any person who may be
liable for the payment of this Note. No delay on the part of the Bank in the
exercise of any right or remedy operates as a waiver. No single or partial
exercise by the Bank of any right or remedy precludes any other future exercise
of it or the exercise of any other right or remedy. No waiver or indulgence by
the Bank of any default is effective unless it is in writing and signed by the
Bank, nor does a waiver on one occasion bar or waive that right on any future
occasion.
MISCELLANEOUS: The Borrower, if more than one, shall be jointly and severally
liable for the obligations represented by this Note, and the term "Borrower"
means any one or more of them, and the receipt of value by any one of them
constitutes receipt of value by the others. This Note binds the Borrower and
its successors, and inures to the benefit of the Bank, its successors and
assigns. Any reference to the Bank includes any holder of this Note. This Note
is delivered in the State of Indiana and governed by Indiana law. Section
headings are for convenience of reference only and do not affect the
interpretation of this Note. This Note and all related loan documents embody
the entire agreement between the Borrower and the Bank regarding the terms of
the loan evidenced by this Note, and supersede all oral statements and prior
writings relating to that loan.
WAIVER OF JURY TRIAL: The Bank and the Borrower, after consulting or having had
the opportunity to consult with counsel, knowingly, voluntarily and
intentionally waive any right either of them may have to a trial by jury in any
litigation based upon or arising out of this Note or any related instrument or
agreement, or any of the transactions contemplated by this Note, or any course
of conduct, dealing, statements (whether oral or written), or actions of either
of them. Neither the Bank nor the Borrower shall seek to consolidate, by
counterclaim or otherwise, any action in which a jury trial has been waived with
any other action in which a jury trial cannot be or has not been waived. These
provisions shall not be deemed to have been modified in any respect or
relinquished by either the Bank or the Borrower except by a written instrument
executed by both of them.
Address: Borrower
9002 Purdue Road MADE2MANAGE SYSTEMS, INC.
Indianapolis, IN 46268
By: /s/ David B. Wortman
-------------------------------------
David B. Wortman President & CEO
----------------------------------------
Printed Name Title
Tax I.D. Number: 35-1665080
- -----------------------------------------
FOR OFFICE USE ONLY:
- -----------------------------------------
Auth #: Note #:
- -----------------------------------------
OFFICER INITIALS OFFICER INITIALS
- -----------------------------------------
Officer # 30057 Officer #
- -----------------------------------------
<PAGE>
AMENDMENT TO CREDIT AGREEMENT
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT is entered into as of September 27, 1995 by and
between MADE2MANAGE SYSTEMS, INC. f/k/a TEKSYN, INC. (the "Borrower") and NBD
Bank, N.A. (the "Bank").
WITNESSETH:
WHEREAS, Borrower and Bank have entered into a certain Credit Agreement
dated as of June 9, 1995 as amended (the "Agreement"); and
WHEREAS, the Borrower has requested and the Bank has agreed to an increase
in the maximum aggregate amount of Facility B described in the Agreement; and
NOW THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
(1) The maximum aggregate amount of Facility B is hereby increased from
$112,500.00 to $212,500.00.
(2) Upon execution of this agreement, the Borrower shall pay the Bank the
following fees, all of which the Borrower acknowledges have been earned by
the Bank: a documentation fee of $250.00.
(3) The following is to be added to the Agreement as Section 7.6 D.
D. Within 30 days after and as of the end of each calendar quarter, a
compliance certificate, certified as correct by one of its authorized
agents.
(4) The following is to be added to the Agreement as Section 8.3 H.
H. Leases. Contract for or assume in any manner capitalized lease
obligations if the aggregate of all payments shall exceed $30,000.00
in any one fiscal year without prior NBD notification.
(5) Except as modified herein, the Agreement, as heretofore amended, shall
remain unchanged and in fill force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this First Amendment to be
entered into and effective as of the date first hereinabove written.
MADE2MANAGE SYSTEMS, INC.
By: /s/ David B. Wortman
-------------------------------------
David B. Wortman President
----------------------------------------
Printed Name Title
NBD BANK, N.A.
By: /s/ Michael K. Dooley
-------------------------------------
Michael K. Dooley AVP
----------------------------------------
Printed Name Title
Address: One Indiana Square
Indianapolis, Indiana 46266
<PAGE>
AMENDMENT TO CREDIT AGREEMENT
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT is entered into as of March 27, 1996 by and between
MADE2MANAGE SYSTEMS, INC. f/k/a TekSyn, Inc. (the "Borrower") and NBD Bank, N.A.
(the "Bank").
WITNESSETH:
WHEREAS, Borrower and Bank have entered into a certain Credit Agreement
dated as of June 9, 1995 as amended by First Amendment dated as of September 27,
1995, as amended (the "Agreement"); and
NOW THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
1. Section 1.3 is added to the Agreement as follows:
1.3 FACILITY C (AUTHORIZATION CONVERTING TO A TERM LOAN). The Bank has
approved a credit facility to the Borrower in the principal sum not to
exceed $510,000.00 in the aggregate at any one time outstanding
("Facility C"). Facility C shall be in the form of advances evidenced
by the Borrower's Business Credit Note. The proceeds of Facility C
shall be used to finance Borrower's acquisition of equipment.
Interest on each loan shall accrue at a rate to be agreed upon by the
Bank and the Borrower at the time the loan is made. Notwithstanding
the aggregate amount of Facility C stated above, the original
principal amount of each advance shall not exceed 75.0% of the cost of
the equipment purchased with Facility C proceeds. Availability of
advances under Facility C shall expire on December 31, 1996 unless
earlier withdrawn, whereupon the outstanding balance of Facility C
shall convert to an amortizing three (3) year term loan.
2. Upon execution of this agreement, the Borrower shall pay the Bank the
following fees, all of which the Borrower acknowledges have been earned by
the Bank: A closing fee of $1,250.00.
3. Section 8.1(B) of the Agreement is replaced in its entirety as follows:
B. "Cash Flow Coverage Ratio" shall mean, earnings before interest and
taxes plus depreciation/amortization less taxes less dividends less
unfunded capital expenditures plus extraordinary losses less
extraordinary gains divided by interest plus scheduled principal
payments.
<PAGE>
4. Sections 8.3 (A) and (B) of the Agreement are replaced in their entirety as
follows:
Borrower will not . . .
A. TANGIBLE NET WORTH. Permit its Tangible Net Worth plus Subordinated
Debt to be less than $600,000.00.
B. LEVERAGE RATIO. Permit the ratio of its total liabilities less
Subordinated Debt to its Tangible Net Worth plus Subordinated Debt to
exceed 3.50 to 1.00 after March 31, 1996, and to exceed 3.00 to 1.00
from and after July 31, 1996.
5. Section 8.3(H) is added to the Agreement as follows:
Borrower will not . . .
H. WORKING CAPITAL. Permit its working capital plus 15% of net fixed
assets less long term debt less long term portion of capital leases to
be less than $0.00.
6. Except as modified herein, the Agreement, as heretofore amended, shall
remain unchanged and in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Second Amendment to be
entered into and effective as of the date first hereinabove written.
MADE2MANAGE SYSTEMS, INC.
By: /s/ David B. Wortman
-------------------------------------
David B. Wortman President & CEO
----------------------------------------
Printed Name Title
NBD BANK, N.A.
By: /s/ Edward R. Salm
-------------------------------------
Edward R. Salm VP
----------------------------------------
Printed Name Title
<PAGE>
AMENDMENT TO CREDIT AGREEMENT
THIRD AMENDMENT TO CREDIT AGREEMENT
THIS THIRD AMENDMENT is entered into as of June 25, 1996 by and between
MADE2MANAGE SYSTEMS, INC. f/k/a Teksyn, Inc. (the "Borrower") and NBD Bank, N.A.
(the "Bank").
WITNESSETH:
WHEREAS, Borrower and Bank have entered into a certain Credit Agreement
dated as of June 9, 1995 as amended by First Amendment dated September 27, 1995,
as amended by Second Amendment dated March 27, 1996, as amended (the
"Agreement"); and
WHEREAS, the Borrower has requested and the Bank has agreed to an extension
of the maturity date of Facility A described in the Agreement; and
NOW THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
(1) The maturity date of the Facility A set for expiration on
July 1, 1996 is hereby extended to July 1, 1997.
