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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended Commission File Number
JANUARY 31, 1999 0-15264
MANATRON, INC.
(Exact Name of Registrant as Specified in its Charter)
MICHIGAN 38-1983228
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2970 SOUTH 9TH STREET
KALAMAZOO, MICHIGAN 49009
(Address of Principal Executive Offices) (Zip Code)
(616) 375-5300
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes __X__.
No _____.
The number of shares outstanding of registrant's common stock, no
par value, at March 12, 1999, was 2,960,246 shares.
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PART I. - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
<TABLE>
MANATRON, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<CAPTION>
JANUARY 31, APRIL 30,
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 2,584,340 $ 1,613,669
Receivables, net 8,502,259 5,909,623
Revenues earned in excess of billings and
retainages on long-term contracts 4,042,207 2,723,571
Inventories 360,525 296,420
Other current assets 619,950 676,255
----------- -----------
Total current assets 16,109,281 11,219,538
----------- -----------
NET PROPERTY AND EQUIPMENT 1,127,319 1,310,096
----------- -----------
OTHER ASSETS:
Long-term receivables, less current portion 612,216 567,222
Officers' receivable 285,580 343,724
Computer software development costs, net 1,765,518 1,461,437
Goodwill, net 761,710 900,334
Other, net 114,890 60,725
----------- -----------
Total other assets 3,539,914 3,333,442
----------- -----------
Total Assets $20,776,514 $15,863,076
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 155,000 $ 100,000
Accounts payable 1,419,221 1,099,365
Billings in excess of revenues earned on
long-term contracts 3,199,748 1,343,490
Billings for future services 6,364,769 4,747,231
Accrued liabilities 3,249,095 3,052,561
----------- -----------
Total current liabilities 14,387,833 10,342,647
----------- -----------
DEFERRED INCOME TAXES 124,000 124,000
----------- -----------
LONG-TERM DEBT 75,000 125,000
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OTHER LONG-TERM LIABILITIES -- 160,814
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SHAREHOLDERS' EQUITY:
Common stock 5,627,482 5,275,130
Retained earnings 964,001 163,797
Deferred compensation (251,802) (103,312)
Unearned ESOP shares (150,000) (225,000)
----------- -----------
Total shareholders' equity 6,189,681 5,110,615
----------- -----------
Total liabilities and shareholders' equity $20,776,514 $15,863,076
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</TABLE>
See accompanying notes to consolidated condensed financial statements.
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<TABLE>
MANATRON, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JANUARY 31, JANUARY 31,
------------------------- ----------------------------
1999 1998 1999 1998
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
NET REVENUES $ 9,355,332 $6,263,200 $26,658,609 $18,144,469
COST OF REVENUES 5,821,302 3,826,832 17,310,158 11,376,066
----------- ---------- ----------- -----------
Gross profit 3,534,030 2,436,368 9,348,451 6,768,403
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 3,218,371 2,298,107 8,550,916 6,499,665
----------- ---------- ----------- -----------
Income from operations 315,659 138,261 797,535 268,738
OTHER INCOME (EXPENSE), net 7,253 (31,231) 2,667 (92,829)
----------- ---------- ----------- -----------
Income before provision
for federal income taxes 322,912 107,030 800,202 175,909
PROVISION FOR FEDERAL
INCOME TAXES (Note 2) -- -- -- --
----------- ---------- ----------- -----------
NET INCOME $ 322,912 $ 107,030 $ 800,202 $ 175,909
=========== ========== =========== ===========
BASIC EARNINGS PER SHARE $ .11 $ .04 $ .28 $ .06
=========== ========== =========== ===========
DILUTED EARNINGS PER SHARE $ .10 $ .04 $ .25 $ .06
=========== ========== =========== ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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<PAGE>
<TABLE>
MANATRON, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<CAPTION>
NINE MONTHS ENDED
JANUARY 31,
-----------------------------------
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 800,202 $ 175,909
Adjustments to reconcile net income to net cash
and equivalents provided by operating activities:
Depreciation and amortization expense 1,461,296 1,178,793
Deferred compensation expense 148,430 52,650
Decrease (increase) in current assets:
Receivables, net (2,592,636) (780,641)
Revenues earned in excess of billings and
retainages on long-term contracts (1,318,636) (248,688)
Inventories (64,105) 209,392
Other current assets 56,305 128,369
Increase (decrease) in current liabilities:
Accounts payable and accrued liabilities 516,390 (254,567)
Billings in excess of revenues earned on
long-term contracts 1,856,258 42,232
Billings for future services 1,617,538 835,939
----------- -----------
Net cash and equivalents provided by
operating activities 2,481,042 1,339,388
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CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in long-term receivables 13,150 340,441
Other, net (105,966) 3,411
Investments in computer software (871,162) (425,523)
Net additions to property and equipment (521,013) (340,851)
----------- -----------
Net cash and equivalents used for investing
activities (1,484,991) (422,522)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Issuances (repurchases) of common stock, net 80,434 (184,430)
Purchase of common stock for ESOP 50,000 50,000
Increase (decrease) in long-term debt 5,000 (960,000)
Decrease in long-term liabilities (160,814) (163,900)
----------- -----------
Net cash and equivalents used
for financing activities (25,380) (1,258,330)
----------- -----------
CASH AND EQUIVALENTS:
Increase (decrease) 970,671 (341,464)
Balance at beginning of period 1,613,669 457,691
----------- -----------
Balance at end of period $ 2,584,340 $ 116,227
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</TABLE>
See accompanying notes to consolidated condensed financial statements.
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MANATRON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
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(1) GENERAL INFORMATION
The consolidated condensed financial statements included herein have
been prepared by the Registrant, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to such rules and regulations,
although the Registrant believes that the disclosures are adequate to
make the information presented not misleading. It is suggested that
these consolidated condensed financial statements be read in
conjunction with the consolidated financial statements and notes
thereto included in the Registrant's Annual Report on Form 10-K for
the year ended April 30, 1998, as filed with the Securities and
Exchange Commission on July 29, 1998. There have been no significant
changes in such information since the date of such Form 10-K.
In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments, consisting of
only a normal and recurring nature, necessary to present fairly
(a) the financial position of the Registrant as of January 31, 1999,
and April 30, 1998, and (b) the results of its operations for the
nine-months ended January 31, 1999 and 1998, and (c) cash flows for
the nine-months ended January 31, 1999 and 1998.
(2) FEDERAL INCOME TAXES
As of April 30, 1997 and 1996, the Company recorded valuation
allowances totaling $912,000 and $834,000, respectively, against
certain of its future tax benefits, including its tax loss
carryforwards, due to the uncertainty of their ultimate realization.
Approximately $166,000 of this valuation allowance was utilized in
fiscal 1998 to offset the provision for federal income taxes.
As of April 30, 1998, the Company had tax loss carryforwards of
approximately $211,000 and a valuation allowance of approximately
$746,000 remaining which will be utilized to offset any provision for
federal income taxes in fiscal 1999. Approximately $280,000 of this
valuation allowance has been used to offset the provision for income
taxes for the nine months ended January 31, 1999. The tax loss
carryforwards are available to offset future taxable income through
the year 2011.
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(3) COMPREHENSIVE INCOME
In July 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" ("SFAS 130"). SFAS 130 establishes standards
for reporting and display of comprehensive income and its components
in a full set of financial statements. The objective of SFAS 130 is
to report a measure of all changes in equity of an enterprise that
result from transactions and other economic events of the period other
than transactions with owners. Comprehensive income is the total of
net income and all other non-owner changes in equity. The Company
adopted this standard effective May 1, 1998. Total comprehensive
income was the same as net income for the three and nine month periods
ended January 31, 1999 and 1998, respectively.
(4) EARNINGS PER SHARE
The following table reconciles the numerators and denominators used in
the calculation of basic and diluted earnings per share for each of
the periods presented:
-8-
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<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JANUARY 31, JANUARY 31,
------------------------- ---------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Numerators:
Net income $ 322,912 $ 107,030 $ 800,202 $ 175,909
========== ========== ========== ==========
Denominators:
Denominator for basic earnings
per share, average outstanding
common shares 2,943,463 2,810,588 2,909,516 2,823,426
Potential dilutive shares resulting 278,599 48,550 258,997 59,973
---------- ---------- ---------- ----------
Denominator for diluted earnings
per share 3,222,062 2,859,138 3,168,513 2,883,399
========== ========== ========== ==========
Earnings Per Share:
Basic $ .11 $ 0.04 $ .28 $ 0.06
========== ========== ========== ==========
Diluted $ .10 $ 0.04 $ .25 $ 0.06
========== ========== ========== ==========
</TABLE>
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
Net revenues of $9,355,332 for the three months ended January 31, 1999,
have increased by 49% in comparison to the $6,263,200 of net revenues that
were reported for the comparable period in the prior fiscal year. Year to
date net revenues of $26,658,609 also have increased by 47% in comparison
to the $18,144,469 of net revenues that were reported for the nine months
ended January 31, 1998. These amounts include revenues from computer
hardware and software shipments, sales of computer forms and supplies,
and various related services such as mass real estate appraisals
(revaluations), software support, training, hardware maintenance, and
forms processing and printing.
Service revenues have increased by 49% in the current quarter and 44% on a
year-to-date basis over the comparable prior year amounts primarily because
of the new revaluation contracts totaling approximately $30.0 million that
were signed with Allegheny County (Pittsburgh), Pennsylvania, and Hamilton
County (Cincinnati), Ohio, during fiscal 1998. In addition, as previously
reported, the Company signed a new contract with Dauphin County
(Harrisburg), Pennsylvania, in June of 1998 which includes approximately
$3.6 million of revaluation services. As of January 31, 1999,
approximately $9.3 million of fees have been recognized as revenue on
these projects. As of January 31, 1999, the Company's backlog for
appraisal services was approximately $26.1 million versus $31.8 million at
April 30, 1998.
Revenues from hardware, software, and supply sales have increased by 51% in
the current quarter and 56% on a year-to-date basis over the comparable
prior year amounts primarily because of additional upgrades by existing and
new customers in the midwest. Many of the orders are a result of year 2000
upgrades. These increases are also due to the tax accounting and internet
contract that was signed with Franklin County, Ohio in the fall of 1998.
Finally, the Company completed a special project for the Ohio Office of
Criminal Justice Services to provide hardware and software for electronic
reporting of criminal dispositions in 50 of its sites in Ohio.
As a result of the increase in net revenues, cost of revenues for the three
months ended January 31, 1999, also increased 52% to $5,821,302 versus the
comparable prior year amount of $3,826,832. In addition, year to date cost
of revenues of $17,310,158 have increased by 52% in comparison to the
$11,376,066 of costs that were reported for the nine months ended
January 31, 1998. Margins have decreased from 39% in the prior year
quarter to 38% in the current quarter and from 37% to 35% on a year-to-date
basis because of the increase in service and hardware revenues, which
typically generate a lower margin than software sales.
