UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-Q
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(Mark One)
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the quarterly period ended March 31, 2000
Or
Transition report pursuant to Section 13 of 15(d) of the Securities Exchange Act
of 1934 For the transition period from ____ to ____
Commission file number: 333-38177
MADE2MANAGE SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Indiana 35-1665080
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
9002 Purdue Road, Indianapolis, IN 46268
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (317) 532-7000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirement for the past 90 days.
Yes [ X ] No [ ]
As of April 30, 2000, there were 4,741,733 shares of Common Stock, no par value,
outstanding.
<PAGE>
MADE2MANAGE SYSTEMS, INC.
FORM 10-Q
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Page
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets
As of March 31, 2000 and December 31, 1999.................. 3
Condensed Consolidated Statements of Operations
For the three months ended March 31, 2000 and 1999.......... 4
Condensed Consolidated Statements of Cash Flows
For the three months ended March 31, 2000 and 1999.......... 5
Notes to Condensed Consolidated Financial Statements........ 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................... 8
PART II OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders......... 18
ITEM 6. Exhibits and Reports on Form 8-K............................ 19
Signatures.................................................. 19
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
MADE2MANAGE SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
March 31, December 31,
2000 1999
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................................................... $ 10,364 $ 12,610
Marketable securities.......................................................... 3,000 1,800
Trade accounts receivable, net ................................................ 7,087 7,376
Prepaid expenses and other..................................................... 1,031 784
Income taxes receivable........................................................ 470 849
Deferred income taxes.......................................................... 737 737
--------- ---------
Total current assets........................................................ 22,689 24,156
Property and equipment, net........................................................ 4,594 4,795
Intangibles, net................................................................... 2,414 2,586
Deferred income taxes.............................................................. 87 87
--------- ---------
Total assets................................................................ $ 29,784 $ 31,624
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................................... $ 768 $ 1,331
Accrued liabilities............................................................ 1,526 2,017
Deferred revenue............................................................... 8,408 8,986
--------- ---------
Total current liabilities................................................... 10,702 12,334
Deferred revenue................................................................... 301 419
--------- ---------
Total liabilities........................................................... 11,003 12,753
--------- ---------
Shareholders' equity:
Preferred stock, no par value; 2,000,000 shares authorized, no shares
issued and outstanding in 2000 and 1999..................................... -- --
Common stock, no par value; 10,000,000 shares authorized, 4,741,733 and
4,652,168 issued and outstanding in 2000 and 1999, respectively............. 22,383 21,889
Accumulated deficit............................................................ (3,602) (3,018)
--------- ---------
Total shareholders' equity.................................................. 18,781 18,871
--------- ---------
Total liabilities and shareholders' equity.................................. $ 29,784 $ 31,624
========= =========
<FN>
See accompanying notes.
</FN>
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
MADE2MANAGE SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended
March 31,
--------------------
2000 1999
--------- ---------
<S> <C> <C>
Revenues:
Software........................................................................ $ 2,851 $ 4,430
Services........................................................................ 4,267 4,168
Hardware........................................................................ 178 273
--------- ---------
Total revenues............................................................... 7,296 8,871
--------- ---------
Costs of revenues:
Software........................................................................ 338 385
Services........................................................................ 2,030 2,243
Hardware........................................................................ 122 191
Amortization of purchased technology............................................ 98 98
--------- ---------
Total costs of revenues...................................................... 2,588 2,917
--------- ---------
Gross profit................................................................. 4,708 5,954
--------- ---------
Operating expenses:
Sales and marketing............................................................. 2,903 2,896
Product development............................................................. 1,700 1,494
General and administrative...................................................... 1,060 1,076
Amortization of acquired intangibles............................................ 75 75
--------- ---------
Total operating expenses..................................................... 5,738 5,541
--------- ---------
Operating income (loss)............................................................. (1,030) 413
Other income, net................................................................... 152 140
--------- ---------
Income (loss) before income taxes................................................... (878) 553
Income tax provision (benefit)...................................................... (294) 205
--------- ---------
Net income (loss)................................................................... $ (584) $ 348
========= =========
Per share amounts:
Basic:
Net income (loss) per share.................................................. $ (0.12) $ .08
========= =========
Average number of shares..................................................... 4,716 4,555
========= =========
Diluted:
Net income (loss) per share.................................................. $ (0.12) $ .07
========= =========
Average number of shares..................................................... 4,716 5,067
========= =========
<FN>
See accompanying notes.
</FN>
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
MADE2MANAGE SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended
March 31,
--------------------
2000 1999
--------- ---------
<S> <C> <C>
Operating activities:
Net income (loss)............................................................... $ (584) $ 348
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property and equipment...................... 441 315
Amortization of purchased technology and other intangibles................... 172 173
Provision for doubtful accounts.............................................. 179 160
Changes in assets and liabilities:
Trade accounts receivable................................................. 110 (643)
Income taxes, receivable.................................................. 379 --
Prepaid expenses and other................................................ (247) (68)
Accounts payable.......................................................... (563) 184
Accrued liabilities....................................................... (491) (1,027)
Deferred revenue.......................................................... (696) 3
--------- ---------
Net cash used in operating activities........................................ (1,300) (555)
--------- ---------
Investing activities:
Purchases of property and equipment............................................. (240) (727)
Purchases of marketable securities.............................................. (3,000) (3,600)
Sale of marketable securities................................................... 1,800 --
--------- ---------
Net cash used in investing activities........................................ (1,440) (4,327)
--------- ---------
Financing activities:
Proceeds from issuance of common stock.......................................... 32 51
Proceeds from exercise of stock options......................................... 462 10
--------- ---------
Net cash provided by financing activities.................................... 494 61
--------- ---------
Change in cash and cash equivalents................................................. (2,246) (4,821)
Cash and cash equivalents, beginning of period...................................... 12,610 15,496
--------- ---------
Cash and cash equivalents, end of period............................................ $ 10,364 $ 10,675
========= =========
Supplemental disclosures - cash paid for:
Income taxes................................................................. $ -- $ 355
<FN>
See accompanying notes.