(2) Upon execution of this agreement, the Borrower shall pay the
Bank the following fees, all of which the Borrower
acknowledges have been earned by the Bank: A Documentation
Fee of 0.2% totaling Two Thousand and 00/100 Dollars
($2,000.00).
(3) The maximum amount of the Credit Facility A as originally
set forth in Section 1.1 of the Agreement is hereby
increased to $1,000,000.00.
(4) Section 3.1 of the Agreement is hereby amended to read as
follows:
3.1 BORROWING BASE. Notwithstanding any other provision of this
agreement, the aggregate principal amount outstanding at any one time
under Facility A shall not exceed the lesser of the Borrowing Base or
$1,000,000.00. "Borrowing Base" means 80% of the Borrower's trade
accounts receivable in which the Bank has a perfected, first priority
security interest, excluding accounts more than 90 days past due from
the date of invoice, accounts subject to offset or defense,
government, bonded, affiliate and foreign accounts, accounts from
trade debtors of which more than 50% is more than 90 days past due,
and accounts otherwise unacceptable to the Bank.
<PAGE>
(5) Section 7.4 of the Agreement is hereby amended to read as
follows;
7.4 COLLATERAL AUDITS. Permit the Bank or its agents to perform an annual
audit of the Collateral (only when there is a balance in excess of
$250,000.00 on Facility A). The Borrower shall compensate the Bank
for such audits in accordance with the Bank's schedule of fees as may
be amended from time to time. The Bank shall retain the right to
inspect the Collateral and business records related to it at such
times and at such intervals as the Bank may reasonably require.
(6) Except as modified herein, the Agreement, as heretofore
amended, shall remain unchanged and in full force and
effect.
IN WITNESS WHEREOF, the parties have caused this Third Amendment to be
entered into and effective as of the date first hereinabove written.
MADE2MANAGE SYSTEMS, INC.
By: /s/ David B. Wortman
------------------------------
David B. Wortman President
---------------------------------
Printed Name Title
NBD BANK, N.A.
By: /s/ Edward R. Salm
-----------------------------
Edward R. Salm VP
---------------------------------
Printed Name Title
<PAGE>
EXTENSION AGREEMENT
This Agreement dated January 14, 1997 is entered into by and between
MADE2MANAGE SYSTEMS, INC. ("Borrower") and, NBD Bank, N.A. ("Bank").
On March 27, 1996 Borrower executed a promissory note ("Note") as evidence
of indebtedness in the amount of Five Hundred Ten Thousand and 00/100
($510,000.00) owing by Borrower to Bank. The Note together with any Agreement
reciting the agreement of the Bank to make credit facilities available to the
Borrower including without limitation, the credit facility evidenced by the Note
and any guarantees or other documents executed in connection with the Note are
herein collectively called the "Documents".
Bank and Borrower hereby agree as follows:
(1) The expiration date for advances of the unused portion of the Note shall be
extended from its present expiration date December 31, 1996 ("Present
Expiration Date") to June 30, 1997 ("Revised Expiration Date").
(2) All amounts advanced under the note from March 27, 1996 to December 31,
1996 shall be repaid as originally set forth in the note.
(3) All amounts advanced under this note from January 1, 1997 to June 30, 1997
(the "Draw Period") shall be repaid in 5 monthly installments of interest
only on the 1st day of each month, commencing February 1, 1997 and 35
consecutive monthly installments equal to one/thirty-sixth of the total
amount advanced during the Draw Period, plus interest, commencing August 1,
1997 until July 1, 2000 at which time the balance plus accrued interest
then unpaid shall be due and payable immediately.
(4) The interest rate for the remainder of the term of the Note shall be
amended to read as follows:
1.50 % per annum above the rate announced from time to time by the Bank
as its "prime" rate (the "Note Rate"), which rate may not be the
lowest rate charged by the Bank to any of its customers, until
maturity, whether by demand, acceleration or otherwise, and at
the rate of 3% per annum above the Note Rate on overdue principal
from the date when due until paid. Each change in the "prime"
rate will immediately change the Note Rate.
(5) Except as specifically modified hereby, the terms and provisions of the
Documents shall remain in full force and effect.
(6) Any guarantors and/or endorsers of Borrower's obligations under the Note,
if required by Bank, shall execute and deliver to Bank this Agreement or
such other consent and acknowledgment of the continuance of their
obligations and liabilities under the
<PAGE>
Documents as Bank may require.
No agreement, promise, representation or warranty relating to the Documents
shall be binding on Bank except as set forth herein.
Each of the parties executing this Agreement acknowledges receipt of a copy
hereof.
IN WITNESS WHEREOF, we have hereunto set our hands and seals as of the day
and year first above written.
MADE2MANAGE SYSTEMS, INC. NBD Bank, N.A.
By: /s/ Stephen R. Hand V.P. Finance By: /s/ Edward R. Salm
-------------------------------------- --------------------------------
Title Edward R. Salm, Vice President
<PAGE>
I FURTHER CERTIFY that the individuals whose signatures appear below have
been duly elected and are presently the incumbents of the offices set below
their respective signatures, and that the signatures are the genuine original
signatures of each respectively.
EXECUTED on February 10, 1997.
/s/ Stephen R. Hand
----------------------------------------
Secretary
If the Secretary is designated to act alone by this resolution, this Certificate
must be further signed by a different individual who is a director or an
officer, unless there are no other individuals as directors or officers, in
which case the boxed statement below should be completed.
President & CEO /s/ David B. Wortman
- --------------------------------- ----------------------------------------
Title Signature
- --------------------------------------------------------------------------------
(Applicable for single management business organizations only)
As permitted by the law of the State of Incorporation, there are no other
individuals who are either officers or directors.
---------------------------------------
President/Secretary, Treasurer and Sole
Director
- --------------------------------------------------------------------------------
ACTUAL SIGNATURES ACTUAL SIGNATURES
/s/ David B. Wortman /s/ Stephen R. Hand
- ------------------------------ -----------------------------------
President Vice-President, Finance
- ------------------------------ -----------------------------------
Treasurer Secretary
<PAGE>
CONTINUING SECURITY AGREEMENT
NAME OF DEBTOR: MADE2MANAGE SYSTEMS, INC. ("the Debtor")
TAXPAYER I.D. NO.: 35-1665080
DEBTOR'S ADDRESS: (Chief executive office): 9002 Purdue Road, Suite 200,
Indianapolis, IN 46268
GRANT OF SECURITY INTEREST: The Debtor grants to NBD Bank, N.A, a national
banking association (the "Bank"),whose address is One Indiana Square,
Indianapolis, IN 46266, a continuing security interest in the Collateral listed
below, to secure the payment and performance of all of Debtor's debt to the
Bank.
Debt shall include each and every debt, liability and obligation of every type
and description now owed or arising at a later time, whether they are direct or
indirect, joint, several, or joint and several and whether or not of the same
type or class as presently outstanding, which shall collectively be referred to
as "Liabilities". Liabilities shall also include all interest, costs, expenses
and reasonable attorney's fees accruing to or incurred by the Bank in collecting
the Liabilities or in the protection, maintenance or liquidation of the
Collateral.
DESCRIPTION OF COLLATERAL: The Collateral covered by this agreement is all of
the Debtor's property defined below, present and future, including, but not
limited to any items listed on any schedule or list attached. Also included are
all proceeds, including but not limited to stock rights, subscription rights,
dividends, stock dividends, stock splits, or liquidating dividends, and all
cash, accounts, chattel paper and general intangibles arising from the sale,
rent, lease, casualty loss or other disposition of the Collateral, and any
Collateral returned to, repossessed by or stopped in transit by Debtor. Where
the Collateral is in the possession of the Bank, the Debtor agrees to deliver to
the Bank any property which represents an increase in the Collateral or profits
or proceeds of the Collateral.
(1) "Accounts Receivable" shall consist of accounts, chattel paper and general
intangibles as those terms are defined in the Indiana Uniform Commercial
Code ("UCC"). Also included is any right to a refund of taxes paid at any
time to any governmental entity. Also included are letters of credit, and
drafts under them, given in support of Accounts Receivable. Debtor
warrants that its chief executive office is at the address shown above.