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Selling, general, and administrative expenses have increased by 40% and 32%
to $3,218,371 for the three months and $8,550,916 for the nine months ended
January 31, 1999, compared to $2,298,107 and $6,499,665 for the same
periods in the prior fiscal year. These increases primarily are due to
additional staff, annual salary adjustments and other increased costs
associated with the ongoing development and rollout of the Company's new
software products, including Year 2000 compliance work.
As a result of the factors noted above, the Company reported a 128%
increase in its operating income for the three months and a 197% increase
for the nine months ended January 31, 1999, versus the comparable periods
in the prior year. Operating income for the current quarter was $315,659
compared to $138,261 while the year-to-date amounts were $797,535 and
$268,738, respectively. In addition, interest expense, which is included
in other expense, has decreased from $126,868 to $40,427 because the
Company has reduced its average outstanding indebtedness.
The Company's provision for federal income taxes generally fluctuates with
the level of pretax income. In addition, the effective tax rate is
generally impacted because of non-deductible goodwill amortization related
to the Company's acquisitions of ATEK Information Services and Specialized
Data Systems. However, as described in Note 2, the Company has not
recorded a provision for federal income taxes for the three or nine months
ended January 31, 1999, because certain unrecorded future tax benefits,
including the Company's tax loss carryforwards, will be utilized to offset
it.
As a result of the factors noted above, the Company reported net income of
$322,912 or $.11 per share for the three months and $800,202 or $.28 per
share for the nine months ended January 31, 1999, versus $107,030 or $.04
per share and $175,909 or $.06 per share for the comparable periods in the
prior fiscal year. This equates to an improvement over the prior year of
202% and 355%, respectively.
YEAR 2000 READINESS DISCLOSURE
This Year 2000 Readiness Disclosure is based upon and partially repeats
information provided by the Company's outside consultants and others
regarding the Year 2000 readiness of the Company and its customers,
suppliers, financial institutions, and other parties. Although the Company
believes this information to be accurate, it has not independently verified
such information.
The Company is currently in the process of addressing a potential problem
that is facing all users of automated information systems. The problem is
that many computer systems and applications process dates using only two
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<PAGE>
digits (rather than four) for the year. These systems may recognize a date
using "00" as the year 1900 rather than the year 2000. The problem could
affect a wide variety of automated information systems such as mainframe
applications, personal computers, and communication systems, in the form of
software failure, errors, or miscalculations. By nature, the software
industry is highly dependent upon computer systems. The year 2000 issue is
especially important to software vendors because most applications have
date dependencies as an integral part of their logic.
The Company has developed and is implementing plans to prepare itself and
its customers for the year 2000. The Company's plan is regularly updated
and monitored by technical personnel and is reviewed by management of the
Company on a periodic basis. Specifically, the plan addresses the
Company's internal data processing systems, its software products, its
third party products, and communications with its customers as follows:
INTERNAL DATA PROCESSING
The Company's internal data processing systems include hardware and
software that facilitates its business operations. The internal systems
include:
- - customer information systems
- - accounting, human resource, and payroll systems
- - customer support systems
The Company's Technical Services department has spearheaded the effort to
manage these systems through a smooth year 2000 conversion. Currently, the
Company's internal hardware and operating systems have been inventoried and
are substantially year 2000 compliant. The internal software systems are
in varying degrees of compliance with the target being to have them all
compliant by mid-1999. The Company is currently implementing a new, year
2000-compliant, corporate-wide "customer care" software product to replace
its customer information and support systems. The Company also has a
planned project to replace its internal financial software with a new, more
capable system which is year 2000 compliant. The Company is evaluating
several software products. The selection, purchase and implementation of
such products is targeted for completion before June 30, 1999. The Company
believes that its internal systems will be able to effectively support its
operations through the year 2000 and beyond.
THE COMPANY'S SOFTWARE PRODUCTS
A core strategy of the Company is to develop and market turnkey software
systems for local government. Most of these products have some dependency
on dates. As such, the Company has been working to update them to properly
handle years after 1999. Of the Company's 91 major products, only 63 are
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targeted for compliance. The others are either being discontinued or
replaced by more modern products. As of January 31, 1999, this effort is
estimated to be almost 90% complete. For comparison, as of January 31,
1998, this effort was estimated to be only about 13% complete, and as of
July 31, 1998 about 60% complete. The Company believes that it has
significant momentum to complete the necessary programming to render its
products year 2000 compliant. As of January 31, 1999, the breakdown is as
follows:
<TABLE>
<CAPTION>
<S> <C> <C>
- - Products that are compliant 62%
- - Products in QA Phase 19%
- - Products in Programming Phase 5%
- - Products with analysis completed 8%
- - Products not yet started 6%
</TABLE>
The remaining development work is minimal and centers primarily around
niche applications with limited scale deployment. The Company expects to
use the balance of 1999 to focus on its customers and ensure that their
systems are upgraded and functional prior to January 1, 2000.
THIRD PARTY HARDWARE AND SOFTWARE
The Company's software products run on industry standard hardware and
operating systems. To facilitate the deployment of its software, the
Company acts as a value-added reseller for a wide variety of hardware
manufacturers, installing and supporting both the hardware and software for
its customers. The Company's technical services department is spearheading
the effort to document the year 2000 compliance status of third party
hardware and software and to identify those products that need to be
upgraded or replaced. This identification effort is also substantially
complete; however, this information changes as vendors release more
information about and options for managing the year 2000 issue.
Significant third parties with which the Company interfaces with regard to
the year 2000 problem include those identified above and other customers,
technology vendors and service providers, financial institutions, and
companies that provide utility infrastructure (power, delivery services,
telecommunications). Unreadiness by these third parties would expose the
Company to the potential for loss and impairment of business processes and
activities. The Company is assessing these risks and is considering the
need for contingency plans intended to address perceived risks. The
Company cannot predict what effect the failure of such a third party to
address, in a timely manner, the year 2000 problem would have on the
Company.
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<PAGE>
COMMUNICATION WITH CUSTOMERS
Another important aspect of the Company's year 2000 strategy is to
coordinate its efforts with those of its customers. Communication of the
Company's strategy to its customers also has been substantially completed.
The communication includes the compliance plans for specific software
products and the year 2000 services offered by the Company. This
communication will continue throughout 1999 as the Company works with its
customer base to upgrade or replace those software and hardware systems.
To support this effort, the Company has launched a year 2000 area on its
web site to make relevant information available to both Company personnel
and customers.
CONTINGENCY PLAN
The Company believes its plan will support the year 2000 rollover both
internally and for its installed customer base. However, the Company is
presently preparing contingency plans to further reduce the risk associated
with the year 2000 issues. Internally, the Company has purchased the year
2000 version of its current financial software even though it intends to
implement a new system before the end of 1999. In addition, for both
internal and external purposes, the Company is planning staffing levels and
limiting vacations during critical periods so that adequate technical
resources will be available to quickly address issues that may arise.
The Company will continue to assess the impact of, and work on, the year
2000 issues throughout fiscal 1999. The Company's goal is to upgrade its
customers' systems and applications during 1999 and to have all remaining
targeted systems and applications compliant with the century change by June
1999, which would allow the Company to have time to address any last minute
issues.
The Company has spent between approximately $400,000 to $600,000 in
connection with year 2000 issues to date and expects that it will spend
approximately $110,000 to $170,000 during 1999. The costs to implement the
year 2000 changes primarily consist of personnel expense for staff
dedicated to identifying, assessing, remediating, and testing year 2000
issues and professional fees paid to third party providers of remedial
services. It is the Company's policy to expense such costs as incurred.
The Company also may invest in new or upgraded technology which has
definable value lasting beyond 2000. In these instances, where year 2000
compliance is merely ancillary, the Company may capitalize and depreciate
such an asset over its estimated useful life.
Based on currently available information, management does not presently
anticipate that the costs to address the Year 2000 issues will have a
material adverse impact on the Company's financial conditions, results of
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operations, or liquidity. However, the extent to which the computer
operations and other systems of the Company's important third parties are
adversely affected could, in turn, affect the Company's ability to
communicate with such third parties and could materially affect the
Company's results of operations in any period or periods. The costs have
had a negative effect on the Company's earnings and the future costs
associated with the year 2000 issue are expected to have a similar effect.
The costs of the project and the date on which the Company believes it will
complete the year 2000 modifications are based on management's best
estimates. There can be no guarantee that these estimates will be achieved
and actual results could differ from those anticipated. Specific factors
that might cause differences include, but are not limited to, the ability
of other companies on which the Company's systems rely to modify or convert
their systems to be year 2000 compliant, the ability of all third parties
who have business relationships with the Company to continue their
businesses without interruption, the ability to locate and correct all
relevant computer codes, and similar uncertainties. As a result, the
Company is continuing to evaluate the possible internal and external
scenarios that might have an adverse effect on the Company, so that it can
plan accordingly.
FINANCIAL CONDITION AND LIQUIDITY
Working capital of $1,721,448 at January 31, 1999, has increased by 96%
compared to the April 30, 1998, amount of $876,891. These levels reflect
current ratios of 1.12 and 1.08, respectively. The increase in working
capital primarily is due to the increase in receivables which are a result
of the higher amount of revenues that the Company is reporting versus the
prior year.
Shareholders' equity at January 31, 1999, increased by $1,079,066 to
$6,189,681 from the balance reported at April 30, 1998, because of $80,434
of employee stock purchases, $800,202 of net income, and $148,430 of
deferred compensation expense that occurred during the first nine months.
As a result, book value per share has increased to $2.09 as of January 31,
1999, from $1.80 at April 30, 1998.
The nature of the Company's business is not property or equipment
intensive. Net capital expenditures, which were approximately $521,000 for
the nine months ended January 31, 1999, are approximately 53% higher than
the $341,000 of capital expenditures reported for the comparable period in
the prior fiscal year. The net capital expenditures relate primarily to
the purchase of additional or new computer hardware and software for the
Company's technical and support personnel. In addition, the Company
recently purchased a corporate-wide "customer care" software product to
replace its Legacy system that was not year 2000 compliant.
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<PAGE>
As the Company's revenues are generated from contracts with local
governmental entities, it is not uncommon for certain of its accounts
receivable to remain outstanding for approximately three to four months,
thereby having a negative impact upon cash flow. On October 9, 1998, the
Company entered into a new loan agreement with Comerica Bank which replaces
its Revolving Credit Agreement dated as of November 11, 1994. This new
agreement provides a $3.0 million line of credit to the Company at prime
through November 1, 2000. As of January 31, 1999, no borrowings were
outstanding under this line of credit. In addition, as of January 31,
1999, the Company owed $80,000 on acquisition-related debt and $150,000 on
its ESOP loan. The Company anticipates that the revolving line of credit,
together with existing cash balances, and cash generated from future
operations will be sufficient for the Company to meet its working capital
requirements for at least the next 12 months.