</FN>
</TABLE>
5
<PAGE>
MADE2MANAGE SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Description of Business
Made2Manage Systems, Inc. (the "Company") develops, markets and supports
business management 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, Microsoft
Windows based business software system for manufacturing companies.
2. Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements
have been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission regarding interim financial reporting.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements
and should be read in conjunction with the consolidated financial statements and
notes thereto included in the Company's December 31, 1999 Annual Report to
Shareholders. In management's opinion, this information has been prepared on the
same basis as the annual financial statements and includes all adjustments
(consisting only of normal and recurring adjustments) necessary for a fair
presentation of the information.
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All intercompany balances have been eliminated.
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
The operating results for the interim periods are not necessarily indicative of
the results of operations for the full year.
3. Cash Equivalents and Marketable Securities
The Company considers highly liquid investments with original maturities of
three months or less to be cash equivalents. Marketable securities consist of
debt instruments with maturities between three and twelve months and are
classified as available-for-sale. Cash equivalents and marketable securities are
valued at cost which approximates market value.
4. Net Income (loss) per Share
Net income (loss) per share ("EPS") is determined in accordance with Statement
of Financial Accounting Standards No. 128 (SFAS No. 128), "Earnings Per Share",
and is based upon the weighted average number of common and common equivalent
shares outstanding for the period. Diluted common equivalent shares consist of
convertible preferred stock (using the "if converted" method), stock options and
warrants (using the treasury stock method) as prescribed by SFAS No. 128. Common
equivalent shares are included in the diluted earnings per share calculation
when dilutive. 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.
6
<PAGE>
<TABLE>
<CAPTION>
The reconciliation of basic EPS to diluted EPS for the three months ended March
31, 2000 and 1999 follows (in thousands, except per share amounts):
Three Months
--------------------------
Net
Income Per Share
(Loss) Shares Amount
------- ------- ----------
<S> <C> <C> <C>
2000:
Basic EPS................................................................ $(584) 4,716 $ (0.12)
Adjustment for diluted EPS -- effect of stock options.................... -- --
------ -------
Diluted EPS.............................................................. $(584) 4,716 $ (0.12)
====== =======
1999:
Basic EPS................................................................ $ 348 4,555 $ 0.08
Adjustment for diluted EPS -- effect of stock options.................... -- 572
------ -------
Diluted EPS.............................................................. $ 348 5,067 $ 0.07
====== =======
</TABLE>
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
This report contains certain "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. These statements reflect our expectations regarding our
strategic plans, future growth, results of operations, performance, business
prospects and opportunities. Words such as, "estimates," "believes,"
"anticipates," "plans" and similar expressions may be used to identify these
forward-looking statements, but are not the exclusive means of identifying these
statements. These statements reflect our current beliefs and are based on
information currently available to us. Accordingly, these statements are subject
to known and unknown risks, uncertainties and other factors that could cause our
actual growth, results, performance and business prospects and opportunities to
differ from those expressed in, or implied by, these statements. In light of the
uncertainties inherent in any forward-looking statement the inclusion of a
forward-looking statement herein should not be regarded as a representation by
us that our plans and objectives will be achieved. Actual results or events
could differ materially from those anticipated in any forward-looking statements
for the reasons discussed in this section, in the "Business Environment and Risk
Factors" section below, and elsewhere in this report, or for other reasons. We
are not obligated to update or revise these forward-looking statements to
reflect new events or circumstances or otherwise. Additional information
concerning factors that could cause actual results to differ materially from
those in the forward-looking statements is contained in the Company's SEC
reports, including the report on Form 10-K for the year ended December 31, 1999.
Overview
We develop, market, license and support Made2Manage, an open architecture,
standards-based, client/server enterprise business system software solution for
small and midsize manufacturers engaged in engineer-to-order, make-to-order,
assemble-to-order, make-to-stock and mixed styles of production. We have
developed manufacturing software applications for this market since our
inception in 1986. Our first generation of Made2Manage, designed for PC networks
running the DOS operating system on Novell networks, was introduced in 1988, and
we introduced a UNIX version of Made2Manage in 1990. We ceased offering the DOS
and UNIX versions to new customers in 1995 and 1994, respectively and we
discontinued supporting these versions in 1999.
In March 2000 we launched m2mEport, our web site dedicated to the needs of small
and midsize manufacturers. This site will provide many Internet resources for
our customers and other manufacturers. The m2mEport site features advanced
distance learning offerings, the ability to offer Made2Manage through an
Application Service Provider (ASP), along with content rich collaboration
opportunities for customers and suppliers.
During 1998 we acquired Bridgeware, Inc., a company that offers advance planning
and scheduling software, for a combination of cash and common stock. The total
cost of the acquisition was $4.5 million. In connection with this acquisition,
we recorded a $1.9 million in-process technology charge. The remaining costs of
the acquisition are recorded as assets and are expected to be amortized over
lives of five and seven years.
Our revenues are derived from software licenses, services and hardware. Software
revenues are generated from licensing software to new customers, and from
current customers increasing the number of licensed users and from licensing new
applications. We recognize revenue from software license fees and hardware upon
shipment to the customer following execution of a sales agreement. Service
revenues are generated from annual fees paid by customers to receive support
services and software upgrades and also from implementation, education and
consulting services. Support is typically purchased as part of the initial sales
agreement and is renewable annually. Support fees are recognized ratably over
the term of the agreement. Service revenues from implementation, education and
consulting services are generally included in the initial agreement. We
recognize 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.
8
<PAGE>
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.
Results of Operations
The following table sets forth the percentage of total revenues and percent
increase or decrease represented by certain items included in our statements of
operations for the periods indicated.