(2) "Inventory" shall consist of all property held at any location by or for
Debtor for sale, rent, or lease, or furnished or to be furnished by Debtor
under any contract of service, or raw materials or work in process and
their products, or materials used or consumed in its business, and shall
include containers and shelving useful for storing. Without limiting the
security interest granted, Inventory is presently located at 9002 Purdue
Road, Suite 200, Indianapolis, IN 46268.
<PAGE>
(3) "Equipment" shall consist of any goods at any time acquired, owned or held
by Debtor at any location primarily for use in its business, including, but
not limited to, machinery, fixtures, furniture, furnishings and vehicles,
and any accessions, parts, attachments, accessories, tools, dies,
additions, substitutions, replacements and appurtenances to them or
intended for use with them. Without limiting the security interest
granted, Equipment is presently located at 9002 Purdue Road, Suite 200,
Indianapolis, IN 46268.
(4) "Instruments" shall consist of Debtor's interest of any kind in any
negotiable instrument or security as those terms are defined in the UCC, or
any other writing which evidences a right to payment of money and is of a
type which is, in the ordinary course of business, transferred by delivery
alone or by delivery with any necessary endorsement or assignment.
WARRANTIES & COVENANTS: The Debtor warrants and covenants to the Bank that:
(1) It will pay all Liabilities to the Bank secured by this agreement;
(2) It is or will become the owner of the Collateral free from any liens,
encumbrances or security interests, except for this security interest and,
existing liens disclosed to and accepted by the Bank in writing, and will
defend the Collateral against all claims and demands of all persons at any
time claiming any interest in it;
(3) It will keep the Collateral free of liens, encumbrances and other security
interests except for this security interest, maintain it in good repair,
not use it illegally and exhibit it to Bank on demand;
(4) At its own expense, the Debtor will maintain comprehensive casualty
insurance on the Collateral against such risks, in such amounts, with such
deductibles and with such companies as may be satisfactory to the Bank.
Each insurance policy shall contain a lender's loss payable endorsement
satisfactory to the Bank and a prohibition against cancellation or
amendment of the policy or removal of the Bank as loss payee without at
least 30 days prior written notice to the Bank. In all events, the amounts
of such insurance coverages shall conform to prudent business practices and
shall be in such minimum amounts that the Debtor will not be deemed a
co-insurer.
(5) It will not sell or offer to sell or otherwise transfer the Collateral, nor
change the location of the Collateral, without the written consent of the
Bank, except in the ordinary course of business;
(6) It will pay promptly when due all taxes and assessments upon the
Collateral, or for its use or operation;
(7) No financing statement covering all or any part of the Collateral or any
proceeds is on file in any public office, unless the Bank has approved that
filing. At Bank's request, Debtor will execute one or more financing
statements in form satisfactory to Bank and will pay the cost of filing
them in all public offices wherever filing is deemed by Bank to be
desirable;
<PAGE>
(8) It will immediately notify Bank in writing of any name change or any change
in business organization;
(9) It will provide any information that Bank may reasonably request, and will
permit Bank upon prior notice, to inspect and copy its books and records
during normal business hours.
ACCOUNTS RECEIVABLE: The Debtor acknowledges that if the Collateral includes
"Accounts Receivable" then until the Bank gives notice to Debtor to the
contrary, Debtor will, in the usual course of its business and at its own cost
and expense, on the Bank's behalf but not as the Bank's agent, demand and
receive and use its best efforts to collect all moneys due or to become due on
the Accounts Receivable. Until the Bank gives notice to Debtor to the contrary
or until Debtor is in default, it may use the funds collected in its business.
Upon notice from the Bank or upon default, the Debtor agrees that all sums of
money it receives on account of or in payment of settlement of the Accounts
Receivable shall be held by it as trustee for the Bank without commingling with
any of its funds, and shall immediately be delivered to the Bank with
endorsement to the Bank's order of any check or similar instrument. It is
agreed that, at any time Bank so elects, it shall be entitled, in its own name
or in the name of the Debtor or otherwise, but at the expense and cost of the
Debtor, to collect, demand, receive, sue for or compromise any and all Accounts
Receivable, and to give good and sufficient releases, to endorse any checks,
drafts or other orders for the payment of money payable to the Debtor in payment
and, in its discretion, to file any claims or take any action or proceeding
which the Bank may deem necessary or advisable. It is expressly understood and
agreed, however, that the Bank shall not be required or obligated in any manner
to make any demand or to make any inquiry as to the nature or sufficiency of any
payment received by it or to present or file any claim or take any other action
to collect or enforce the payment of any amounts which may have been assigned to
it or to which it may be entitled at any time or times. All notices required in
this paragraph will be immediately effective when sent. Such notices need not
be given prior to the Bank taking action.
REPRESENTATIONS BY DEBTOR: Each Debtor represents: (a) that the execution and
delivery of this agreement and the performance of the obligations it imposes
does not violate any law, conflict with any agreement by which it is bound, or
require the consent or approval of any governmental authority or other third
party; (b) that this agreement is valid and binding, enforceable according to
its terms; and (c) that all balance sheets, profit and loss statements, and
other financial statements furnished to the Bank are accurate and fairly reflect
the financial condition of the organizations and persons to which they apply on
their effective dates, including contingent liabilities of every type, which
financial condition has not changed materially and adversely since those dates.
Each Debtor, other than a natural person, further represents: (a) that it is
duly organized, existing and in good standing pursuant to the laws under which
it is organized; and (b) the execution and delivery of this agreement and the
performance of the obligations it imposes (i) are within its powers and have
been duly authorized by all necessary action of its governing body, and (ii) do
not contravene the terms of its articles of incorporation or organization, its
by-laws, or any partnership, operating or other agreement governing its affairs.
DEFAULT/REMEDIES: if the Debtor fails to pay any of the Liabilities when due, or
otherwise defaults under the terms of any agreement related to any of the
Liabilities, or if the Debtor fails to
<PAGE>
observe or perform any term of this agreement, or if any representation or
warranty of the Debtor contained in this agreement is untrue in any material
respect, then the Bank shall have the rights and remedies provided by law or
this agreement, including but not limited to the right to require the Debtor to
assemble the Collateral and make it available to the Bank at a place to be
designated by Bank which is reasonably convenient to both parties, the right to
take possession of the Collateral with or without demand and with or without
process of law, and the right to sell and dispose of it and distribute the
proceeds according to law. In connection with the right of Bank to take
possession of the Collateral, the Bank may take possession of any other items of
property in or on the Collateral at the time of taking possession, and hold them
for the Debtor without liability on the part of Bank. If there is any statutory
requirement for notice, that requirement shall be met if Bank sends notice to
the Debtor at least seven (7) days prior to the date of sale, disposition or
other event giving rise to the required notice. The Debtor shall be liable for
any deficiency remaining after disposition of the Collateral, and waives all
valuation and appraisement laws.
MISCELLANEOUS:
(1) At its option the Bank may, but shall be under no duty or obligation to,
discharge taxes, liens, security interests or other encumbrances at any
time levied or placed on the Collateral, pay for insurance on the
Collateral, and pay for the maintenance and preservation of the Collateral,
and the Debtor agrees to reimburse the Bank on demand for any payment made
or expense incurred by the Bank, with interest at the maximum legal rate.
(2) No delay on the part of Bank in the exercise of any right or remedy shall
operate as a waiver, no single or partial exercise by Bank of any right or
remedy shall preclude any other exercise of it or the exercise of any other
right or remedy, and no waiver or indulgence by the Bank of any default
shall be effective unless in writing and signed by Bank, nor shall a waiver
on one occasion be construed as a waiver of that right on any future
occasion.
(3) If any provision of this agreement is invalid, it shall be ineffective only
to the extent of its invalidity, and the remaining provisions shall be
valid and effective.
(4) Except as provided in the Accounts Receivable paragraph above, notice from
one party to another relating to this agreement shall be deemed effective
if made in writing (including telecommunications) and delivered to the
recipient's address, telex number or facsimile number set forth above by
any of the following means: (a) hand delivery, (b) registered or certified
mail, postage prepaid, with return receipt requested, (c) first class or
express mail, postage prepaid, (d) Federal Express, Purolator Courier or
like overnight courier service or (e) facsimile, telex or other wire
transmission with request for assurance of receipt in a manner typical with
respect to communications of that type. Notice made in accordance with
this section shall be deemed delivered on receipt if delivered by hand or
wire transmission, on the third business day after mailing if mailed by
first class, registered or certified mail, or on the next business day
after mailing or deposit with an overnight courier service if delivered by
express mail or overnight courier.