The Company cannot precisely determine the effect of inflation on its
business. The Company continues, however, to experience relatively stable
costs for its inventory as the computer hardware market is very
competitive. Inflationary price increases related to labor and overhead
will have a negative effect on the Company's cash flow and net income to
the extent that they cannot be offset through improved productivity and
price increases.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995
Certain information contained in this Form 10-Q may constitute or include
forward-looking statements. Such forward-looking information involves
important known and unknown risks and uncertainties and other factors that
may cause the actual results, performance, or achievements of the Company
to be materially different from any future results, performance, or
achievements expressed or implied by such forward-looking statements.
These risks and uncertainties include, but are not limited to,
uncertainties relating to economic conditions; possible future acquisitions
and divestitures; technological changes and developments in the competitive
environment in which the Company operates; the effect of the year 2000 on
the Company's business; spending patterns of the Company's customers;
success of the Company in negotiations with its lenders; size, timing, and
recognition of revenue from significant orders; ability of the Company to
successfully implement its business strategy of developing and licensing
client/server decision support applications software designed to address
specific industry markets; new product introductions and announcements by
the Company's competitors; changes in Company strategy; product life
cycles, cost and continued availability of third party software and
technology incorporated into the Company's products; cancellations of
maintenance and support agreements; potential obsolescence of the Company's
existing products or services; pricing and availability of equipment,
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<PAGE>
materials, inventories, and programming; success in and expense associated
with the development, production, testing, marketing, and shipping of
products, including a failure to ship new products and technologies when
anticipated, failure of customers to accept these products and technologies
when planned, and any defects in products; perceived absolute or relative
overall value of the Company's products by the Company's customers,
including features, quality, and pricing compared to other competitive
products; amount, and rate of growth in, the Company's selling, general,
and administrative expenses; occurrence of any expenditures and expenses,
including depreciation and research and development expenses; costs and
other effects of legal and administrative cases and proceedings (whether
civil or criminal), settlements, and investigators, claims, and changes in
those items; developments or assertions by or against the Company relating
to intellectual property rights; adoption of new, or changes in, accounting
policies and practices and the application of such policies and practices;
and effects or changes within the Company's organization or in compensation
and benefit plans. Since the purchase of the Company's products is
relatively discretionary and generally involves a significant commitment of
capital, in the event of any downturn in any potential customer's business
or the economy in general, purchases of the Company's products may be
deferred or canceled. Further, the Company's expense levels are based, in
part, on its expectations as to future revenue and a significant portion of
the Company's expenses do not vary with revenue. As a result, if revenue
is below expectations, results of operations are likely to be materially
adversely affected. Shareholders are cautioned not to place undue reliance
on the forward-looking statements made in this Form 10-Q, which speak only
as of the date hereof.
PART II. - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS. The following documents are filed as exhibits to this
report on Form 10-Q:
3.1 Restated Articles of Incorporation. Previously filed as an
exhibit to the Company's Form 10-K Annual Report for the
fiscal year ended April 30, 1995, and incorporated herein by
reference.
3.2 Bylaws. Previously filed as an exhibit to the Company's
Form 10-K Annual Report for the fiscal year ended April 30,
1995, and incorporated herein by reference.
4.1 Restated Articles of Incorporation. See Exhibit 3.1 above.
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<PAGE>
4.2 Bylaws. See Exhibit 3.2 above.
4.3 Revolving Credit Loan Agreement. Previously filed as an
exhibit to the Company's Form 8-K Current Report dated
November 11, 1994, and incorporated herein by reference.
4.4 First Amendment to Revolving Credit Agreement. Previously
filed as an exhibit to the Company's Form 10-K Annual Report
for the fiscal year ended April 30, 1996, and incorporated
herein by reference.
4.5 Second Amendment to Revolving Credit Agreement. Previously
filed as an exhibit to the Company's Form 10-K Annual Report
for the fiscal year ended April 30, 1996, and incorporated
herein by reference.
4.6 Rights Agreement dated June 2, 1997 between Manatron, Inc.
and Registrar and Transfer Company. Previously filed as an
exhibit to the Company's Form 8-A filed on June 11, 1997,
and incorporated herein by reference.
10.1 Manatron, Inc. 1989 Stock Option Plan.* Previously filed as
an exhibit to the Company's Form 10-K Annual Report for the
fiscal year ended April 30, 1995, and incorporated herein by
reference.
10.2 Manatron, Inc. 1995 Long-Term Incentive Plan.<F*>
Previously filed as an exhibit to the Company's Form 10-K
Annual Report for the fiscal year ended April 30, 1995, and
incorporated herein by reference.
10.3 Executive Employment Agreement with Randall L. Peat.<F*>
Previously filed as an exhibit to the Company's Form 10-K
Annual Report for the fiscal year ended April 30, 1995, and
incorporated herein by reference.
10.4 Manatron, Inc. Employee Stock Ownership and Salary Deferral
Plan.<F*> Previously filed as an exhibit to the Company's
Form 10-K Annual Report for the fiscal year ended April 30,
1995, and incorporated herein by reference.
10.5 ATEK Information Services, Inc. Stock Purchase Agreement.
Previously filed as an exhibit to the Company's Form 10-K
Annual Report for the fiscal year ended April 30, 1995, and
incorporated herein by reference.
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<PAGE>
10.6 Stock Purchase Agreement between Ronald D. Stoynoff and
Allen F. Peat dated March 15, 1994. Previously filed as an
exhibit to the Company's Form 10-K Annual Report for the
fiscal year ended April 30, 1995, and incorporated herein by
reference.
10.7 Agreement between Manatron, Inc. and Ronald D. Stoynoff
effective as of April 1, 1994. Previously filed as an
exhibit to the Company's Form 10-K Annual Report for the
fiscal year ended April 30, 1995, and incorporated herein by
reference.
10.8 Asset Purchase Agreement between Manatron, Inc. and Moore
Business Forms, Inc. dated November 11, 1994. Previously
filed as an exhibit to the Company's Form 10-K Annual Report
for the fiscal year ended April 30, 1995, and incorporated
herein by reference.
10.9 Manatron, Inc. 1994 Long-Term Incentive Plan.<F*>
Previously filed as an exhibit to the Company's Form 10-K
Annual Report for the fiscal year ended April 30, 1995, and
incorporated herein by reference.
10.10 Agreement between Manatron, Inc. and Allen F. Peat dated
October 17, 1995.<F*> Previously filed as an exhibit to the
Company's Form 10-K Annual Report for the fiscal year ended
April 30, 1995, and incorporated herein by reference.
10.11 Employment Agreement with Douglas A. Peat dated October 10,
1996.<F*> Previously filed as an exhibit to the Company's
Form 10-K Annual Report for the fiscal year ended April 30,
1995, and incorporated herein by reference.
10.12 Employment Agreement with Jane M. Rix dated October 10,
1996.<F*> Previously filed as an exhibit to the Company's
Form 10-K Annual Report for the fiscal year ended April 30,
1995, and incorporated herein by reference.
10.13 Employment Agreement with James W. Sanderbeck dated October
10, 1996.<F*> Previously filed as an exhibit to the
Company's Form 10-K Annual Report for the fiscal year ended
April 30, 1995, and incorporated herein by reference.
10.14 Employment Agreement with Paul R. Sylvester dated October
10, 1996.<F*> Previously filed as an exhibit to the
Company's Form 10-K Annual Report for the fiscal year ended
April 30, 1995, and incorporated herein by reference.
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<PAGE>
10.15 Employment Agreement with Larry L. Terhune dated October 10,
1996.<F*> Previously filed as an exhibit to the Company's
Form 10-K Annual Report for the fiscal year ended April 30,
1995, and incorporated herein by reference.
10.16 Manatron, Inc. Executive Incentive Plan for 1999.<F*>
Previously filed as an exhibit to the Company's Form 10-Q
Quarterly Report for the period ended October 31, 1998, and
here incorporated by reference.
10.17 Form of Indemnity Agreement.<F*> Previously filed as an
exhibit to the Company's Form 10-K Annual Report for the
fiscal year ended April 30, 1995, and incorporated herein by
reference.
10.18 Indemnity Agreement of Daniel P. Muthard.<F*> Previously
filed as an exhibit to the Company's Form 10-K Annual Report
for the fiscal year ended April 30, 1995, and incorporated
herein by reference.
10.19 Property Revaluation Articles of Agreement for Allegheny
County, Pennsylvania dated May 20, 1998. Previously filed
as an exhibit to the Company's Form 10-Q Quarterly Report
for the period ended July 31, 1998, and here incorporated by
reference.
10.20 Restricted Stock Plan of 1998.<F*> Previously filed as an
exhibit to the Company's Definitive Proxy Statement for its
Annual Meeting of Shareholders held October 8, 1998, and
here incorporated by reference.
10.21 Employee Stock Purchase Plan of 1998.<F*> Previously filed
as an exhibit to the Company's Definitive Proxy Statement
for its Annual Meeting of Shareholders held October 8, 1998,
and here incorporated by reference.
10.22 Letter Loan Agreement between Comerica Bank and Manatron, Inc.,
dated October 9, 1998.
10.23 Promissory Note between Comerica Bank and Manatron, Inc.,
dated October 9, 1998.
10.24 Guaranty between Comerica Bank and Manatron, Inc., dated
October 9, 1998 regarding indebtedness of Manatron, Inc.
Employee Stock Option and Salary Deferral Plan.
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<PAGE>
10.25 Guaranty between Comerica Bank and Specialized Data Systems,
Inc., dated October 9, 1998 regarding indebtedness of
Manatron, Inc.
10.26 Guaranty between Comerica Bank and Atek Information Systems,
Inc., dated October 9, 1998 regarding indebtedness of
Manatron, Inc.
10.27 Security Agreement between Comerica Bank and Manatron, Inc.,
dated October 9, 1998.
10.28 Security Agreement between Comerica Bank and Specialized
Data Systems, Inc., dated October 9, 1998.
10.29 Security Agreement between Comerica Bank and Atek
Information Systems, Inc., dated October 9, 1998.
27 Financial Data Schedule.
_______________________
<F*>Management contract or compensatory plan or arrangement.
(b) No reports on Form 8-K were filed during the three months ended
January 31, 1999.
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<PAGE>
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.