<TABLE>
<CAPTION>
Three Months Ended
March 31, Percent
--------------------- Increase
2000 1999 (Decrease)
----------- --------
<S> <C> <C> <C>
Revenues:
Software..................................................... 39.1% 49.9% (35.6)%
Services..................................................... 58.5 47.0 2.4
Hardware..................................................... 2.4 3.1 (34.8)
----------- ------
Total revenues............................................ 100.0 100.0 (17.8)
----------- ------
Costs of revenues:
Software..................................................... 4.6 4.3 (12.2)
Services..................................................... 27.8 25.3 (9.5)
Hardware..................................................... 1.7 2.2 (36.1)
Amortization of purchased technology......................... 1.4 1.1 --
----------- ------
Total costs of revenues................................... 35.5 32.9 (11.3)
----------- ------
Gross profit.............................................. 64.5 67.1 (20.9)
----------- ------
Operating expenses:
Sales and marketing.......................................... 39.8 32.7 0.2
Product development.......................................... 23.3 16.8 13.8
General and administrative................................... 14.5 12.1 (1.5)
Amortization of acquired intangibles......................... 1.0 0.9 --
----------- ------
Total operating expenses.................................. 78.6 62.5 3.6
----------- ------
Operating income (loss).......................................... (14.1) 4.6 (349.4)
Other income, net................................................ 2.1 1.6 8.6
----------- ------
Income (loss) before income taxes................................ (12.0) 6.2 (258.8)
Income tax (provision) benefit................................... 4.0 (2.3) (243.4)
----------- ------
Net income....................................................... (8.0)% 3.9% (267.8)%
----------- ------
<FN>
NM - Not Meaningful
</FN>
</TABLE>
Comparison of Three Months Ended March 31, 2000 and 1999
Revenues
Revenues are derived from software license fees, service and support fees and
hardware sales. Total revenues decreased by $1.6 million, or 17.8%, to $7.3
million in 2000 from $8.9 million in 1999. The decrease was primarily due to a
lower volume of license transactions. We believe the decrease in revenues is due
to a continuation of Year 2000 effects. See "Business Environment and Risk
Factors - Year 2000 Market Dynamics" for a description of Year 2000 market
dynamics and potential revenue impact. We have not historically recognized
significant annual revenues from any single customer.
Software Revenues. Software revenues decreased by $1.6 million, or 35.6%, to
$2.9 million in 2000 from $4.4 million in 1999. Software license revenues
constituted 39.1% and 49.9% of total revenues in 2000 and 1999, respectively.
The decrease in software license revenues in 2000 from 1999 was principally due
to a lower number of license transactions.
9
<PAGE>
Services Revenues. Services revenues increased by $99,000 or 2.4%, to $4.3
million in 2000 from $4.2 million in 1999. These revenues constituted 58.5% and
47.0% of total revenues in 2000 and 1999, respectively. The increases in the
dollar amount recognized were due primarily to an increased installed base of
customers that require services.
Hardware Revenues. Hardware revenues decreased by $95,000, or 34.8%, to $178,000
in 2000 from $273,000 in 1999. These revenues constituted 2.4% and 3.1% of total
revenues in 2000 and 1999, respectively. The decrease in hardware sales in 2000
from 1999 was principally due to a lower volume of transactions. The Company
limits the type of hardware equipment it sells to bar-coding and data collection
equipment necessary to utilize certain features of Made2Manage.
m2mEport
In March 2000 we launched m2mEport, our web site dedicated to small and mid size
manufacturing operations. There were no revenues from m2mEport in the first
three months of 2000.
Costs of Revenues
Costs of Software Revenues. Costs of software revenues totaled $338,000 and
$385,000 in 2000 and 1999, respectively, resulting in gross profits of 88.1% and
91.3% of software revenues, respectively. The decrease in the gross profit in
2000 was due to an increase in higher cost third party products as a percentage
of total software revenues.
Costs of Services Revenues. Costs of services revenues totaled $2.0 million and
$2.2 million in 2000 and 1999, respectively, resulting in gross profits of 52.4%
and 46.2% of service revenues, respectively. The decrease in dollar amounts
resulted primarily from lower headcount in relation to revenue generated.
Costs of Hardware. Costs of hardware totaled $122,000 and $191,000 in 2000 and
1999, respectively. The gross profit from hardware was 31.5% and 30.0% of
hardware revenues in 2000 and 1999, respectively.
Amortization of Purchased Technology. This expense of $98,000 results from
amortizing the costs of purchased technology related to the acquisition of
Bridgeware.
Operating Expenses
Sales and Marketing Expenses. Sales and marketing expenses were $2.9 million in
both 2000 and 1999, representing 39.8% and 32.7% of total revenues,
respectively. The increase in sales and marketing as a percent of revenue in
2000 compared to 1999 was a result of lower productivity in software licenses
sold.
Product Development Expenses. Product development expenses were $1.7 million and
$1.5 million in 2000 and 1999, respectively, representing 23.3% and 16.8% of
total revenues, respectively. The increase in expense in 2000 compared to 1999
is due in part to development expenditures related to m2mEport. We did not
capitalize any software development costs during these periods.
General and Administrative Expenses. General and administrative expenses were
$1.1 million in both 2000 and 1999, representing 14.5% and 12.1% of total
revenues, respectively. Expenses were substantially flat year over year.
Amortization of Acquired Intangibles. This expense of $75,000 results from
amortizing excess costs over net assets acquired and assembled workforce related
to the 1998 acquisition of our Bridgeware subsidiary.
10
<PAGE>
Other Income, Net
Other income, net was $152,000 and $140,000 in 2000 and 1999, respectively,
representing 2.1% and 1.6% of total revenues, respectively. The increase in the
dollar amount of other income in 2000 compared to 1999 was due primarily to
higher interest rates on invested securities.
Income Tax Provision (Benefit)
The income tax effective rate was a benefit of 33.5% in 2000 and a provision of
37.1% in 1999. The effective rate is lower in 2000 due to the impact of net
operating loss carryforwards, research and experimentation credit carryforwards
and minimum tax credit carryforwards.