(5) All rights of Bank shall inure to the benefit of the Bank's successors and
assigns; and all
<PAGE>
obligations of the Debtor shall bind the Debtor's heirs, executors,
administrators, successors and assigns. If there is more than one
Debtor, their obligations are joint and several.
(6) A carbon, photographic or other reproduction of this agreement is
sufficient, and can be filed as a financing statement. The Bank is
irrevocably appointed the Debtor's attorney-in-fact to execute any
financing statement on Debtor's behalf covering the Collateral.
(7) The terms and provisions of this security agreement shall be governed by
Indiana law.
<PAGE>
WAIVER OF JURY TRIAL BY BANK AND DEBTOR: The Bank and the Debtor, after
consulting or having had the opportunity to consult with counsel, knowingly,
voluntarily and intentionally waive any right either of them may have to a trial
by jury in any litigation based upon or arising out of this agreement or any
related instrument or agreement, or any of the transactions contemplated by this
agreement, or any course of conduct, dealing, statements (whether oral or
written), or actions of either of them. Neither the Bank nor the Debtor shall
seek to consolidate, by counterclaim or otherwise, any action in which a jury
trial has been waived with any other action in which a jury trial cannot be or
has not been waived. These provisions shall not be deemed to have been modified
in any respect or relinquished by either the Bank or the Debtor except by a
written instrument executed by both of them.
Debtor:
TEKSYN, INC. k/n/a MADE2MANAGE
SYSTEMS, INC.
Dated: March 20, 1995
By: /s/ David B. Wortman
-----------------------------------------
David B. Wortman President
-----------------------------------------
Printed Name Title
<PAGE>
MADE2MANAGE SYSTEMS, INC.
STOCK OPTION AGREEMENT
This Stock Option Agreement is entered into by and between _______________
(the "Optionee") hereinbelow set forth and Made2Manage Systems, Inc., an Indiana
corporation (the "Company").
1. OPTIONEE: BASIC TERMS. The Optionee is hereby granted an option to
purchase the number of fully paid and non-assessable shares of the
Common Stock, without par value, of the Company at the option price
hereinbelow set forth, subject to the following additional terms and
conditions:
A. DEFINITIONS
1. "Code" shall mean the Internal Revenue Code of 1986, and as
amended from time to time.
2. "Incentive Option" shall mean an option described in Section
422A of the Code. TO QUALIFY FOR FAVORABLE TAX TREATMENT
PROVIDED BY AN INCENTIVE OPTION, THE SHARES PURCHASED UPON
EXERCISE MUST BE HELD FOR A PERIOD OF TWO (2) YEARS FROM THE
DATE OF THE OPTION GRANT AND FOR A PERIOD OF ONE (1) YEAR
AFTER THE SHARES ARE TRANSFERRED TO OPTIONEE.
3. "Non-Qualified Option" shall mean an option other than an
Incentive Option, the exercise of which generally results in
an immediate taxable event.
4. Unless otherwise indicated, all capitalized terms set forth
in this Agreement shall have the meaning provided to them
under the Plan, a copy of which Optionee acknowledges having
received.
B. GRANT OF OPTION
1. The Company hereby grants to the Optionee an option (the
"Option") to purchase _____ shares of Common Stock of the
Company, upon the terms and conditions set forth below. The
date of grant of the Option is _________________________
(the "Grant Date").
2. This Option is intended to be a(n):
/ / Incentive Option (to be received only by EMPLOYEES of
the Company).
<PAGE>
/ / Non-Qualified Option.
3. The Optionee is a(n) (if applicable, check more than one):
/ / Employee / / Officer / / Director
/ / Consultant / / Other Person providing services
C. DURATION OF OPTION
1. INCENTIVE OPTION: If this Option is an Incentive Option, as
set forth above, it shall expire ten (10) years from the
Grant Date, provided, however, for any Optionee who owns
more than ten percent (10%) of the total combined voting
power or value of all classes of stock of the Company, the
duration of this Option shall be five (5) years.
2. NON-QUALIFIED OPTION: If this Option is a Non-Qualified
Option, as set forth above, it shall expire ten (10) years
after the Grant Date.
D. PURCHASE PRICE
The purchase price for the shares subject to the Option shall be
$___________ per share, which is either: (a) equal to at least
eighty-five percent (85%) of Fair Market Value if the Option is a
Non-Qualified Option, (b) equal to at least one-hundred percent
(100%) of Fair Market Value if the Option is an Incentive Option,
or (c) equal to at least one-hundred ten percent (110%) of Fair
Market Value if the Option is an Incentive Option and Optionee
holds more than ten percent (10%) of the total combined voting
power or value of all classes of stock of the Company.
2. EXERCISABILITY. This Option shall not be exercisable in whole or in
part until ___________________, 19____. Subject to Section 6
regarding termination of Optionee's employment, consulting or other
relationships with the Company and Section 10A regarding Incentive
Options, this Option shall become exercisable on or after
_________________, 19____, with respect to _____% of the shares of
Common Stock and on the first day of each month thereafter through
__________________, 19 ____, with respect to an additional 1/_____ of
the shares of Common Stock subject to the Option.
- 2 -
<PAGE>
3. METHOD OF EXERCISE AND PAYMENT. This Option may be exercised from time
to time, in whole or in part, to the extent exercisable, only by
delivery to an officer of the Company of the original of this Option
with an appropriate Notice of Exercise duly signed by the holder,
together with the full purchase price of the shares purchased pursuant
to the exercise of the Option; provided, however, that this Option may
not be exercised if such exercise would violate any law or
governmental order or regulation. If the offer and sale of the shares
subject to the Option has not been registered under the Securities Act
of 1933, as amended (the "Act"), Optionee shall deliver to the
Company, at the time of exercise, an appropriate "investment letter"
in form and content satisfactory to the Company unless, in the opinion
of counsel for the Company, the shares issued would not be deemed
"restricted securities" within the meaning of such Act or the rules
and regulations promulgated thereunder. Payment for the shares
purchased pursuant to any exercise shall be made in full at the time
of such exercise, in any of the following methods, as may be elected
by the Optionee, except for those PROHIBITED methods indicated by a
check mark within any of the boxes below (A CHECK MARK MEANS THE
METHOD IS PROHIBITED):
/ / In cash or by check payable to the order of the Company;
/ / In Common Stock of the Company already owned by the Optionee for a
period of six (6) months prior to such exercise, valued as of the
date of exercise of the Option at Fair Market Value;
/ / By a promissory note payable to the order of the Company; if a
promissory note is tendered, such note shall bear interest at an
interest rate determined by, and shall be subject to such terms
and conditions as are prescribed by, the Board of Directors of
the Company as set forth in the form of promissory note.
Optionee agrees to have withheld from any remuneration payable to
him/her by the Company and/or to pay to the Company, at the time of
exercise of the Option, an amount which is required to be withheld or
paid pursuant to any Federal, State or Local tax or revenue laws or
regulation, as may be determined by the Company. ****The Optionee:
may / / or may not / /
- 3 -
<PAGE>
satisfy such tax withholding by instructing the Company to withhold
such number of option shares exercised which, when valued at fair
Market Value on the date of Exercise, equal the total tax obligations
required to be withheld.***
4. NON-TRANSFERABILITY. This Option shall not be transferred, sold,
pledged, assigned, hypothecated, or disposed of in any manner by
Optionee other than by will or the laws of descent and distribution
to the extent hereinafter set forth. This Option may be exercised
during the holder's lifetime only by the holder hereof or, upon the
holder's legal incapacity to act on his/her own behalf, by the
holder's conservator or other lawful representative. The Option
shall be null and void and without effect upon any attempted
assignment or transfer, except as hereinabove provided, including
without limitation, any purported assignment, whether voluntary
or by operation of law, pledge, hypothecation or other disposition
contrary to the provisions hereof, or levy of execution, attachment,
trustee process or similar process, whether legal or equitable, upon
the Option.