Date: March 15, 1999 By /S/ PAUL R. SYLVESTER
Paul R. Sylvester
President, Chief Executive Officer,
and Treasurer (Principal Executive
Officer)
Date: March 15, 1999 By /S/ JOSEPH ZALEWSKI
Joseph Zalewski
Vice President-Finance and Chief
Financial Officer (Principal
Financial and Accounting Officer)
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<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DOCUMENT
3.1 Restated Articles of Incorporation. Previously filed as an
exhibit to the Company's Form 10-K Annual Report for the
fiscal year ended April 30, 1995, and incorporated herein by
reference.
3.2 Bylaws. Previously filed as an exhibit to the Company's
Form 10-K Annual Report for the fiscal year ended April 30,
1995, and incorporated herein by reference.
4.1 Restated Articles of Incorporation. See Exhibit 3.1 above.
4.2 Bylaws. See Exhibit 3.2 above.
4.3 Revolving Credit Loan Agreement. Previously filed as an
exhibit to the Company's Form 8-K Current Report dated
November 11, 1994, and incorporated herein by reference.
4.4 First Amendment to Revolving Credit Agreement. Previously
filed as an exhibit to the Company's Form 10-K Annual Report
for the fiscal year ended April 30, 1996, and incorporated
herein by reference.
4.5 Second Amendment to Revolving Credit Agreement. Previously
filed as an exhibit to the Company's Form 10-K Annual Report
for the fiscal year ended April 30, 1996, and incorporated
herein by reference.
4.6 Rights Agreement dated June 2, 1997 between Manatron, Inc. and
Registrar and Transfer Company. Previously filed as an
exhibit to the Company's Form 8-A filed on June 11, 1997, and
incorporated herein by reference.
10.1 Manatron, Inc. 1989 Stock Option Plan.<F*> Previously filed
as an exhibit to the Company's Form 10-K Annual Report for the
fiscal year ended April 30, 1995, and incorporated herein by
reference.
10.2 Manatron, Inc. 1995 Long-Term Incentive Plan.<F*> Previously
filed as an exhibit to the Company's Form 10-K Annual Report
for the fiscal year ended April 30, 1995, and incorporated
herein by reference.
-i-
<PAGE>
10.3 Executive Employment Agreement with Randall L. Peat.<F*>
Previously filed as an exhibit to the Company's Form 10-K
Annual Report for the fiscal year ended April 30, 1995, and
incorporated herein by reference.
10.4 Manatron, Inc. Employee Stock Ownership and Salary Deferral
Plan.<F*> Previously filed as an exhibit to the Company's
Form 10-K Annual Report for the fiscal year ended April 30,
1995, and incorporated herein by reference.
10.5 ATEK Information Services, Inc. Stock Purchase Agreement.
Previously filed as an exhibit to the Company's Form 10-K
Annual Report for the fiscal year ended April 30, 1995, and
incorporated herein by reference.
10.6 Stock Purchase Agreement between Ronald D. Stoynoff and Allen
F. Peat dated March 15, 1994. Previously filed as an exhibit
to the Company's Form 10-K Annual Report for the fiscal year
ended April 30, 1995, and incorporated herein by reference.
10.7 Agreement between Manatron, Inc. and Ronald D. Stoynoff
effective as of April 1, 1994. Previously filed as an exhibit
to the Company's Form 10-K Annual Report for the fiscal year
ended April 30, 1995, and incorporated herein by reference.
10.8 Asset Purchase Agreement between Manatron, Inc. and Moore
Business Forms, Inc. dated November 11, 1994. Previously
filed as an exhibit to the Company's Form 10-K Annual Report
for the fiscal year ended April 30, 1995, and incorporated
herein by reference.
10.9 Manatron, Inc. 1994 Long-Term Incentive Plan.<F*> Previously
filed as an exhibit to the Company's Form 10-K Annual Report
for the fiscal year ended April 30, 1995, and incorporated
herein by reference.
10.10 Agreement between Manatron, Inc. and Allen F. Peat dated
October 17, 1995.<F*> Previously filed as an exhibit to the
Company's Form 10-K Annual Report for the fiscal year ended
April 30, 1995, and incorporated herein by reference.
10.11 Employment Agreement with Douglas A. Peat dated October 10,
1996.<F*> Previously filed as an exhibit to the Company's
Form 10-K Annual Report for the fiscal year ended April 30,
1995, and incorporated herein by reference.
-ii-
<PAGE>
10.12 Employment Agreement with Jane M. Rix dated October 10,
1996.<F*> Previously filed as an exhibit to the Company's
Form 10-K Annual Report for the fiscal year ended April 30,
1995, and incorporated herein by reference.
10.13 Employment Agreement with James W. Sanderbeck dated October
10, 1996.<F*> Previously filed as an exhibit to the Company's
Form 10-K Annual Report for the fiscal year ended April 30,
1995, and incorporated herein by reference.
10.14 Employment Agreement with Paul R. Sylvester dated October 10,
1996.<F*> Previously filed as an exhibit to the Company's
Form 10-K Annual Report for the fiscal year ended April 30,
1995, and incorporated herein by reference.
10.15 Employment Agreement with Larry L. Terhune dated October 10,
1996.<F*> Previously filed as an exhibit to the Company's
Form 10-K Annual Report for the fiscal year ended April 30,
1995, and incorporated herein by reference.
10.16 Manatron, Inc. Executive Incentive Plan for 1999.<F*>
Previously filed as an exhibit to the Company's Form 10-Q
Quarterly Report for the period ended October 31, 1998, and
here incorporated by reference.
10.17 Form of Indemnity Agreement.<F*> Previously filed as an
exhibit to the Company's Form 10-K Annual Report for the
fiscal year ended April 30, 1995, and incorporated herein by
reference.
10.18 Indemnity Agreement of Daniel P. Muthard.<F*> Previously
filed as an exhibit to the Company's Form 10-K Annual Report
for the fiscal year ended April 30, 1995, and incorporated
herein by reference.
10.19 Property Revaluation Articles of Agreement for Allegheny
County, Pennsylvania dated May 20, 1998. Previously filed as
an exhibit to the Company's Form 10-Q Quarterly Report for the
period ended July 31, 1998, and here incorporated by
reference.
10.20 Restricted Stock Plan of 1998.<F*> Previously filed as an
exhibit to the Company's Definitive Proxy Statement for its
Annual Meeting of Shareholders held October 8, 1998, and here
incorporated by reference.
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<PAGE>
10.21 Employee Stock Purchase Plan of 1998.<F*> Previously filed as
an exhibit to the Company's Definitive Proxy Statement for its
Annual Meeting of Shareholders held October 8, 1998, and here
incorporated by reference.
10.22 Letter Loan Agreement between Comerica Bank and Manatron, Inc.,
dated October 9, 1998.
10.23 Promissory Note between Comerica Bank and Manatron, Inc.,
dated October 9, 1998.
10.24 Guaranty between Comerica Bank and Manatron, Inc., dated
October 9, 1998 regarding indebtedness of Manatron, Inc.
Employee Stock Option and Salary Deferral Plan.
10.25 Guaranty between Comerica Bank and Specialized Data Systems,
Inc., dated October 9, 1998 regarding indebtedness of
Manatron, Inc.
10.26 Guaranty between Comerica Bank and Atek Information Systems,
Inc., dated October 9, 1998 regarding indebtedness of
Manatron, Inc.
10.27 Security Agreement between Comerica Bank and Manatron, Inc.,
dated October 9, 1998.
10.28 Security Agreement between Comerica Bank and Specialized Data
Systems, Inc., dated October 9, 1998.
10.29 Security Agreement between Comerica Bank and Atek Information
Systems, Inc., dated October 9, 1998.
27 Financial Data Schedule.
_______________________
<F*>Management contract or compensatory plan or arrangement.
-iv-
<PAGE>
EXHIBIT 10.22
October 9, 1998
Manatron, Inc.
2970 South Ninth Street
Kalamazoo, Michigan 49009
Gentlemen:
This letter (herein called the "Agreement") constitutes an agreement
by and between COMERICA BANK, a Michigan banking corporation (herein called
"Bank"), and MANATRON, INC., a Michigan corporation, (herein called
"Company"), pertaining to certain loans and other credit which Bank has
made and/or may from time to time hereafter make available to Company.
This Agreement supersedes and replaces that certain Revolving Credit Loan
Agreement dated as of November 11, 1994, by and between Company and Bank,
as amended.
In consideration of all present and future loans, advances and other
credit from time to time made available by Bank to or in favor of Company,
including, without limitation, all loans and advances made or to be made,
by Bank to or in favor of Company under a Three Million Dollar
($3,000,000.00) line of credit made available by Bank in favor of Company
and in consideration of all present and future Liabilities of Company to
Bank, Company represents, warrants, covenants and agrees as follows:
1. For purposes of this Agreement, the following terms shall have
the following respective meanings:
"Affiliate" shall mean, when used with respect to any Person, any
other Person which, directly or indirectly, controls, is controlled
by, or is under common control with such Person. For purposes of this
definition, "control" (including the correlative meanings of the terms
"controlled by" and "under common control with"), with respect to any
Person, shall mean possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by
contract or otherwise.
"Collateral" shall mean all property, rights and interests in
which a security interest, lien, mortgage or other encumbrance has
been granted or has arisen, or is hereafter granted or arises, to or
in favor of Bank under or in connection with any of the Loan
Documents, to secure the payment and performance of the Liabilities,
together with all property and assets of Company and/or any of its
Subsidiaries now or hereafter in possession of Bank or any Affiliate
of Bank, and all amounts in any and all deposit or other accounts
(including, without limit, any account evidenced by a certificate of
<PAGE>
deposit) of Company and/or any of its Subsidiaries now or hereafter
with Bank or any Affiliate of Bank.
"Consolidated" shall mean, when used with reference to any
financial statements or financial or accounting terms in this
Agreement, the aggregate for two or more persons determined on a
consolidated basis in accordance with GAAP. Unless otherwise
specified herein, references to "consolidated" financial statements or
data of Company includes consolidation with all Subsidiaries of
Company in accordance with GAAP.
"Debt" shall mean, for any applicable Person(s) and as of any
applicable time of determination thereof, the total liabilities of
such Person(s) at such time, as determined in accordance with GAAP.
"Debt-to-Tangible Net Worth Ratio" shall mean, for any applicable
Person(s) and as of any applicable time of determination thereof, the
ratio of (i) the total Debt of such Person(s) at such time, as
determined in accordance with GAAP, to (ii) the Tangible Net Worth of
such Person(s) at such time.
"Default" shall mean any condition or event which, with the
giving of notice or the passage of time, or both, would constitute an
Event of Default.