Liquidity and Capital Resources
We have funded our operations primarily through equity capital from our initial
public offering of Common Stock in December 1997, debt and cash generated from
operations. As of March 31, 2000, we had $13.4 million of cash, cash equivalents
and marketable securities resulting principally from the proceeds of our initial
public offering.
Cash used in operations was $1.3 million in the first three months of 2000,
compared to $555,000 in the first three months of 1999. Cash used in operations
was impacted mainly by our operating loss for the first three months of 2000 and
by a decrease in accounts payable, accrued liabilities and deferred revenue.
Cash used in investing activities was due in part to the purchase of computer
and telephone equipment and office furniture and aggregated $240,000 in 2000
compared to $727,000 in 1999. Additionally, cash was used to invest in
marketable securities with maturities from three months to one year.
At March 31, 2000, we had working capital of $12.0 million, including accounts
receivable, net, of $7.1 million. The average accounts receivable days'
outstanding was 88 days as of March 31, 2000 and was 93 days at December 31,
1999. Deferred revenue of $8.7 million at March 31, 2000 was $696,000 lower than
the balance at December 31, 1999. Deferred revenue is related to support
agreements or contracted services, and the current portion of deferred revenue
is expected to be recognized in revenue during the next twelve months.
We have a revolving credit agreement with a commercial bank which expires on
April 30, 2001, borrowings under which bear interest at the prime rate (9.00% at
March 31, 2000). Loans under the revolving credit agreement are limited, in the
aggregate, to $2 million. We have not borrowed under the revolving line of
credit.
We believe that cash and cash equivalents, cash flow from operations and credit
commitments will be sufficient to meet our currently anticipated working capital
and capital expenditure requirements at least through 2000.
Year 2000 Compliance
The Year 2000 issue relates to whether computer systems are able to properly
recognize and process information relating to dates in and after the year 2000.
Prior to January 1, 2000, significant uncertainty existed in the software
industry concerning the potential consequences that might have occurred from the
failure of software to adequately address the Year 2000 issue.
We have not encountered any Year 2000 compliance issues relating to our
currently developed and actively marketed software products or with our internal
computer information system and non-computer systems.
We expensed all costs related to preparation for Year 2000 issues. The total
costs of evaluation and compliance were not material.
11
<PAGE>
Inflation
We believe that inflation has not had a material impact on its operations.
Accounting Pronouncements
In December 1998, the AICPA issued SOP 98-9, "Modification of SOP 97-2, Software
Revenue Recognition, With Respect to Certain Transactions," which will retain
the limitation of SOP 97-2 on what constitutes vendor specific objective
evidence of fair value. As the Company's revenue recognition policies and
practices were consistent with SOP 98-9, the new guidance did not have an impact
on the Company.
Business Environment and Risk Factors
In addition to other information contained in this report, the following factors
could affect our actual results and could cause such results to differ
materially from those achieved in the past or expressed in our forward looking
statements.
Fluctuations of Quarterly Operating Results; Seasonality
We have experienced in the past, and expect to experience in the future,
significant fluctuations in quarterly operating results. A substantial portion
of our software license revenue in each quarter is from licenses signed and
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, our quarterly
results of operations are difficult to predict, and delays in closings of sales
near the end of a quarter or product delivery could cause quarterly revenues
and, to a greater degree, net income to fall substantially short of anticipated
levels. In addition, we have experienced a seasonal pattern in our 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 our control, that may contribute to
fluctuations in quarterly operating results include the size of individual
orders, the timing of product introductions or enhancements by us and our
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 us or our 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 of our
control. Since software is generally shipped as orders are received, we have
historically operated without significant backlog.
Because our operating expenses are based on anticipated revenue levels and a
high percentage of our 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, we currently
intend to increase 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, our business, financial
condition and results of operations could be materially and adversely affected.
12
<PAGE>
Year 2000 Market Dynamics
We believe the Year 2000 planning cycle reduced demand for enterprise business
systems in 1999. In addition, each customer's evaluation of its need to achieve
Year 2000 compliance with other internal systems potentially lengthened the
sales cycle. We believe that in 1999 certain customers and potential customers
were engaged in testing and correcting system Year 2000 problems, and such
customers may have chosen to defer system investments during 1999, negatively
impacting our revenues. Additionally, prior year sales may have been increased
due to customers' need to address Year 2000 issues. Such Year 2000 demand most
likely was reduced in 1999 due to the lead time required to implement new
systems, possibly negatively impacting our revenues. Our sales cycles may
lengthen in 2000 and future years due to lessened urgency of customers' system
investment decisions. Because Year 2000 related impacts on customer purchasing
decisions were unprecedented, we have a limited ability to determine the impact
of the Year 2000 market dynamics on our quarter-to-quarter revenues in 2000.
Product and Market Concentration
Our revenues are currently derived from licenses of Made2Manage, including
optional modules, licensing of Bridgeware's Advanced Planning and Scheduling
products and third-party software, and related support, services and hardware.
In the near term, Made2Manage and related services are expected to continue to
account for substantially all of the our 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 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 our business, financial condition and results of operations.
Our 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 our target market to curtail or postpone capital expenditures
for business information systems. Any adverse change in the amount or timing of
software expenditures by our target customers could have a material adverse
effect on our business, financial condition and results of operations.
Dependence on Third Party Technologies
Made2Manage uses a variety of third party technologies, including operating
systems, tools and other applications developed and supported by Microsoft
Corporation ("Microsoft"). There can be no assurance that Microsoft will
continue to support the operating systems, tools and other applications utilized
by Made2Manage or that they will continue to be widely accepted in our target
market. Made2Manage relies heavily on Microsoft's Visual Studio, and there can
be no assurance that Microsoft will not discontinue or otherwise fail to support
Visual Studio or any of its components. In addition, we use a number of other
programming tools and applications, including ActiveX, OLE, ODBC, OLEDB and
Internet Information Server.