5. TERMINATION. To the extent that this Option shall not have been
exercised in full prior to its termination or expiration date,
whichever shall be sooner, it shall terminate and become void and of
no effect.
6. CESSATION OF CONTINUOUS STATUS -- TERMINATION RETIREMENT DEATH OR
DISABILITY. If the holder shall voluntarily or involuntarily cease
his/her Continuous Status (as such term is defined in the Plan)
(hereinafter referred to as a "Termination"), the Option of the holder
shall terminate forthwith, except that the holder shall have thirty
(30) days (or such longer period as the Board may approve) following
the Termination to exercise this Option or any portion hereof which
the holder could have exercised on the date of Termination; provided,
however, that if the Termination is due to retirement by the holder on
or after attaining the age of sixty-five (65) years, the disability of
the holder or the death of the holder, the holder or the
representative of the estate of the holder shall have the privilege of
exercising the entire unexercised portion of this Option (regardless
of whether otherwise exercisable on the date of such Termination),
provided that such exercise be accomplished: (1) prior to the
expiration of this Option and (2) either within thirty (30) days of
the holder's retirement, or within twelve (12) months after the date
of death of the holder, as the case may be. Notwithstanding any of
the foregoing, if the Termination is "for cause" (as defined in
Section (d) of the Plan), or the holder is terminated due to his
expropriation of Company property (including trade secrets or other
proprietary rights), the existence of which shall be determined by
the Board of Directors or the Committee established to administer the
Plan (such decision to be made by the Board or Committee in its sole
discretion and which determination shall be conclusive), this Option
shall terminate immediately upon the Termination and the holder in
such event shall have no right
- 4 -
<PAGE>
after such Termination to exercise any unexercised Option he might
have exercised on or prior to the Termination.
7. STOCK SPLITS AND CAPITAL ADJUSTMENTS. If, prior to the complete
exercise of this Option, there shall be declared and paid a stock
dividend upon the Common Stock of the Company or if such stock shall
be split up, converted, exchanged or reclassified, this Option, to the
extent that it has not been exercised, shall entitle the holder, upon
the future exercise of this Option, to such number and kind of
securities or other property, subject to the terms of the Option, to
which the holder would be entitled had he/she actually owned the stock
subject to the unexercised portion of the Option at the time of the
occurrence of such stock dividend, split up, conversion, exchange,
reclassification or substitution; and the aggregate purchase price
upon the future exercise of the Option shall be the same as if shares
of Common Stock of the Company originally optioned were being
purchased as provided herein.
8. ACCELERATION OF EXERCISE DATE.
A. REORGANIZATION. Notwithstanding anything to the contrary
contained in this Agreement, all outstanding unexercised Options
shall become fully vested under the Plan and shall be fully
exercisable in the event of any reorganization, sale of all or
substantially all of the assets of the Company in a transaction
in which the Company does not survive in its present form (other
than a sale or transfer to a subsidiary or parent of the
Company), merger, consolidation, liquidation or similar
transaction pursuant to which the Company is not the surviving
corporation; provided, however, such Options shall not become
fully vested or immediately exercisable (1) if in its sole
discretion, the Board has affirmatively determined that such
immediate vesting is not in the best interests of the Company,
in which event the Option shall be assumed or an equivalent
option shall be substituted by the successor corporation or a
parent or subsidiary thereof, or (2) if such transaction is
effected by the Company for the principal purpose of changing
the Company's state of incorporation.
B. TIME OF EXERCISE. In the event of such accelerated vesting
pursuant to Section 8.A. above, the Option shall be fully
exercisable during a period to be designated by the Board
(but not less than ten (10) nor more than sixty (60) days prior
to the closing date of any such transaction).
C. DEFINITION OF SUBSIDIARY. For purposes of this paragraph, the
term "subsidiary" means any corporation which is part of a chain,
beginning with the Company, which owns at least fifty percent
(50%) or more of the
- 5 -
<PAGE>
total combined voting power of all classes of stock in one of the
other corporations in such a chain.
9. COMPLIANCE WITH SECURITIES LAWS.
A. POSTPONE ISSUANCE. Notwithstanding any provision of this Option
to the contrary, the Company may postpone the issuance and
delivery of shares upon any exercise of this Option until one of
the following conditions shall be met:
1. The shares with respect to which such Option has been
exercised are at the time of the issue of such shares
effectively registered under applicable Federal and State
securities laws now in force or hereafter enacted or
amended; or
2. Counsel for the Company shall have given an opinion that
registration of such shares under applicable Federal and
State securities laws, as now in force or hereafter enacted
or amended, is not required.
B. INVESTMENT REPRESENTATION. In the event that for any reason the
shares to be issued upon exercise of the Option shall not be
effectively registered under the Securities Act of 1933
(the "1933 Act"), upon any date on which the Option is exercised
in whole or in part, the Company shall be under no further
obligation to issues shares covered by the Option, unless the
Optionee shall give a written representation to the Company, in
form satisfactory to the Company, that such person is acquiring
the shares issued pursuant to such exercise of the Option for
investment and not with a view to, or for sale in connection
with, the distribution of any such shares, and that he/she will
make no transfer of the same except in compliance with the 1933
Act and the rules and regulations promulgated thereunder and then
in force, and in such event, the Company may place an "investment
legend" upon any certificate for the shares issued by reason of
such exercise.
10. SPECIAL RULES REGARDING INCENTIVE OPTIONS.
A. NOTICE OF TRANSFER. If this Option is an Incentive Option, the
employee-optionee hereby agrees to notify the Company in writing
within three (3) days after any sale, transfer or other
disposition of shares acquired upon the exercise of this Option
which occurs within either twelve (12) months following the date
of exercise or twenty-four (24) months following the date of
grant.
- 6 -
<PAGE>
B. $100,000 PER YEAR EXERCISE LIMIT. If this Option is an Incentive
Stock Option it shall be exercisable in accordance with the above
Section 2, but in no event shall it be exercised to the extent
that the aggregate fair market value of Common Stock covered by
such Option which is exercisable for the first time during any
calendar year, when combined with the aggregate fair market value
of all stock covered by incentive stock options (as defined in
the Code) granted to Optionee after December 31, 1986 by the
Company, its parent or a subsidiary of the Company which are
exercisable for the first time during the same calendar year,
exceeds $100,000.
11. NO AGREEMENT OF EMPLOYMENT. Neither the grant of this Option nor this
Agreement shall be deemed to create any agreement with, or obligation
by, the Company to employ the Optionee for any period of time, it
being understood that employment is strictly "at will" in the absence
of any written agreement to the contrary and, in the absence of such
written agreement, such person may be terminated by the Company at any
time, with or without cause.
12. SUBJECT TO PLAN. This Option is issued subject and pursuant to the
provisions of the Plan, receipt of a copy of which the holder
acknowledges. A determination of the Board of Directors or the
Committee established pursuant to the Plan as to any questions which
may arise with respect to the interpretation of the provisions of this
Option and of the Plan shall be final. The Board of Directors or the
Committee may authorize and establish such rules and regulations, and
revisions thereof, not inconsistent with the provisions of the Plan,
as it may deem advisable. Any provision hereof which is inconsistent
with, or contrary to, the terms and conditions of the Plan shall be
superseded and governed by the Plan.
13. SEVERABILITY. If any condition, term or provision of this Agreement is
determined by a court to be illegal or in conflict with any law, State
or Federal, the validity of the remaining portions or provisions shall
not be affected, and the rights and obligations of the parties shall
be construed and enforced as if this Agreement did not contain the
particular condition, terms or provisions determined to be
unenforceable.
14. ENTIRE AGREEMENT; INDIANA LAW. This Agreement contains the entire
understanding and agreement between the parties hereto respecting the
within subject matter, and there are no representations, agreements,
arrangements or understandings, oral or written, between the parties
hereto relating to the subject matter of this Agreement that are not
fully expressed herein. The Company is an Indiana corporation, and
this Agreement shall be governed by and construed in accordance with
the laws and the State of Indiana.
- 7 -
<PAGE>
WITNESS the signature of its duly authorized office of the Company as of
the date of grant hereof.
MADE2MANAGE SYSTEMS, INC.