"Environmental Laws" shall mean all laws, codes, ordinances,
rules, regulations, orders, decrees and directives issued by any
federal, state, local, foreign or other governmental or quasi-
governmental authority or body (or any agency, instrumentality or
political subdivision thereof) pertaining to hazardous or toxic
materials, including, without limitation, any hazardous materials or
wastes, toxic substances, flammable, explosive or radioactive
materials, asbestos, and/or other similar materials; any so-called
"superfund" or "superlien" law pertaining to hazardous or toxic
materials on or about any property at any time owned, leased or
otherwise used by Company and/or any of its Subsidiaries, or any
portion thereof, including, without limitation, those relating to
soil, surface, subsurface groundwater conditions and the condition of
the ambient air; and any other federal, state, foreign or local
statute, law, ordinance, code, rule, regulation, order or decree
regulating, relating to, or imposing liability or standards of conduct
concerning, any hazardous, toxic, radioactive, flammable or dangerous
waste, substance or material, as now or at any time hereafter in
effect.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, or any successor act or code.
2
<PAGE>
"Event of Default" shall mean the occurrence or existence of any
of the conditions or events set forth in Section 6 of this Agreement.
"GAAP" shall mean generally accepted accounting principles
consistently applied.
"Liabilities" shall mean all present and future liabilities,
obligations and indebtedness of Company to Bank, howsoever created,
evidenced, existing or arising, whether direct or indirect, absolute
or contingent, joint or several, now or hereafter existing or arising,
or due or to become due, and any and all extensions, renewals,
amendments, modifications and/or restatements thereof.
"Loan Documents" shall mean this Agreement and any and all notes,
instruments, guaranties, documents and agreements at any time
evidencing, governing, securing or otherwise relating to any of the
Liabilities or the Collateral.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or
any successor thereto.
"Permitted Encumbrances" is defined in Section 5(d) of this
Agreement.
"Person" or "person" shall mean any individual, corporation,
partnership, limited liability company, trust, incorporated or
unincorporated organization, joint venture, joint stock company,
government, or any agency or political subdivision thereof, or any
other entity of any kind.
"Subordinated Debt" shall mean, for any applicable Person(s) and
as of any applicable time of determination thereof, any Debt of such
Person(s) which is subordinated in priority of payment to any of the
Liabilities of any such Person(s) to Bank, in each case, pursuant to
an agreement executed and delivered unto and in form and detail
satisfactory to Bank.
"Subsidiary" of a Person shall mean any corporation, association,
limited liability company, partnership or other business entity of
which more than fifty percent (50%) of the outstanding voting stock or
other equity interests is owned or controlled either directly or
indirectly by such Person or one or more of its other Subsidiaries, or
any combination thereof, or the management of which is controlled,
either directly or indirectly by such Person or one or more of its
other Subsidiaries, or any combination thereof. Without limiting the
generality of the foregoing definition of the term "Subsidiary", such
term shall include, without limitation, Atek Information Services,
3
<PAGE>
Inc., an Indiana corporation, and Specialized Data Systems, Inc., a
North Carolina corporation.
"Tangible Net Worth" shall mean, for any applicable Person(s) and
as of any applicable time of determination thereof, the excess of
(i) the net book value of the assets of such Person(s) at such time
(EXCLUDING patents, patent rights, trademarks, trade names,
franchises, copyrights, licenses, goodwill and all other intangible
assets of such Person(s) at such time, amounts due to such Person(s)
from employees and shareholders, and prepaid expenses), after all
appropriate deductions in accordance with GAAP (including, without
limitation, reserves for doubtful receivables, obsolescence,
depreciation and amortization), over (ii) the total Debt of such
Person(s) at such time, all as determined in accordance with GAAP.
2. Each loan, advance or other extension of credit made by Bank to
or otherwise in favor of Company shall be evidenced by and subject to a
promissory note or other agreement or evidence of indebtedness acceptable
to Bank, in each case, executed and delivered by Company unto Bank. The
funding and disbursement of any loan or advance, and the extension of any
other credit, to or in favor of Company, shall be subject to the execution
and/or delivery unto Bank of such documents, instruments, agreements,
opinions and certificates as Bank may reasonably require, and shall be
further subject to the satisfaction of such other conditions and
requirements as Bank, and its counsel, may from time to time require.
3. Company hereby represents and warrants, and such representations
and warranties shall be deemed to be continuing representations and
warranties during the entire life of this Agreement, so long as Bank shall
have any commitment or obligation, if any, to make loans or otherwise
extend credit to or in favor of Company, and thereafter, so long as any
Liabilities remain unpaid and outstanding:
(a) Company, and each of its Subsidiaries, if any, is a corporation
duly organized, validly existing and in good standing under the
laws of the State of its incorporation, is duly qualified and
authorized to do business in each jurisdiction where the
character of its assets or the nature of its activities makes
such qualification necessary, and has the legal power and
authority to own its properties and assets and to carry out its
business as now being conducted in each such jurisdiction wherein
such qualification is necessary; execution, delivery and
performance of this Agreement, and any and all other Loan
Documents to which Company and/or any of its Subsidiaries is a
party or by which it is otherwise bound, are within Company's and
each such Subsidiary's corporate powers and authorities, have
been duly authorized by all requisite corporate or other
4
<PAGE>
necessary or appropriate action, and are not in contravention or
violation of law or the terms of Company's or any such
Subsidiary's Articles of Incorporation or Bylaws, and do not
require the consent or approval of any governmental body, agency
or authority; and this Agreement, and any other Loan Documents
contemplated hereby, when executed, issued and/or delivered by
Company and/or any such Subsidiary, or by which Company or any
such Subsidiary is otherwise bound, will be valid and binding and
legally enforceable against Company and/or any such Subsidiary,
as the case may be, in accordance with their terms.
(b) The execution, delivery and performance of this Agreement, and
any other Loan Documents required under or contemplated by this
Agreement to which Company and/or any of its Subsidiaries is a
party or by which it is otherwise bound, and the issuance of this
Agreement and any such other Loan Documents by Company and/or any
such Subsidiary, and the borrowings and other transactions
contemplated hereby and thereby are not in contravention or
violation of the unwaived terms of any indenture, agreement or
undertaking to which Company or any such Subsidiary is a party or
by which it or any of its property or assets is bound, and will
not result in the creation or imposition of any lien or
encumbrance of any nature whatsoever upon any of the property or
assets of Company or any such Subsidiary, except to or in favor
of Bank.
(c) No litigation or other proceeding before any court or
administrative or governmental agency is pending, or, to the
knowledge of Company or any of its officers, is threatened
against Company or any of its Subsidiaries, the outcome of which
could materially impair Company's or any such Subsidiary's
financial condition or its ability to carry on its business or
its/their ability to pay and perform its/their liabilities and
obligations hereunder or otherwise in respect of the Liabilities.
(d) There are no security interests in, liens, mortgages, or other
encumbrances on any of Company's or any of its Subsidiary's
property or assets, except Permitted Encumbrances.
(e) No Default or Event of Default has occurred and is continuing or
exists under any of the Liabilities or Loan Documents.
(f) The most recent financial statements with respect to Company and
its Subsidiaries delivered to Bank fairly present the financial
condition of Company and its Subsidiaries and the results of
their operations as of the date thereof and for the period(s)
covered thereby in accordance with GAAP; and since July 31, 1998,
5
<PAGE>
there has been no material adverse change in the condition
(financial or otherwise) or operations of Company or any of its
Subsidiaries, and there are no material debts, liabilities or
obligations (absolute or contingent) of Company or any of its
Subsidiaries, except as disclosed in such financial statements
(or in the notes thereto).
4. So long as Bank shall have any commitment or obligation, if any,
to make any loans or extend credit to or in favor of Company, and so long
as any Liabilities remain unpaid and outstanding, Company covenants and
agrees that it shall:
(a) Furnish to Bank, or cause to be furnished to Bank, in each case,
in form and detail and on a reporting basis satisfactory to Bank,
the following:
(i) as soon as available, and in any event not later than ninety
(90) days after and as of the end of each fiscal year of
Company, beginning with the fiscal year ending April 30,
1999, audited consolidated financial statements of Company
and its Subsidiaries, containing the consolidated balance
sheet of Company and its Subsidiaries as of the close of
each such fiscal year, consolidated statements of income and
retained earnings and a statement of cash flows of Company
and its Subsidiaries for each such fiscal year, and such
other comments and financial details as are usually included
in similar reports. Such financial statements shall be
audited by independent certified public accountants of
recognized standing selected by Company and acceptable to
Bank, shall be prepared in accordance with GAAP, and shall
be in such detail as Bank may reasonably require;
(ii) as soon as available, and in any event not later than forty
five (45) days after and as of the end of each fiscal
quarter of Company, beginning with the fiscal quarter ending
October 31, 1998, consolidated financial statements of
Company and its Subsidiaries, containing the consolidated
balance sheets of Company and its Subsidiaries as of the
close of each such fiscal quarter, consolidated statements
of income and retained earning and a statement of cash flows
for Company and its Subsidiaries for each such fiscal
quarter and for the portion of the fiscal year of Company
and its Subsidiaries through the end of the fiscal quarter
then ending, and such other comments and financial details
as are usually included in similar reports. Such financial
statements shall be prepared by Company in accordance with
GAAP, and on a basis consistent with the annual statements
6
<PAGE>
to be furnished to Bank pursuant to sub-section (i) above,
shall be in such detail as Bank may reasonably require, and
shall be certified as to accuracy and fairness by the chief
executive officer or chief financial officer of Company;
(iii) simultaneous with the delivery to Bank of the respective
financial statements required in sub-sections (i) and (ii)
above, a compliance certificate in form and detail
satisfactory to Bank, certified by the chief executive
officer or chief financial officer of Company, certifying
that, as of the date thereof, to the best of such officer's
knowledge, no Default or Event of Default shall have
occurred and be continuing or exist, or if any Default or
Event of Default shall have occurred and be continuing or
exist, specifying, in detail, the nature and period of
existence thereof and any action taken or proposed to be
taken by Company in respect thereto, and also certifying as
to whether Company is in compliance with the financial
covenants contained in Sections 4(g) and (h) of this
Agreement (which certificate shall set forth, in reasonable
detail, Company's calculations and the resultant ratios or
financial tests determined thereunder);
(iv) as soon as possible, and in any event within three (3)
business days after becoming aware of the occurrence or
existence of any Default or Event of Default, or of any
other condition or occurrence which has had or could
reasonably be expected to have a materially adverse effect
upon Company's or any of its Subsidiary's business,
properties, or financial condition or upon Company's or any
such Subsidiary's ability to comply with its obligations
hereunder or otherwise in respect of any of the Liabilities
or Loan Documents, a written statement of an authorized
officer of Company setting forth the details of such Default
or Event of Default, or such other condition or occurrence,
and the action which Company has taken or caused to be
taken, or proposes to take or cause to be taken, with
respect thereto; and
(v) promptly, at such times as Bank may reasonably require, in
form and detail satisfactory to Bank, such other information
and reports as may be required under the terms of any Loan
Documents or as Bank may reasonably request from time to
time.