We sublicense various third party products, including Microsoft Visual FoxPro,
Microsoft Project, products from Powerway, Best Software, and FRx, 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 our target market. The
occurrence of any of these events could have a material adverse effect on our
business, financial condition and results of operations.
13
<PAGE>
Product Development and Rapid Technological Change
Our growth and future financial performance depend in part upon our ability to
enhance existing applications and to develop and introduce new applications to
incorporate technological advances that 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 that we develop in the future will be delivered on a timely basis
or ultimately accepted in the market. Any failure by us to anticipate or respond
adequately to technological development or end-user requirements, or any
significant delays in product development or introduction, could damage our
competitive position and have a material adverse effect on our business,
financial condition and results of operations.
We believe the Internet is changing the way businesses operate and therefore the
software needs of customers. We believe customers will increasingly require
eBusiness applications and software solutions that will enable them to engage in
commerce or service over the Internet. If we are unable to respond to emerging
industry standards and technological changes we may not be able to deliver
products and services that meet our customer's changing needs. If we are not
successful in addressing these changing needs our products may become obsolete
and our financial results may be materially and adversely impacted.
Dependence on Key Personnel
Our success depends to a significant extent upon a number of key employees,
including members of senior management. No employee is subject to an employment
contract. Our ability to implement business strategy is substantially dependent
on our ability to attract, on a timely basis, and retain skilled personnel,
especially sales, service, support and development personnel. Competition for
such personnel is intense, and we compete for such personnel with numerous
companies, including larger, more established companies with significantly
greater financial resources. There can be no assurance that we 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 our business,
financial condition and results of operations.
Management of Growth; International Expansion
We have experienced rapid growth in our domestic business and operations. While
we have managed this growth to date, there can be no assurance that we will be
able to effectively do so in the future. Our ability to manage growth
successfully is contingent on a number of factors including our ability to
implement and improve operational, financial and management information systems
and to motivate and effectively manage employees. While we are beginning to
distribute Made2Manage in international markets, we have no significant
experience in international markets and there can be no assurance that such
expansion can be successfully accomplished. If we are unable to manage future
growth effectively, our business, financial condition and results of operations
would be materially and adversely affected.
Risks Associated with Acquisitions
As part of our business strategy, we expect to review acquisition prospects that
would complement our existing product offerings, augment market coverage or
enhance technological capabilities or that may otherwise offer growth
opportunities. Acquisitions could result in potentially dilutive issuances of
equity securities, the incurrence of debt and contingent liabilities or
amortization expenses related to goodwill and other intangible assets, any of
which could materially adversely affect operating results and/or the price of
our common stock. Acquisitions entail numerous risks, including difficulties in
the assimilation of acquired operations, technologies and products, diversion of
management's attention from other business concerns, risks of entering markets
in which we have no or limited prior experience and potential loss of key
employees of acquired organizations. No assurance can be given as to our ability
to successfully integrate any businesses, products, technologies or personnel
that might be acquired in the future, and the failure to do so could have a
material adverse effect on our business and financial condition or results of
operations.
14
<PAGE>
Insufficient Customer Commitment
To obtain the benefits 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, our
reputation could be tarnished and our 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. We face 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 business management
systems. The technologies we use to develop Made2Manage are generally available
and widely known and include technologies developed by Microsoft. There can be
no assurance that competitors will not develop products based on the same
technology upon which Made2Manage is based.
Our competitors include a large number of software and system vendors, many of
which are public companies. In addition, there are numerous international,
national and regional vendors that offer alternative systems. Several software
companies that have traditionally marketed business management systems to larger
manufacturers have announced initiatives to market business management systems
to midsize manufacturers. Compared to us, many of the 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.
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 for Made2Manage, our business, financial condition and
results of operation would be adversely affected.
Relationships with Value Added Resellers
We distribute our software products through a direct sales force and a network
of value added resellers ("VARs"). A significant portion of licenses of
Made2Manage sold to new customers is sold by VARs. If some or all of the VARs
reduce their efforts to sell Made2Manage, promote competing products or
terminate their relationships with us, our business, financial condition and
results of operation would be materially and adversely affected. Furthermore,
VARs frequently develop strong relationships with their customers, so if VARs
criticize us or our products to their customers, our reputation could be
damaged, which could have a material adverse effect on our business, financial
condition or results of operations.
Product Liability and Lack of Insurance
We market, sell and support software products used by manufacturers to manage
their business operations and to store substantially all of their operational
data. Software programs as complex as those we offer may contain undetected
errors, despite testing, 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 our software or that any such errors
will not impair the market acceptance of these products. 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. We have 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 us, if successful and of a sufficient magnitude, could have a material
adverse effect on our business, financial condition and results of operations.
15
<PAGE>
Dependence on Proprietary Rights; Risk of Infringement
We rely primarily on a combination of trade secret, copyright and trademark
laws, nondisclosure agreements and other contractual provisions and technical
measures to protect our proprietary rights. There can be no assurance that these
protections will be adequate or that competitors will not independently develop
products incorporating technology that is substantially equivalent or superior
to our technology. Furthermore, other than pending United States patent
applications for software included in Made2Manage related to the Material
Requirements Planning regeneration feature and a navigational interface for the
enterprise, the we have no patents or patent applications pending, and existing
copyright laws afford only limited protection. In the event that we are unable
to protect our proprietary rights, our business, financial condition and results
of operations could be materially and adversely affected.
There can be no assurance that we will not be subject to claims that our
technology infringes on the intellectual property of third parties, that we
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 our business,
financial condition and results of operations.
Substantial Control by Single Shareholder
As of March 1, 2000, Hambrecht & Quist ("H&Q") and its affiliates, as a group,
beneficially owned approximately 20.7% of our 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.
Effect of Antitakeover Provisions
Our Amended and 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 Systems, Inc.