By:
-------------------------------------
Name: David B. Wortman
-----------------------------------
Title: President and CEO
----------------------------------
Acknowledged and Agreed to:
- -----------------------------------
Signature
- -----------------------------------
Name
- -----------------------------------
Street Address
- -----------------------------------
City, State, Zip Code
- -----------------------------------
Social Security No.
- 8 -
<PAGE>
MADE2MANAGE, INC.
STOCK OPTION PLAN
As adopted on August 16, 1990 and amended as of July 8, 1996
1. PURPOSE OF THE PLAN. The Made2Manage, Inc. Stock Option Plan is
intended to promote the growth of the Company by attracting and motivating key
employees, consultants, independent contractors, vendors, suppliers and other
persons whose efforts are deemed worthy of encouragement through the incentive
effects of stock options.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "BOARD" shall mean the Committee if one has been appointed or, if no
Committee has been appointed, the Board of Directors of the Company.
(b) "CODE" shall mean the Internal Revenue Code, the rules and regulations
promulgated thereunder and the interpretations thereof, all from time to time in
effect.
(c) "COMMITTEE" shall mean the Committee appointed by the Board of
Directors in accordance with Section 3(a) below, if one is appointed.
(d) "COMMON STOCK" shall mean the Common Stock of the Company.
(e) "COMPANY" shall mean Made2Manage, Inc., an Indiana corporation.
(f) "CONSULTANT" shall mean any person who is engaged by the Company or
any parent or Subsidiary of the Company to render consulting services.
(g) "CONTINUOUS STATUS" shall mean the absence of any interruption or
termination of service as an Employee, Consultant or other person providing
services on a regular basis to the Company or its Parent or any Subsidiary.
Continuous Status shall not be considered interrupted in the case of sick leave,
military leave, or any other leave of absence approved by the Board, provided
that either such leave is for a period of not more than ninety (90) days or
reemployment upon the expiration of such leave is provided or guaranteed by
contract or statute.
(h) "DIRECTOR" shall mean any person serving on the Board of Directors.
(i) "EMPLOYEE" shall mean any person, including Officers and Directors,
employed by the Company or its Parent or any Subsidiary of the Company. The
payment or a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
(j) "FAIR MARKET VALUE" shall mean the average of the closing bid and
asked prices of a share of Common Stock, as reported by The Wall Street Journal
(or, if not reported, as otherwise quoted by the National Association of
Securities Dealers through NASDAQ), on the date of the grant the Option, or, if
the Common Stock is listed on the NASDAQ National Market
<PAGE>
System or is listed on a national stock exchange, the closing price on such
System or such exchange on the date of the grant of the option, as reported
in The Wall Street Journal. In the event the Common Stock is not traded
publicly, the Fair Market Value of a share of Common Stock on the date of the
grant of the option shall be determined, in good faith, by the Board or the
Committee and such determination shall be conclusive for all purposes. The
Board or Committee shall take into account such factors affecting value as
it, in its sole and absolute discretion, may deem relevant.
(k) "OFFICER" shall mean any person, which may include directors, employed
by the Company or its Parent or any Subsidiary of the Company who has been
elected an officer by the respective Board of Directors.
(l) "OPTION" shall mean stock options issued pursuant to the Plan.
Options may be either "INCENTIVE OPTIONS," which are defined as Options intended
to meet the requirements of Section 422A of the Code, or "NONQUALIFIED OPTIONS,"
which are defined as options not intended to meet such requirements of the Code.
(m) "OPTION AGREEMENT" shall mean the written agreement setting forth the
terms and conditions of an option.
(n) "OPTIONED STOCK" shall mean the Common Stock subject to an Option.
(o) "OPTIONEE" shall mean a person who receives an Option.
(p) "PARENT" shall mean a "parent corporation," whether now or hereafter
existing, as defined in Section 425(e) of the Code.
(q) "PARTICIPANT" shall mean a person to whom an Option has been granted.
(r) "PLAN" shall mean this Made2Manage, Inc. Stock Option Plan (1990).
(s) "SHARE" shall mean a share of Common Stock of the Company, as may be
adjusted in accordance with Section 6 below.
(t) "SUBSIDIARY" shall mean a "subsidiary corporation" of the Company,
whether now or hereafter existing, as defined in Section 425(f) of the Code.
3. ADMINISTRATION OF THE PLAN.
(a) BY THE BOARD OF DIRECTORS OR BY THE COMMITTEE. The Plan shall be
administered by the Board of Directors or, if appointed, by a Committee, a
majority of which shall be "disinterested" as defined in Rule 16b-3 under the
Securities Exchange Act of 1934 (or any similar successor rule). The Board and
the Committee shall have full authority to administer the Plan,
-2-
<PAGE>
including authority to interpret and construe any provision of the Plan and
to adopt such rules and regulations for administering the Plan as it may deem
necessary in order to comply with the requirements of the Plan, or in order
that any Option that is intended to be an Incentive Option will be classified
as an incentive stock option under the Code, or in order to conform to any
regulation or to any change in any law or regulation applicable thereto. The
Board of Directors may reserve to itself any of the authority granted to the
Committee as set forth herein, and it may perform and discharge all of the
functions and responsibilities of the Committee at any time that a duly
constituted committee is not appointed and serving.
(b) ACTIONS OF THE BOARD AND THE COMMITTEE. All actions taken and all
interpretations and determinations made by the Board or by the Committee in good
faith (including determinations of Fair Market Value) shall be final and binding
upon all Participants, the Company and all other interested persons. No member
of the Board or the Committee shall be personally liable for any action,
determination or interpretation made in good faith with respect to the Plan, and
all members of the Board or the Committee shall, in addition to their rights as
directors, be fully protected by the Company with respect to any such action,
determination or interpretation.
(c) POWERS OF THE BOARD AND THE COMMITTEE. Subject to the provisions of
the Plan, the Board and, if appointed, the Committee shall have the authority,
in their discretion:
(i) to determine, upon review of the relevant information, the Fair
Market Value of the Common Stock; (ii) to determine the persons to whom
Options shall be granted, the time or times at which Options shall be
granted, the number of shares to be represented by each Option and the
exercise price per share; (iii) to interpret the Plan; (iv) to prescribe,
amend, and rescind rules and regulations relating to the Plan; (v) to
determine whether an option granted shall be an Incentive Option or a
Nonqualified Option and to determine the terms and provisions of each
Option granted (which need not be identical) and, with the consent of the
holder thereof, to modify or amend each option, including reductions in the
exercise price thereof; (vi) to accelerate or defer (with the consent of
the Optionee) the exercise date of any Option; (vii) to authorize any
person to execute on behalf of the Company any instrument required to
effectuate the grant of an Option previously granted by the Board; and
(viii) to make all other determinations deemed necessary or advisable for
the administration of the Plan.
4. ELIGIBILITY AND PARTICIPATION.
(a) ELIGIBILITY. Grants of Options may be made to any Employee or
Consultant (which may include officers and/or Directors) of the Company or of
its Parent or Subsidiary, or any independent contractor, vendor, supplier or any
other person providing services to the Company or a Parent or Subsidiary whose
efforts are deemed worthy of encouragement by the Board; provided, however, an
Incentive Option may only be granted to an Employee.
-3-
<PAGE>
(b) PARTICIPATION BY DIRECTOR. Members of the Board who are either
eligible for Options or have been granted Options may vote on any matters
affecting the administration of the Plan or the grant of any Options pursuant to
the Plan, except that no such member shall act upon the granting of an option to
himself, but any such member may be counted in determining the existence of a
forum at any meeting of the Board and may be counted as part of an action by
unanimous written consent during or with respect to which action is taken to
grant Options to him.
5. EXERCISE PRICE; CONSIDERATION; AND FORM OF OPTION AGREEMENT.
(a) EXERCISE PRICE. The exercise price of any Incentive Option shall be
not less than one hundred percent (100%) of the Fair Market Value of a share of
Common Stock on the date of the grant of the Option. The exercise price of a
Nonqualified Option shall not be less than eighty-five percent (85%) of the Fair
Market Value on the date of the grant of the option. If an Incentive Option is
granted to an Optionee who then owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or its Parent or
any Subsidiary, the exercise price of such Incentive Option shall be at least
one hundred ten percent (110%) of the Fair Market Value of the Company's Common
Stock on the date of the grant of such option.