(b) Keep, and cause each of its Subsidiaries to keep, proper books of
record and account in which full and correct entries shall be
7
<PAGE>
made of all of its financial transactions and its assets and
businesses so as to permit the presentation of financial
statements (including, without limitation, those financial
statements to be delivered to Bank pursuant to Section 4(a)
above) prepared in accordance with GAAP; and permit Bank, or its
representatives, at reasonable times and intervals to visit all
of Company's and each of its Subsidiary's offices and to make
inquiries as to Company's and each such Subsidiary's respective
financial matters with its respective directors, officers,
employees, and independent certified public accountants.
(c) Permit Bank, and cause each of its Subsidiaries to permit Bank,
through Bank's authorized employees, officers, attorneys,
accountants and representatives, to inspect, audit and examine
Company's and each of its Subsidiary's books, accounts, records,
ledgers and assets and properties of every kind and description,
wherever located, at all reasonable times during normal business
hours, upon oral or written request of Bank.
(d) Keep, and cause each of its Subsidiaries to keep, its insurable
properties (including, without limitation, any Collateral at any
time securing all or any part of the Liabilities) adequately
insured, and maintain (i) insurance against fire and other risks
customarily insured against under an "all-risk" policy and such
additional risks customarily insured against by companies engaged
in the same or a similar business to that of Company or such
Subsidiary, as the case may be, (ii) necessary workers'
compensation insurance, (iii) public liability and product
liability insurance, and (iv) such other insurance as may be
required by law or as may be reasonably required by Bank, all of
which insurance shall be in such amounts, contain such terms, be
in such form, be for such purposes, prepaid for such time
periods, and written by such companies as may be satisfactory to
Bank. All such policies shall contain a provision whereby they
may not be canceled or materially amended except upon thirty (30)
days' prior written notice to Bank. Company will promptly
deliver to Bank, or caused to be delivered to Bank, at Bank's
request, evidence satisfactory to Bank that such insurance has
been so procured and, with respect to casualty insurance, made
payable to Bank.
(e) Pay, and cause each of its Subsidiaries to pay, promptly and
within the time that they can be paid without late charge,
penalty or interest, all taxes, assessments and similar imposts
and charges of every kind and nature lawfully levied, assessed or
imposed upon Company or any such Subsidiary and/or its/their
property, except to the extent being contested in good faith and,
8
<PAGE>
if requested by Bank, bonded in an amount and manner satisfactory
to Bank. If Company or any such Subsidiary fails to pay such
taxes and assessments within the time they can be paid without
penalty, late charge or interest, Bank shall have the option (but
not the obligation) to do so, and Company agrees to repay Bank,
upon demand, with interest at the highest rate of interest
applicable to any of the Liabilities, all amounts so expended by
Bank.
(f) Do, or cause to be done, all things necessary to preserve and
keep in full force and effect Company's and each of its
Subsidiary's corporate existence, rights and franchises and
comply with all applicable laws; continue to conduct and operate,
and cause each of its Subsidiaries to continue to conduct and
operate, its respective business substantially as conducted and
operated during the present and preceding calendar year; at all
times maintain, preserve and protect, and cause each of its
Subsidiaries to so maintain, preserve and protect, all franchises
and trade names and preserve all the remainder of its property
and keep the same in good repair, working order and condition;
and from time to time make, or cause to be made, all needed and
proper repairs, renewals, replacements, betterments and
improvements thereto so that the business carried on in
connection therewith may be properly and advantageously conducted
at all times.
(g) Maintain, on a Consolidated statement basis, a Tangible Net Worth
of not less than the following amounts during each of the
following respective specified periods:
<TABLE>
<CAPTION>
PERIOD AMOUNT
<S> <C> <C>
(i) From the date of this Agreement through April 29, 1999 $1,900,000
(ii) From April 30, 1999, through April 29, 2000 2,000,000
(iii) From April 30, 2000, through April 29, 2001 2,100,000
(iv) From and after April 30, 2001 2,200,000
</TABLE>
(h) Maintain, on a Consolidated statement basis, a Debt-to-Tangible
Net Worth Ratio of not more than the following amounts during
each of the following respective specified periods:
9
<PAGE>
<TABLE>
<CAPTION>
PERIOD RATIO
<S> <C> <C>
(i) From the date of this Agreement through April 29, 1999 6.50:1.00
(ii) From April 30, 1999, through April 29, 2000 6.35:1.00
(iii) From April 30, 2000, through April 29, 2001 6.10:1.00
(iv) From and after April 30, 2001 5.65:1.00
</TABLE>
(i) At all times meet, and cause each of its Subsidiaries to meet,
the minimum funding requirements of ERISA with respect to
Company's and each Subsidiary's employee benefit plans subject to
ERISA; promptly after Company knows or has reason to know of the
occurrence of any event, which would constitute a reportable
event or prohibited transaction under ERISA, or that the PBGC or
Company or any of its Subsidiaries has instituted or will
institute proceedings to terminate an employee pension plan,
deliver to Bank a certificate of an authorized officer of Company
setting forth details as to such event or proceedings and the
action which Company and/or such Subsidiary(ies) propose(s) to
take with respect thereto, together with a copy of any notice of
such event which may be required to be filed with the PBGC; and
upon the request of Bank, furnish to Bank (or cause the plan
administrator to furnish Bank) a copy of the annual return
(including all schedules and attachments) for each plan covered
by ERISA, and filed with the Internal Revenue Service by Company
and/or any of its Subsidiaries not later than ten (10) days after
such report has been so filed. Company and its Subsidiaries
shall be permitted to voluntarily terminate employee pension or
benefit plans, so long as any such voluntary termination is done
in accordance with ERISA and does not result in a material
liability or obligation to Company or any of its Subsidiaries.
(j) Comply, and cause each of its Subsidiaries to comply, in all
material respects with all applicable Environmental Laws, and
maintain all material permits, licenses and approvals required
under applicable Environmental Laws, where the failure to do so
could have a material adverse effect upon the business,
operations, condition (financial or otherwise) performance or
properties of Company or any of its Subsidiaries, or could have a
material adverse effect upon the ability of Company to perform
its obligations under this Agreement or any of the other Loan
Documents or otherwise in respect of any of the Liabilities, or
could materially adversely affect the enforceability of this
Agreement or any of the other Loan Documents; and promptly
provide to Bank, immediately upon receipt thereof, copies of any
10
<PAGE>
material correspondence, notice, pleading, citation, indictment,
complaint, order, decree, or other document from any source
asserting or alleging a violation of any Environmental Laws by
Company or any of its Subsidiaries, or of any circumstance or
condition which requires or may require a financial contribution
by Company or any of its Subsidiaries, or a clean-up, removal,
remedial action or other response by or on behalf of Company or
any of its Subsidiaries under applicable Environmental Law(s), or
which seeks damages or civil, criminal, or punitive penalties
from Company or any of its Subsidiaries for any violation or
alleged violation of any Environmental Law(s) by Company or any
of its Subsidiaries. Company hereby indemnifies, saves and holds
Bank, and any of Bank's past, present and future officers,
directors, shareholders, employees, representatives and
consultants, harmless from any and all losses, damages, suites,
penalties, costs, liabilities and expenses (including, without
limitation, reasonable legal expenses and attorneys' fees)
incurred or arising out of any claim, loss or damage of any
property, injuries to or death of any persons, contamination of
or adverse effects on the environment, or other violation of any
applicable Environmental Law(s), in any case, caused by Company
or any of its Subsidiaries, or in any way related to any property
owned or operated by Company or any of its Subsidiaries, or due
to any acts of Company or any of its Subsidiaries, or any of
their respective officers, directors, shareholders, employees,
consultants and/or representations; PROVIDED, HOWEVER, that the
foregoing indemnification shall not be applicable, and Company
shall not be liable for any such losses, damages, suits,
penalties, costs, liabilities or expenses, to the extent (but
only to the extent) the same arise or result from any gross
negligence or willful misconduct of Bank or any of its agents or
employees.
5. So long as Bank shall have any commitment or obligation, if any,
to make any loans or extend credit to or in favor of Company, and so long
as any Liabilities remain unpaid and outstanding, Company covenants and
agrees that it shall not, and, to the extent applicable, shall cause each
of its Subsidiaries to not, without the prior written consent of Bank:
a) Create, incur, assume or suffer to exist any mortgage,
pledge, encumbrance, security interest, lien or charge of
any kind upon any of its property or assets (including,
without limit, any charge upon property purchased or
acquired under a conditional sales or other title retaining
agreement or lease required to be capitalized under GAAP),
whether now owned or hereafter acquired, other than the
following (collectively, "Permitted Encumbrances"):
11
<PAGE>
(i) liens, mortgages, security interests and encumbrances to or
in favor of Bank;
(ii) liens for taxes, assessments or other governmental charges
incurred in the ordinary course of business and for which no
interest, late charge or penalty is attaching or which is
being contested in good faith by appropriate proceedings
diligently pursued and, if requested by Bank, bonded in an
amount and manner satisfactory to Bank;
(iii) liens, not delinquent, created by statute in connection with
workers' compensation, unemployment insurance, social
security, old age pensions (subject to the applicable
provisions of this Agreement) and similar statutory
obligations;
(iv) Liens in favor of mechanics, materialmen, carriers,
warehousemen or other like statutory or common law liens
securing obligations incurred in good faith in the ordinary
course of business that are not yet due and payable;
(v) minor encumbrances or imperfections of title consisting of
existing or future zoning restrictions, existing recorded
rights-of-way, existing recorded easements, existing
recorded private restriction or existing or future public
restrictions on the use of real property, one of which
(individually or in the aggregate) materially impairs, or
would materially impair, the present or future use of such
property in the operation of the business for which it is
used, or would be violated in any material respect by any
existing or proposed structure or land use or would have a
material adverse effect on the sale or lease of such
property, or render title thereto unmarketable;
(vi) purchase money security interests and liens arising out of
"capitalized leases" securing obligations (including,
without limit, all loan and lease installment payments) not
to exceed One Hundred Thousand Dollars ($100,000.00), in
aggregate, at any time, so long as such security interests
and liens arise substantially contemporaneously with the
incurrence of the purchase money indebtedness or capitalized
lease obligation to which it relates, secures only the
respective purchase money indebtedness or capitalized lease
obligation to which it relates, and no other Debt, and
covers and extends only to the respective property and
assets to which it relates, and no other property or assets;
and
12
<PAGE>
(b) Sell, lease (as lessor), transfer or otherwise dispose of
properties and assets having an aggregate book value of more than
Two Hundred Fifty Thousand Dollars ($250,000.00) (whether in one
transaction or in a series of transactions), except as to the
sale of inventory in the ordinary course of business; change its
name; enter into a share exchange with or consolidate with or
merge into any other corporation or other business entity, or
permit any other corporation or other business entity to merge
into it (except for mergers of Subsidiaries into Company and
mergers or consolidations of Subsidiaries of Company into other
Subsidiaries of Company); acquire all or substantially all of
the capital stock, properties or assets of any other Person to
the extent that the aggregate amount(s) payable by Company and
its Subsidiaries in respect of all such transactions shall exceed
Two Hundred Fifty Thousand Dollars ($250,000.00) in any fiscal
year of Company; enter into any reorganization or
recapitalization, or reclassify its capital stock; or enter into
any sale-leaseback transaction.