Stock Option Plan (the "Option Plan") provides that, unless the Board of
Directors or a committee of the our Board of Directors decides to the contrary,
all outstanding options vest and become immediately exercisable upon a merger or
similar transaction. 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. 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 without the approval of management even if
such third party were willing to purchase shares of common stock at a premium
over its then market price.
Possible Volatility of Stock Price
The trading price of our common stock could be subject to wide fluctuations in
response to quarterly variations in operating results, announcements of
technological innovations or new applications by us or our competitors, the
failure of earnings to meet the expectations of securities analysts 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.
16
<PAGE>
Shares Eligible for Future Sale
The sale of a substantial number of shares of our common stock in the public
market could adversely affect the market price of the common stock. As of April
30, 2000, we had 4,741,733 shares of common stock outstanding, of which 976,793
shares of common stock are "Restricted Shares," which are subject to volume and
other limitations of Rule 144 and Rule 701 restrictions under the Securities
Act. As of April 30, 2000, there were options outstanding to purchase 1,794,731
shares of common stock at a weighted average price of $7.22 share under the
Company's stock option plans, of which options to purchase 888,235 shares of
common stock were then vested and exercisable. We have reserved 238,928 shares
of common stock for future grant under the Option Plan. We have reserved 100,000
shares of common stock for issuance under the Made2Manage Systems, Inc. Employee
Stock Purchase Plan (the "Stock Purchase Plan"). As of April 30, 2000, 32,713
shares have been issued under the Stock Purchase Plan. We have filed
registration statements registering shares of common stock issued pursuant to
the Made2Manage Systems, Inc. Stock Option Plan and Stock Purchase Plan on
January 30, 1998. Accordingly, shares issued pursuant to these plans will be
saleable in the public market upon issuance, subject to certain restrictions.
Absence of Dividends
We do not anticipate paying any cash dividends on our common stock in the
foreseeable future. We currently intend to retain earnings, if any, for the
development of our business.
Investment Risk
Despite the high credit ratings on our cash equivalents and investments, there
is no assurance such agencies will not default on their obligations which could
result in losses of principal and accrued interest.
17
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders was held on April 25, 2000 at which the
stockholders approved the following two proposals.
Proposal 1 Election of Directors to serve until the next Annual Meeting
of Shareholders.
Votes Votes
For Against Abstentions
--------- ------- -----------
Michael P. Cullinane 3,972,469 -- 359,795
John M. Dillon 3,972,469 -- 359,795
Richard G. Halperin 3,972,469 -- 359,795
David B. Wortman 3,972,469 -- 359,795
Proposal 2 Approval of the Amendment to the Made2Manage Systems, Inc.
1999 Stock Option Plan.
Votes For 1,848,505
Votes Against 937,002
Abstentions 27,184
18
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
See Index to Exhibits
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the current period.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: May 7, 1999
MADE2MANAGE SYSTEMS, INC.
/s/David B. Wortman
David B. Wortman
President, Chief Executive Officer
and Director
(Principal Executive Officer)
/s/Traci M. Dolan
Traci M. Dolan
Vice President, Finance and Administration,Chief Financial Officer,
Secretary and Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
19
<PAGE>
<TABLE>
<CAPTION>
Index to Exhibits
Number Assigned in
Regulation S-K
Item 601 Exhibit Number Description of Exhibit
-------- -------------- ----------------------
<S> <C> <C>
(2) 2.0 Stock Purchase Agreement, dated August 3, 1998, among Made2Manage
Systems, Inc. and the stockholders of Bridgeware, Inc.
(Incorporated by reference to June 30, 1998 Form 10-Q).
(3) 3.1 Amended and Restated Articles of Incorporation of Made2Manage
Systems, Inc. (Incorporated by reference to Registration Statement
on Form S-1, Registration No. 333-38177).
3.2 Amended and Restated Code of By-Laws of Made2Manage Systems, Inc.
(Incorporated by reference to Registration Statement on Form S-1,
Registration No. 333-38177).
(4) 4.1 Specimen Stock Certificate for Common stock (Incorporated by
reference to Registration Statement on Form S-1, Registration No.
333-38177).
4.2 Other rights of securities holders - see Exhibits 3.1 and 3.2.
(10) 10.12 Form of Made2Manage Systems, Inc. Stock Option Agreement
(Incorporated by reference to Exhibit 10.16 to Registration
Statement on Form S-1, Registration No. 333-38177).
10.18 Made2Manage Systems, Inc. Employee Stock Purchase Plan
(Incorporated by reference to Exhibit 10.22 to Registration
Statement on Form S-1, Registration No. 333-38177).
10.27 Best Software, Inc. Linked Software Dealer Agreement by and
between Best Software, Inc. and Made2Manage Systems, Inc. dated
May 14, 1998 (Incorporated by reference to June 30, 1998 Form 10Q).
10.28 Business Loan Agreement by and between Bank One, Indiana, NA and
Made2Manage Systems, Inc. dated March 19, 1999.
10.29 Promissory Note by and between Bank One, Indiana, NA and
Made2Manage Systems Inc. dated March 19, 1999.
10.30 1999 Made2Manage Systems Inc. Employee Stock Option Plan.
10.31 Amendment to the 1999 Made2Manage Systems, Inc. Employee Stock
Option Plan (Incorporated by reference to March 31,200 schedule
14-a, appendix 1 )
10.32 First Amendment to Business Loan Agreement by and between Bank
One, Indiana NA and Made2Manage Systems, Inc. dated April 1, 2000.
10.33 Promissory Note Modification Agreement by and between Bank One,
Indiana, NA and Made2Manage Systems, Inc. dated April 1,2000
(21) 21.1 List of Subsidiaries ( Incorporated by reference to December
31,1999 Form 10-K).
(27) 27.1 Financial Data Schedule.
</TABLE>
20
FIRST AMENDMENT TO BUSINESS LOAN AGREEMENT
This First Amendment to Business Loan Agreement ("Amendment") is made
as of April 1, 2000, to be effective March 31, 2000, by and between MADE2MANAGE
SYSTEMS, INC., an Indiana corporation, (the "Borrower") and BANK ONE, INDIANA,
N.A. (the "Lender").