(b) CONSIDERATION. The exercise price shall be paid in full, at the time
of exercise of the Option, by personal or bank cashier's check or in such other
form of lawful consideration as the Board of Directors or the Committee may
approve from time to time, including, without limitation, the transfer of
outstanding shares of Common Stock or the withholding of Optioned Stock as
provided in Section 7(c) or the Optionee's promissory note in form satisfactory
to the Company and bearing interest at a rate of not less than 6% per annum.
(c) FORM OF OPTION AGREEMENT. Each option shall be evidenced by an option
Agreement specifying the number of shares which may be purchased upon exercise
of the option and containing such terms and provisions as the Board or the
Committee may determine, subject to the provisions of the Plan.
6. SHARES OF COMMON STOCK SUBJECT TO THE PLAN.
(a) NUMBER. The aggregate number of shares of Common Stock subject to
Options which may be granted under the Plan shall be 1,200,000 subject to
adjustment as provided herein. To the extent any Option granted under the Plan
shall expire or terminate unexercised or for any reason become unexercisable,
the shares subject to such Option shall thereafter be available for future
grants under the Plan.
(b) CAPITAL CHANGES. Except as hereinafter provided, no adjustment shall
be made in the number of shares of Common stock issued to a Participant, or in
any other rights of the Participant upon exercise of an Option, by reason of any
dividend, distribution or other right granted to stockholders for which the
record date is prior to the date of exercise of the
-4-
<PAGE>
Participant's Option. In the event any change is made to the shares of
Common Stock (whether by reason of a merger, consolidation, reorganization,
recapitalization, stock dividend, stock split, combination of shares,
exchange of shares, change in corporate structure or otherwise), appropriate
adjustments shall be made in: (i) the number of shares of Common Stock
theretofore made subject to Options, and in the exercise price of such
shares; and (ii) the aggregate number of shares which may be made subject to
Options. If any of the foregoing adjustments shall result in a fractional
share, the fraction shall be disregarded, and the Company shall have no
obligation to make any cash or other payment with respect to such a
fractional share.
7. EXERCISE OF STOCK OPTIONS.
(a) TIME OF EXERCISE. Subject to the provisions of the Plan, including
without limitation Section 7(d) and Section 8, the Board or the Committee, in
its discretion, shall determine the time when an Option, or a portion of an
Option, shall become exercisable, and the time when an Option, or a portion of
an option, shall expire; provided, however, that (i) an Incentive Option shall
expire, to the extent not exercised, no later than the tenth anniversary of the
date on which it was granted; and (ii) any Incentive Option granted to any
person who owns shared possessing more than 10% of the total combined voting
power or value of all classes of stock of the Company or of its Parent or a
Subsidiary shall have a term of not to exceed five (5) years. Such time or
times shall be set forth in the Option Agreement evidencing such Option.
(b) NOTICE OF EXERCISE. An Optionee electing to exercise an Option shall
give written notice to the Company, as specified by the Option Agreement, of
his/her election to purchase a specified number of shares, such notice shall be
accompanied by the instrument evidencing such Option and any other documents
required by the Company, and shall tender the exercise price of the shares
he/she has elected to purchase. If the notice of election to exercise is given
by the executor or administrator of a deceased Participant, or by the person or
persons to whom the Option has been transferred by the participant's will or the
applicable laws of descent and distribution, the Company will be under no
obligation to deliver shares pursuant to such exercise unless and until the
company is satisfied that the person or persons giving such notice is or are
entitled to exercise the Option.
(c) EXCHANGE OF OUTSTANDING STOCK OR OPTIONED STOCK. As part or full
payment for the exercise of an Option, the Board, in its sole discretion, may
permit an Optionee (i) to surrender to the Company shares of Common Stock
previously acquired by the Optionee at least six (6) months prior to such
surrender or (ii) to authorize the Corporation to withhold Optional Stock. Such
surrendered shares shall be valued at their Fair Market Value on the date of
exercise of the option.
(d) TERMINATION OF CONTINUOUS STATUS BEFORE EXERCISE. If a Participant's
Continuous Status with the Company or its Parent or any Subsidiary shall cease
for any reason (other than the Participant's death, retirement or disability as
provided below), any Option then held by the Participant or his/her estate, to
the extent then exercisable, shall remain exercisable after such
-5-
<PAGE>
cessation of the Continuous Status for a period of thirty (30) days
commencing upon the date of such cessation (or such longer period as the
Board may allow, either in the form of Option Agreement or by Board action).
If the Option is not exercised during this period it shall be deemed to have
been forfeited and be of no further force or effect. Notwithstanding the
exercise period hereinabove described, if the holder of an option (i) is
terminated for "cause" (as hereinafter defined) or (ii) is terminated due to
his expropriation of Company property (including trade secrets or other
proprietary rights), the Board shall have the authority, by notice to the
holder of an Option, to immediately terminate such Option, effective on the
date of termination, and such Option shall no longer be exercisable to any
extent whatsoever. As used herein, "cause" shall mean that the holder of an
Option has willfully and intentionally engaged in material misconduct, gross
neglect of duties or grossly negligent failure to act which materially and
adversely affects the business or affairs of the company, or has committed
any act of fraud or any act not approved by the Board involving any material
conflict of interest or self-dealing adverse to the Company, or has been
convicted of a felony or any offense involving moral turpitude, or has
unreasonably failed to comply with any reasonable direction from the Board or
its Chairman with respect to a major policy decision affecting the Company,
issued pursuant to its authority under the By-Laws of the company, which
direction is approved by a majority of the Board.
(e) DEATH. If a Participant dies at a time when he is entitled to
exercise an Option, then at any time or times within twelve (12) months after
his/her death (or such further period as the Board may allow) such option may be
exercised, as to all or any of the shares which the Participant was entitled to
purchase immediately prior to his/her death by his/her executor or administrator
or the person(s) to whom the Option is transferred by will or the applicable
laws of descent and distribution, and except as so exercised such Option will
expire at the end of such period. In no event, however, may any Option be
exercised after the expiration of the term.
(f) RETIREMENT AND DISABILITY. If a Participant retires from service at
age 65 or older or retires at less than age 63 with the consent of the Board of
Directors or becomes disabled (within the meaning of Section 105(d)(4) of the
Code) at a time when he is entitled to exercise an Option, then, at any time or
times within thirty (30) days of the date of such retirement or within twelve
(12) months of the date of such disability, he may exercise such Option as to
all or any of the shares which he was entitled to purchase under such Option
immediately prior to such retirement or disability. Except as so exercised,
such Option shall expire at the end of such period. In no event, however, may
any Option be exercised after the expiration of its term.
(g) DISPOSITION OF TERMINATED STOCK OPTIONS. Any shares of Common Stock
subject to Options which have been terminated as provided above shall not
thereafter be eligible for purchase by the Participant but shall again be
available for grant by the Board to other Participants.
8. SPECIAL PROVISIONS RELATING TO INCENTIVE OPTIONS. The Company shall
not grant Incentive Options under the Plan to any Optionee to the extent that
the aggregate Fair Market Value of the Common Stock Covered by such Incentive
Options which are exercisable for the first
-6-
<PAGE>
time during any calendar year, when combined with the aggregate Fair Market
Value of all stock covered by Incentive Options granted to such optionee
after December 31, 1986 by the Company, its Parent or a Subsidiary thereof
which are exercisable for the first time during the same calendar year,
exceeds $100,000. Incentive Options shall be granted only to persons who, on
the date of grant, are employees of the Company or its Parent or a Subsidiary
of the Company.
9. NO CONTRACT OF EMPLOYMENT. Unless otherwise expressed in a writing
signed by an authorized officer of the Company, all employees of the Company are
for an unspecified period of time and are considered to be "at-will employees."
Nothing in this Plan shall confer upon any Participant the right to continue in
the employ of the Company, its Parent or any Subsidiary, nor shall it limit or
restrict in any way the right of the Company, its Parent or any such Subsidiary
to discharge the Participant at any time for any reason whatsoever, with or
without cause.
10. NO RIGHTS AS A STOCKHOLDER. A Participant shall have no rights as a
stockholder with respect to any shares of Common Stock subject to an option.