(c) Acquire or expend for, or commit itself to acquire or expend for,
fixed assets, whether by lease, purchase or otherwise, in an
aggregate amount that exceeds Seven Hundred and Fifty Thousand
Dollars ($750,000.00) in any fiscal year of Company.
6. The occurrence and/or existence of any of the following
conditions or events shall constitute an "Event of Default":
(a) Company shall fail to pay the principal of or interest on or
shall otherwise fail to pay any other amount owing by Company to
Bank, when due, under any of the Liabilities, and such default in
payment shall continue unremedied or uncured beyond any
applicable period of grace provided with respect thereto, if any,
in the relevant Loan Document(s);
(b) any representation, warranty, certification or statement made or
deemed to have been made by Company herein, or by any Person(s)
(including, without limit, Company) in any certificate, financial
statement or other document or agreement delivered by or on
behalf of Company in connection with the Liabilities or any of
the Loan Documents, shall prove to be untrue in any material
respect;
(c) Company shall fail to observe or perform any condition, covenant
or agreement of Company set forth herein;
(d) Company, any Subsidiary(ies), or any other Person(s) party
thereto, shall fail to observe or perform any condition, covenant
13
<PAGE>
or agreement set forth in any other Loan Document (other than as
provided in subparagraphs (a) and (c) above), and such default
shall remain unremedied or uncured beyond any applicable period
of grace or cure, if any, provided with respect thereto;
(e) If there shall be rendered against Company and/or any of its
Subsidiaries one or more judgments or decrees involving an
aggregate liability of One Hundred Thousand Dollars
($100,000.00), or more, which has or have become non-appealable
and shall remain undischarged, unsatisfied by insurance and
unstayed for more than thirty (30) days, whether or not
consecutive; or if a writ of attachment or garnishment against
the property of Company or any of its Subsidiaries shall be
issued and levied in an action claiming One Hundred Thousand
Dollars ($100,000.00), or more, and not released or appealed and
bonded in a manner satisfactory to Bank;
(f) if Company or any of its Subsidiaries shall voluntarily suspend
transaction of its business or make a general assignment for the
benefit of creditors; or if Company or any of its Subsidiaries
shall be adjudicated a bankrupt; or if Company or any of its
Subsidiaries shall file a voluntary petition in bankruptcy or for
a reorganization or to effect a plan or other arrangement with
its creditors; or if Company or any of its Subsidiaries shall
file an answer to a creditor's petition or other petition against
it (admitting the material allegations thereof) for any
adjudication in bankruptcy or for a reorganization; or if Company
or any of its Subsidiaries shall apply for or permit the
appointment of a receiver, trustee, or custodian for any
substantial portion of its properties or assets; or if any order
shall be entered by any court approving an involuntary petition
seeking reorganization of Company or any such Subsidiary, or if a
receiver, trustee, or custodian shall be appointed for Company or
any of its Subsidiaries or for any substantial portion of its
properties or assets; or if any order shall be entered by any
court approving an involuntary petition seeking reorganization of
Company or any of its Subsidiaries; or if a receiver, trustee, or
custodian shall be appointed for Company or any of its
Subsidiaries or for any substantial portion of its/their property
or assets; or if bankruptcy, reorganizational or liquidation
proceedings are instituted against Company or any of its
Subsidiaries and remain undismissed for thirty (30) days; or if
Company or any of its Subsidiaries becomes unable to meet its
obligations as they mature; or if Company or any of its
Subsidiaries commits an act of bankruptcy;
(g) if Company or any of its Subsidiaries shall fail to meet its
minimum funding requirements under ERISA with respect to any
14
<PAGE>
employee benefit plan established or maintained by it, or if any
such plan shall be the subject of termination proceedings
(whether voluntary or involuntary) and there shall result form
such termination proceedings a liability of Company or any of its
Subsidiaries to the PBGC which, in the opinion of Bank, will have
a material adverse effect upon the operations, business,
property, assets, financial condition or credit of Company or any
of its Subsidiaries, as the case may be;
(h) if there shall occur, with respect to any pension plan maintained
by Company or any of its Subsidiaries, any reportable event
(within the meaning of Section 4043(b) of ERISA) which Bank shall
determine constitutes a ground for the termination of any such
plan, and if such event continues for thirty (30) days after Bank
gives written notice to Company, provided that termination of
such plan or appointment of such trustee would, in the opinion of
Bank, have a material adverse effect upon the operations,
business, property, assets, financial condition or credit of
Company or any of its Subsidiaries, as the case may be;
(i) any action, suit or proceeding is initiated against Company or
any of its Subsidiaries under any federal or state controlled
substance, gambling or racketeering statute (including, without
limit, the Racketeer Influenced and Corrupt Organization Act of
1970), which action, suit or proceeding could result in the
confiscation or forfeiture of any portion of the assets of
Company or any of its Subsidiaries;
(j) upon the occurrence or existence of any "Default" or "Event of
Default", as the case may be, set forth in any other Loan
Document.
7. Upon the occurrence and at any time during the continuance or
existence of any Event of Default, Bank may give notice to Company
declaring all outstanding Liabilities to be due and payable, whereupon all
such Liabilities then outstanding shall immediately become due and payable,
without further notice or demand, and any commitment or obligation, if
any, on the part of Bank to make loans or otherwise extend credit to or in
favor of Company shall immediately terminate; PROVIDED, HOWEVER, upon the
occurrence of any Event of Default set forth in sub-Section 6(f) hereof,
the Liabilities shall immediately and automatically become due and payable
and any commitment or obligation of Bank to make loans or extend credit to
or in favor of Company shall immediately and automatically terminate, in
each case, without any necessity of notice or demand, each of which is
hereby expressly waived by Company. Further, upon the occurrence or at any
time during the continuance or existence of any Event of Default hereunder,
Bank may collect, deal with and dispose of all or any part of any
15
<PAGE>
Collateral in any manner permitted or authorized by the Michigan Uniform
Commercial Code or other applicable law (including public or private sale),
and after deducting expenses (including, without limitation, reasonable
attorneys' fees and expenses), Bank may apply the proceeds thereof in part
or full payment of any of the Liabilities, whether due or not, in any
manner or order Bank elects. In addition to the foregoing, upon the
occurrence and at any time during the continuance or existence of any Event
of Default hereunder, Bank may exercise any and all rights and remedies
available to it as a result thereof, whether by agreement, by law, or
otherwise.
8. No forbearance on the part of the Bank in enforcing any of its
rights or remedies under this Agreement or any other Loan Document, nor any
renewal, extension or rearrangement of any payment or covenant to be made
or performed by Company hereunder or any such other Loan Document, shall
constitute a waiver of any of the terms of this Agreement or such Loan
Document or of any such right or remedy.
9. This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Michigan.
10. All covenants, agreements, representations and warranties by or
on behalf of Company made in connection with this Agreement and any other
Loan Documents shall survive the borrowing hereunder or thereunder and
shall be deemed to have been relied upon by Bank. All statements contained
in any certificate or other document delivered to Bank at any time by or on
behalf of Company pursuant hereto shall constitute representations and
warranties by Company.
11. This Agreement shall inure to the benefit of and shall be binding
upon the parties hereto and their respective successors and assigns;
PROVIDED, HOWEVER, that Company shall not assign or transfer any of its
rights or obligations hereunder or otherwise in respect of any of the
Liabilities without the prior written consent of Bank.
12. COMPANY AND BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A
CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER
CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR
CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVE ANY
RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE
OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT OR THE
LIABILITIES.
16
<PAGE>
If the foregoing is acceptable to Company, please indicate such with the
authorized signature(s) of Company as provided below.
Very truly yours,
COMERICA BANK
By: /S/ ROBERT W. CARPENTER
Robert W. Carpenter
Its: Vice President
ACCEPTED AND AGREED:
MANATRON, INC.
By: /S/ PAUL R. SYLVESTER
Paul R. Sylvester
Its: President
Dated: October 9, 1998
17
<PAGE>
EXHIBIT 10.23
TAX I.D. No. 38-1983228
PROMISSORY NOTE
$3,000,000.00 Detroit, Michigan
October 9, 1998
On or before November 1, 2000 (herein called the "Maturity Date"), FOR
VALUE RECEIVED, the undersigned, MANATRON, INC., a Michigan corporation
(herein called the "Borrower"), promises to pay to the order of COMERICA
BANK, a Michigan banking corporation (herein called "Bank"), at any office
of Bank located in the State of Michigan, in lawful currency of the United
States of America, the principal sum of THREE MILLION DOLLARS
($3,000,000.00), or so much of said sum as has been advanced and is then
outstanding hereunder, together with interest thereon as hereinafter set
forth.
This Note is a note under which Advances, repayments and new Advances
may be made from time to time, provided that Bank shall not be obligated to
make any Advance hereunder (notwithstanding anything expressed or implied
herein or elsewhere to the contrary) in the event that any Default (as
hereinafter defined) or any condition or event which, with the giving of
notice or the passage of time, or both, would constitute a Default, shall
have occurred and be continuing or exist, and provided, further, that in no
event shall Bank be obligated to make any Quoted Rate Advance hereunder,
whether or not any Default, or any such condition or event, shall have
occurred and be continuing or exist. Advances hereunder may be requested
in Borrower's discretion by telephonic notice to Bank or by submission to
Bank of a Request for Advance in form annexed hereto as Exhibit "A". Any
Advance requested by telephonic notice shall be confirmed by Borrower that
same day by submission to Bank, either by first class mail or telefax, of
the written Request for Advance aforementioned. Borrower acknowledges that
if Bank makes an Advance based on a telephonic request, it shall be for
Borrower's convenience and all risks involved in the use of such procedure
shall be borne by Borrower, and Borrower expressly agrees to indemnify and
hold Bank harmless therefor. Bank shall have no duty to confirm the
authority of anyone requesting an Advance by telephone.