WHEREAS, the Borrower and the Lender entered into a Business Loan
Agreement dated March 19, 1999 (the "Agreement"); and
WHEREAS, the parties hereto desire to amend the Agreement as set forth
below:
NOW, THEREFORE, the parties hereto agree as follows:
1. THE LOAN. The maturity date referenced in the Agreement is
changed from March 31, 2000 to April 30, 2001.
2. REPRESENTATIONS AND WARRANTIES. The Borrower represents and
warrants that (a) the representations and warranties contained in the Agreement
are true and correct in all material respects as of the date of this Agreement,
and (b) no condition, act or event which could constitute an Event of Default or
Unmatured Event of Default under the Agreement exists.
3. FEES. The Borrower agrees to pay all fees and out-of-pocket
disbursements incurred by the Lender in connection with this Agreement,
including legal fees incurred by the Lender in the preparation, consummation,
administration and enforcement of this Amendment.
4. CONDITIONS PRECEDENT. This Amendment shall become effective
only after it is fully executed by the Borrower and the Lender and the Lender
shall have received from the Borrower the following documents:
(a) First Amendment to Business Loan Agreement; and
(b) Promissory Note Modifications Agreement.
any other agreements, documents, and certifications, fully executed by the
Borrower as may be reasonably requested by this Lender, including amendments to
collateral documents.
Except as amended by this Amendment, the Agreement shall remain in full force
and effect in accordance with its terms.
5. REAFFIRMATION. This Amendment is a modification only and not a
novation. Except for the above-quoted modification, this Agreement, any
agreement or security document, and all the terms and conditions thereof, shall
be and remain in full force and effect with the changes herein deemed to be
incorporated therein. This Amendment is to be considered attached to the
Agreement and made a part thereof. This Amendment shall not release of affect
the liability of anyguarantor, surety or endorser of the Agreement or release
any owner of collateral securing the Agreement. The validity, priority and
enforecability of the Agreement shall not be impaired hereby. To the extent that
any provision of this Amendment conflicts with any term or condition set forth
in the Agreement, or any agreement or security document executed in conjunction
therewith, the provisions of this Amendment shall supersede and control.
Borrower acknowledges that as of the date of this Amendment it has no offsets
with respect to all amounts owned by Borrower to Lender and Borrower waives and
releases all claims which it may have against Lender arising under the Agreement
on or prior to the date of this Amendment.
<PAGE>
IN WITNESS WHEREOF, the parties have entered into this Amendment as of
the day and year first above written.
BANK ONE, INDIANA, N.A. MADE2MANAGE SYSTEMS, INC.
By: /s/ Edward R. Salm By: /s/ David B. Wortman
------------------------------ ----------------------------
Edward R. Salm, Vice President David B. Wortman, President and CEO
(Printed Name and Title)
PROMISSORY NOTE MODIFICATION AGREEMENT
This Agreement is made and entered into on the 1st day of April, 2000, to be
effective March 31, 2000 ("Agreement Date"), by and between MADE2MANAGE SYSTEMS,
INC. (the "Borrower") and BANK ONE INDIANA, N.A. (the "Lender").
WITNESSETH:
WHEREAS, Borrower heretofore executed a promissory note in the amount of
$2,000,000.00 dated May 19, 1999, in favor of Lender as same may have been
amended or modified from time to time ("Promissory Note"); and, WHEREAS,
Borrower hereby acknowledges, agrees, verifies, ratifies and affirms that as of
March 8, 2000, the outstanding principal balance on the Promissory Note is ZERO
DOLLARS ($-0-) plus accrued interest and charges; and, WHEREAS, the Promissory
Note has at all times been, and is now, continuously and without interruption
outstanding in favor of Lender and WHEREAS, Borrower has requested that the
Promissory Note be modified to the limited extent as hereinafter set forth; and,
WHEREAS, Lender has agreed to such modification; NOW THEREFORE, by mutual
agreement of the parties and in mutual consideration of the agreements contained
herein and for other good and valuable considerations, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree that the
Promissory Note is modified as hereinafter indicated.
1. ACCURACY OF RECITALS.
--------------------
Borrower acknowledges the accuracy of the Recitals, stated above.
2. MODIFICATION OF PROMISSORY NOTE.
-------------------------------
2.1 The maturity date of the Promissory Note is extended from March
31, 2000 to April 30, 2001. On the maturity date Borrower shall pay to Lender
the unpaid principal, accrued and unpaid interest, and all other amounts payable
by Borrower under the Promissory Note and Loan Documents.
2.2 Each of the Loan Documents is modified to provide that it shall be
a default or an event of default thereunder if Borrower shall fail to comply
with any of the covenants of Borrower herein or if any representation or
warranty by Borrower or by any guarantor herein is materially incomplete,
incorrect, or misleading as of the date hereof. As used in this Agreement, "Loan
Documents" shall include the Promissory Note and all documents executed by
Borrower(s) or others in connection with the Loan which is represented by the
Promissory Note.
2.3 Each reference in the Loan Documents to any of the Loan Documents
shall be a reference to such document as modified herein.
3. RATIFICATION OF LOAN DOCUMENT AND COLLATERAL.
--------------------------------------------
The Loan Documents are ratified and affirmed by Borrower and shall remain in
full force and effect as modified herein. Any property or rights to or interest
in property granted as security in the Loan Documents shall remain as security
for the loan and the obligations of Borrower in the Loan Documents.
<PAGE>
4. BORROWER REPRESENTATIONS AND WARRANTIES.
---------------------------------------
Borrower represents and warrants to Lender:
4.1 No default or event of default under any of the Loan Documents as
modified hereby, nor any event, that, with the giving of notice or the passage
of time or both, would be a default or an event of default under the Loan
Documents as modified herein has occurred and is continuing.