11. NONTRANSFERABILITY OF OPTIONS; DEATH OF PARTICIPANT. No option
acquired by a Participant under the Plan shall be assignable or transferable by
a Participant, other than by will or the laws of descent and distribution, and
such Options are exercisable, during his lifetime, only by Optionee. Subject to
Section 7(e), in the event of Optionee's death, the Option may be exercised by
the personal representative of the Participant's estate or if no personal
representative has been appointed, by the successor(s) in interest determined
under the Participant's will or under the applicable laws of descent and
distribution.
12. LIQUIDATION OR MERGER OF THE COMPANY.
(a) LIQUIDATION. In the event of a proposed dissolution or liquidation of
the Company, the Option shall terminate immediately prior to the consummation of
such proposed action, unless otherwise provided by the Board. The Board may, in
the exercise of its sole discretion in such instances, declare that any Option
shall terminate as of a date fixed by the Board and give each Optionee the right
to exercise his Option, as to all or any part of the Shares covered by an
Option, including Shares as to which the option would not otherwise be
exercisable.
(b) SALE OF ASSETS, MERGER OR CONSOLIDATION. In the event of a proposed
sale of all or substantially all of the assets of the Company, or the merger or
consolidation of the Company with or into another corporation in a transaction
in which the Company does not survive, all Options shall vest immediately and
may be fully exercised without regard to the normal vesting schedules of the
Options; provided, however, that if the Board, determines, after giving due
consideration to the effects of any such sale, merger or consolidation on the
employees of the Company, that such immediate vesting is not in the best
interests of the Company, the Option shall be assumed or an equivalent option
shall be substituted by such successor corporation or a parent or subsidiary of
such successor corporation. If the Option becomes fully exercisable
immediately, the Board shall notify the Optionee that the option shall be fully
exercisable for a period of not less than ten
-7-
<PAGE>
(10) nor more than sixty (60) days from the date of such notice and, if such
Option shall not be exercised, the Option shall terminate upon the expiration
of such period and be of no further force or effect.
1. Amendments; Discontinuance of Plan. The Board may from time to time
alter, amend, suspend or discontinue the Plan, including, where
applicable, any modifications or amendments as it shall deem advisable
for any reason, including satisfying the requirements of any law or
regulation or any change thereof; provided, however, that no such
action shall adversely affect the rights and obligations with respect
to Options at any time outstanding under the Plan; and provided
further, that no such action shall, without the approval of the
stockholders of the company, (a) increase the maximum number of shares
of Common Stock that may be made subject to options (unless necessary
to effect the adjustments required by Section 6(b)), (b) change the
formula for determining the exercise price or the maximum term of
Options that may be granted under the Plan or (c) materially lessen
the requirements as to eligibility for participation in the Plan.
No such amendment shall materially adversely affect the rights of any
Participant under any Option previously granted without such
Participant's prior consent.
2. Registration of Optioned Shares. The Options shall not be exercisable
unless the purchase of such Optioned Shares is pursuant to an
applicable effective registration statement under the Securities Act
of 1933, as amended, or unless, in the opinion of counsel to the
Company, the proposed purchase of such Optioned Shares would be exempt
from the registration requirements of the Securities Act of 1933, as
amended.
3. Withholding Taxes; Satisfied by Withholding Optioned Shares.
(i) General. The Company, its Parent or any Subsidiary may
take such teps as it may deem necessary or appropriate for
the withholding of any taxes which the Company, its Parent
or any Subsidiary is required by law or regulation of any
governmental authority, whether Federal, state or local,
domestic or foreign, to withhold in connection with
any Option including, but not limited to, requiring the
Optionee to pay such tax at the time of exercise or the
withholding of issuance of shares of Common Stock to be
issued upon the exercise of any Option until the
Participant reimburses the Company for the amount the
Company is required to withhold with respect to such taxes,
or, at the Company's sole discretion, cancelling any portion
of such issuance of Common Stock in any amount sufficient
to reimburse itself for the amount it is required to so
withhold.
(ii) Satisfying Taxes by Withholding Optioned Shares. Option
Agreements under the Plan may, at the discretion of the
Board, contain a provision to the effect that all Federal
and state taxes required to be withheld or collected
from an Optionee upon exercise of an Option may be
satisfied
-8-
<PAGE>
by the withholding or sufficient number of exercised
Option Shares which, valued at Fair Market Value on the
date or exercise, would be equal to the total
withholding obligation of the Optionee for the exercise
of such Option; provided, however, that if the Company is
a public reporting corporation, no person who is an
"officer" of the Company as such term is defined in
Rule 3B-2 under the Securities Exchange Act of 1934 may
elect to satisfy the withholding of Federal and state
taxes upon the exercise of an Option by the withholding of
Optioned Shares unless such election is made either (i)
at least six months prior to the date that the exercise
of the Option becomes a taxable event or (ii) during any
of the periods beginning on the third business day
following the date on which the Company issues a news
release containing the operating results of a fiscal
quarter or fiscal year and ending on the twelfth business
day following such date. Such election shall be deemed
made upon receipt of notice thereof by an officer of the
Company, by mail, personal delivery or by facsimile
message, and shall (unless notice to the contrary is
provided to the Company) be operative for all Option
exercises which occur during the twelve-month period
following election.
4. Effective Date and Term of Plan. The Plan is effective as of the date
of adoption by the Board and Options may be granted at any time on or
after such date; provided, however, that the Plan shall terminate if
the stockholders of the Company do not approve and adopt it within
twelve (12) months of such date. No Options shall be granted
subsequent to ten years after the effective date of the Plan; however,
Options outstanding subsequent to ten years after the effective date
of the Plan shall continue to be governed by the provisions of the Plan
until exercised or terminated in accordance with the Plan or the
respective Option Agreements.
ADOPTED BY THE BOARD OF DIRECTORS
ON AUGUST 16, 1990
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<PAGE>
MADE2MANAGE SYSTEMS, INC.
COMPUTATION OF PRO FORMA NET INCOME PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Year Nine Months
Ended Ended
December 31, September 30,
1996 1997
------------ -------------
<S> <C> <C>
Weighted average common shares outstanding for the period $ 374 $ 391
Weighted average shares from assumed conversion of
preferred stock 1,480 1,480
Common equivalent shares pursuant to Staff Accounting
Bulletin No. 83 326 326
Options and warrants under the treasury stock method 666 689
------- -------
Shares used in per share calculation 2,846 2,886
------- -------
------- -------
Net income $ 1,606 $ 323
Income addback under modified treasury stock method 115 109
------- -------
Net Income $ 1,721 $ 432
------- -------
------- -------
Net Income per share $ .60 $ .15
------- -------
------- -------
</TABLE>
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 (File No.
_____________) of our report dated January 18, 1997, on our audits of the
financial statements and financial statement schedules of Made2Manage Systems,
Inc. We also consent to the reference to our firm under the caption "Experts."
/s/ Coopers & Lybrand L.L.P.
Indianapolis, Indiana
October 15, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MADE2MANAGE
SYSTEMS, INC. FINANCIAL STATEMENTS INCLUDED IN THIS REGISTRATION STATEMENT AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 SEP-30-1997
<CASH> 1,139 1,856
<SECURITIES> 0 0
<RECEIVABLES> 3,638 4,173
<ALLOWANCES> 188 256
<INVENTORY> 0 0
<CURRENT-ASSETS> 5,242 6,353
<PP&E> 1,184 2,275
<DEPRECIATION> 263 537
<TOTAL-ASSETS> 6,666 8,566
<CURRENT-LIABILITIES> 4,069 5,131
<BONDS> 436 733
0 0
4,042 4,042
<COMMON> 356 356
<OTHER-SE> (2,236) (1,913)
<TOTAL-LIABILITY-AND-EQUITY> 6,666 8,566
<SALES> 6,381 7,313
<TOTAL-REVENUES> 9,379 11,041
<CGS> 763 692
<TOTAL-COSTS> 2,525 3,101
<OTHER-EXPENSES> 6,154 7,367
<LOSS-PROVISION> 140 280
<INTEREST-EXPENSE> 117 78
<INCOME-PRETAX> 578 520
<INCOME-TAX> (1,028) 197
<INCOME-CONTINUING> 1,606 323
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,606 323
<EPS-PRIMARY> .60 .15
<EPS-DILUTED> .60 .15
</TABLE>