4.2 There has been no material adverse change in the financial
conditions of Borrower or any other person whose financial statement has been
delivered to Bank in connection with the Promissory Note from the most recent
financial statement received by Bank.
4.3 Each and all representations and warranties of Borrower in the
Loan Documents are accurate on the date hereof.
4.4 Borrower has no claims, counterclaims, defenses, or set-offs with
respect to the Loan or the Loan Documents as modified herein.
4.5 The Promissory Note and Loan Documents as modified herein are the
legal, valid, and binding obligation of Borrower, enforceable against Borrower
in accordance with their terms.
4.6 Borrower is validly existing under the laws of the State of its
formation or organization and has the requisite power and authority to execute
and deliver this Agreement and to perform the Loan Documents as modified herein.
The execution and delivery of this Agreement and the performance of the Loan
Documents as modified herein have been duly authorized by all requisite action
by or on behalf of Borrower. This Agreement has been duly executed and delivered
on behalf of Borrower.
5. BORROWER COVENANTS.
------------------
Borrower covenants with Lender:
5.1 Borrower shall execute, deliver, and provide to Lender such
additional agreements, documents, and instruments as reasonably required by
Lender to effectuate the intent of this Agreement.
5.2 Borrower fully, finally, and forever releases and discharges
Lender and its successors, assigns, directors, officers, employees, agents, and
representatives from any and all actions, cause of action, claims, debts,
demands, liabilities, obligations, and suits, of whatever kind or nature, in law
or equity of Borrower, whether now known or unknown to Borrower, (i) in respect
of the Loan, the Loan documents, or the actions or omissions of Lender in
respect of the Loan or the Loan Documents and (ii) arising from events occurring
prior to the date of this Agreement. As used in this Agreement, "Loan Documents"
shall include the Promissory Note and all documents executed by Borrower(s) in
connection with the Loan which is represented by the Promissory Note.
<PAGE>
5.3 Contemporaneously with the execution and delivery of this
Agreement, Borrower has paid to Bank:
5.3.1 All accrued and unpaid interest under the Promissory Note and all
amounts, other than interest and principal, due and payable by Borrower under
the Loan Documents as the date hereof.
6. EXECUTION AND DELIVERY OF AGREEMENT BY BANK.
-------------------------------------------
Lender shall not be bound by this Agreement until (i) Lender as executed and
delivered this Agreement, (ii) Borrower has performed all of the obligations of
Borrower under this Agreement to be performed contemporaneously with the
execution and delivery of this Agreement, (iii) each guarantor(s) of the Loan,
if any, has executed this Agreement and (iv) if required by Lender, Borrower and
any guarantor(s) have executed and delivered to Lender an arbitration
resolution, and an environmental questionnaire, and an environmental
certification and indemnity agreement.
7. INTEGRATION, ENTIRE AGREEMENT, CHANGE DISCHARGE,
TERMINATION, OR WAIVER
----------------------
The Loan Documents as modified herein contain the complete understanding and
agreement of Borrower and Lender in respect of the Loan and supersede all prior
representations, warranties, agreements, arrangements, understandings, and
negotiations. No provision of the Loan Documents as modified herein may be
changed, discharged, supplemented, terminated, or waived except in a writing
signed by the parties thereto.
8. BINDING EFFECT.
--------------
The Loan Documents as modified herein shall be binding upon and shall inure to
the benefit of Borrower and Lender and their successors and assigns and the
executors, legal administrators, personal representatives, heirs, devisees, and
beneficiaries of Borrower, provided, however, Borrower may not assign any of its
right or delegate any of its obligation under the Loan Documents and any
purported assignment or delegation shall be void.
9. CHOICE OF LAW.
-------------
This Agreement shall be governed by and construed in accordance with the laws of
the State of Indiana without giving effect to conflicts of law principles.
10. COUNTERPART EXECUTION.
---------------------
This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original and all of which together shall constitute one and the
same document. Signature pages may be detached from the counterparts and
attached to a single copy of this Agreement to physically form one document.
11. NOT A NOVATION.
--------------
This Agreement is a modification only and not a novation. Except for the
above-quoted modification(s), the Promissory Note, any agreement or security
document, and all the terms and conditions thereof, shall be and remain in full
force and effect with the changes herein deemed to be incorporated therein. This
Agreement is to be considered attached to the Promissory Note and made a part
thereof. This Agreement shall not release or affect the liability of any
guarantor, surety or endorser of the Promissory Note or release any owner of
collateral securing the Promissory Note. The validity, priority and
enforceability of the Promissory Note shall not be impaired hereby.
<PAGE>
MADE2MANAGE SYSTEMS, INC.
By: /s/ David B. Wortman
-----------------------------------
David B. Wortman
(Printed Name and Title)
BANK ONE'S ACCEPTANCE
The foregoing Promissory Note Modification Agreement is hereby agreed to and
acknowledged this 1st day of April, 2000.
BANK ONE, INDIANA, N.A.
By: /s/ Edward R. Salm
-----------------------------------
Edward R. Salm, Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF MADE2MANAGE SYSTEMS, INC. AS OF AND FOR THE THREE MONTHS ENDED
MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 10,364
<SECURITIES> 3,000
<RECEIVABLES> 7,732
<ALLOWANCES> 645
<INVENTORY> 140
<CURRENT-ASSETS> 22,689
<PP&E> 8,148
<DEPRECIATION> (3,554)
<TOTAL-ASSETS> 29784
<CURRENT-LIABILITIES> 10,702
<BONDS> 0
0
0
<COMMON> 22,383
<OTHER-SE> (3,602)
<TOTAL-LIABILITY-AND-EQUITY> 29,784
<SALES> 178
<TOTAL-REVENUES> 7,296
<CGS> 122
<TOTAL-COSTS> 8,326
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (878)
<INCOME-TAX> (294)
<INCOME-CONTINUING> (584)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (584)
<EPS-BASIC> (.12)
<EPS-DILUTED> (.12)
</TABLE>