Each Quoted Rate Advance hereunder shall be in a minimum principal
amount of Two Hundred Fifty Thousand Dollars ($250,000.00).
Each Prime-based Advance outstanding under this Note shall bear
interest at the Prime-based Rate, and each Quoted Rate Advance outstanding
under this Note shall bear interest at the applicable Quoted Rate. Each
Advance hereunder shall be payable upon the respective Repayment Date
therefor (unless sooner accelerated in accordance with the terms of this
Note), unless Bank, in its sole and absolute discretion, and subject to all
<PAGE>
other terms and conditions of this Note, agrees to allow the continuation
of an outstanding Advance as the same type of Advance or the conversion of
an outstanding Advance to another type of Advance, in which case, that
portion of such Advance which is not so continued or converted, as the case
may be, shall be repaid on such Repayment Date. Interest shall be computed
on a daily basis using a year of 360 days and shall be assessed for the
actual number of days elapsed, and in such computations, effect shall be
given to any change in the interest rate as a result of any change in the
Prime-based Rate on the date of each such change in the Prime-based Rate.
Unless sooner accelerated in accordance with the terms of this Note,
accrued and unpaid interest on each Advance hereunder shall be payable
monthly, in arrears, on the first (1st) Business Day of each month, and on
the Maturity Date, and, in the case of Quoted Rate Advances, also on the
respective Repayment Date therefor.
The amount, applicable interest rate, and Repayment Date of each
Advance shall be noted on Bank's books and records, which books and records
will be conclusive evidence thereof; provided, however, any failure on the
part of Bank to make any such notation shall not relieve Borrower of its
obligations to repay Bank all amounts owing under this Note when due in
accordance with the terms hereof.
If Borrower makes any payment of principal with respect to any Quoted
Rate Advance on any day other than the applicable Repayment Date therefor
(whether voluntarily, by acceleration, or otherwise), or if Borrower fails
to borrow a Quoted Rate Advance after notice has been given by Borrower to
Bank in accordance with the terms of this Note requesting such Advance and
Bank has agreed to make such Quoted Rate Advance, or if Borrower fails to
make any payment of principal or interest in respect of any Quoted Rate
Advance when due, Borrower shall reimburse Bank, on demand, for any
resulting loss, cost or expense incurred by Bank as a result thereof,
including, without limitation, any such loss, cost or expense incurred in
obtaining, liquidating, employing or redeploying deposits from third
parties. Calculation of any amounts payable to Bank under this paragraph
shall be made as though Bank shall have actually funded or committed to
fund the relevant Quoted Rate Advance through the purchase of an underlying
deposit in an amount equal to the amount of such Advance and having a
maturity date comparable to the applicable repayment date of such Quoted
Rate Advance; provided, however, Bank may fund any Quoted Rate Advance in
any manner it deems fit and the foregoing assumption shall be utilized only
for the purpose of the calculation of amounts payable under this paragraph.
Prime-based Advances may be prepaid at any time without penalty or premium.
This Note and any other indebtedness and liabilities of any kind of
Borrower to Bank, and any and all modifications, renewals or extensions
thereof, whether joint or several, contingent or absolute, direct or
indirect, now existing or later arising, and however evidenced
2
<PAGE>
(collectively the "Indebtedness"), are secured by and Bank is granted a
security interest in all items at any time deposited in any account of
Borrower with Bank and by all proceeds of these items (cash or otherwise),
all account balances of Borrower from time to time with Bank, by all
property of Borrower from time to time in the possession of Bank, and by
any other collateral, rights and properties described in each and every
mortgage, security agreement, pledge, assignment and other security or
collateral agreement which has been, or will at any time(s) later be,
executed by Borrower or others to or for the benefit of Bank (collectively
the "Collateral"). Notwithstanding the foregoing, if Borrower has given or
gives Bank a deed of trust or mortgage covering California real property,
that deed of trust or mortgage shall not secure this Note or any other
Indebtedness of Borrower to Bank, unless expressly provided to the contrary
in another place.
If (a) Borrower or any guarantor under a guaranty of all or part of
the Indebtedness (a "guarantor") fail(s) to pay this Note, or any part
thereof, or any of the Indebtedness when due, by maturity, acceleration or
otherwise, or fail(s) to pay any Indebtedness owing on a demand basis upon
demand; or (b) Borrower or any guarantor fail(s) to comply with any of the
terms or provisions of any agreement between Borrower or any guarantor and
Bank; or (c) Borrower or any guarantor become(s) insolvent or the subject
of a voluntary or involuntary proceeding in bankruptcy, or a
reorganization, arrangement or creditor composition proceeding, (if a
business entity) cease(s) doing business as a going concern, (if a natural
person) die(s) or become(s) incompetent, (if a partnership) dissolve(s) or
any general partner of it dies, becomes incompetent or becomes the subject
of a bankruptcy proceeding, or (if a corporation) is the subject of a
dissolution, merger or consolidation; or (d) any warranty or representation
made by Borrower or any guarantor in connection with this Note or any of
the Indebtedness shall be discovered to be untrue or incomplete; or
(e) there is any termination, notice of termination, or breach of any
guaranty, pledge, collateral assignment or subordination agreement relating
to all or any part of the Indebtedness; or (f) there is any failure by
Borrower or any guarantor to pay when due any of its indebtedness (other
than to Bank) or in the observance or performance of any term, covenant or
condition in any document evidencing, securing or relating to such
indebtedness; or (g) Bank deems itself insecure, believing in good faith
that the prospect of payment or performance of this Note or any of the
Indebtedness is impaired or shall fear deterioration, removal or waste of
any of the Collateral; or (h) there is filed or issued a levy or writ of
attachment or garnishment or other like judicial process upon Borrower or
any guarantor or any of the Collateral, including, without limit, any
accounts of Borrower or any guarantor with Bank, then Bank, upon the
occurrence or existence of any of these conditions or events (each a
"Default"), may at its option and without prior notice to Borrower, declare
any or all of the Indebtedness to be immediately due and payable
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<PAGE>
(notwithstanding any provisions contained in the evidence of it to the
contrary), sell or liquidate all or any portion of the Collateral, set off
against the Indebtedness any amounts owing by Bank to Borrower, and
exercise any one or more of the rights and remedies granted to Bank by any
agreement with Borrower or given to it under applicable law, or otherwise.
Upon the occurrence and during the continuance of any Default
hereunder, (a) interest on all outstanding Prime-based Advances shall be
payable at a per annum rate of three percent (3%) above the Prime-based
Rate, and (b) interest on any outstanding Quoted Rate Advances shall be
payable until the respective Repayment Date for each such Advance at a per
annum rate equal to the greater of three percent (3%) above (i) the
applicable Quoted Rate, or (ii) the Prime-based Rate, and after such
Repayment Date, at a per annum rate equal to three percent (3%) above the
Prime-based Rate, which interest, in any case, shall be payable upon
demand.
All payments under this Note shall be in immediately available United
States funds, without setoff or counterclaim.
Borrower waives presentment, demand, protest, notice of dishonor,
notice of demand or intent to demand, notice of acceleration or intent to
accelerate, and all other notices, and agrees that no extension or
indulgence to Borrower, or release, substitution or nonenforcement of any
security, or release or substitution of any of Borrower, any guarantor or
any other party, whether with or without notice, shall affect the
obligations of Borrower. Borrower waives all defenses or right to
discharge available under Section 3-605 of the Uniform Commercial Code and
waives all other suretyship defenses or right to discharge. Borrower
agrees that Bank has the right to sell, assign, or grant participations, or
any interest, in any or all of the Indebtedness, and that, in connection
with such right, but without limiting its ability to make other disclosures
to the full extent allowable, Bank may disclose all documents and
information which Bank now or later has relating to Borrower and the
Indebtedness.
Borrower agrees to reimburse Bank, or any other holder or owner of
this Note, for any and all costs and expenses (including, without limit,
court costs, legal expenses and reasonable attorneys' fees, whether inside
or outside counsel is used, whether or not suit is instituted, and, if suit
is instituted, whether at the trial court level, appellate level, in a
bankruptcy, probate or administrative proceeding or otherwise) incurred in
collecting or attempting to collect this Note or the Indebtedness or
incurred in any other matter or proceeding relating to this Note or the
Indebtedness.
Borrower acknowledges and agrees that there are no contrary
agreements, oral or written, establishing a term of this Note and agree
4
<PAGE>
that the terms and conditions of this Note may not be amended, waived or
modified except in a writing signed by a duly authorized officer of Bank
expressly stating that the writing constitutes an amendment, waiver or
modification of the terms of this Note. If any provision of this Note is
unenforceable in whole or part for any reason, the remaining provisions
shall continue to be effective. THIS NOTE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MICHIGAN.
This Note shall bind Borrower and Borrower's respective successors and
assigns.
For purposes of this Note, the following terms will have the following
meanings:
"Advance" means a borrowing requested by Borrower and made by Bank
under this Note in accordance with the terms hereof, including, without
limitation, the continuation of an outstanding Advance as the same type of
Advance or the conversion of an outstanding Advance to another type of
Advance, and shall include a Prime-based Advance and a Quoted Rate Advance.
"Business Day" means any day, other than a Saturday, Sunday or
holiday, on which Bank is open for all or substantially all of its
commercial banking business in Detroit, Michigan.
"Prime-based Advance" means an Advance which bears interest at the
Prime-based Rate.
"Prime-based Rate" means a per annum interest rate which is equal to
the greater of (a) the Prime Rate, or (b) the rate of interest equal to the
sum of one-percent (1%) plus the rate of interest equal to the average of
the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers (the "Overnight
Rates"), as published by the Federal Reserve Bank of New York, or, if the
Overnight Rates are not so published for any day, the average of the
quotations for the Overnight Rates received by Bank from three (3) Federal
funds brokers of recognized standing selected by Bank, as the same may be
changed from time to time.
"Prime Rate" means the per annum rate of interest established by Bank
from time to time as its prime rate, which rate may not necessarily be
Bank's lowest rate for loans.
"Quoted Rate" means a per annum rate of interest, other than the
Prime-based Rate, which is quoted by Bank and accepted by Borrower as the
applicable interest rate with respect to a Quoted Rate Advance hereunder.
"Quoted Rate Advance" means an Advance which bears interest at a
Quoted Rate.
5
<PAGE>
"Repayment Date" means, (a) in respect of an outstanding Prime-based
Advance, the Maturity Date (unless sooner accelerated in accordance with
the terms of this Note), and (b) in respect of an outstanding Quoted Rate
Advance, a date which is acceptable to and offered by Bank, in its sole and
absolute discretion, as the Repayment Date for such Quoted Rate Advance and
which is accepted by Borrower as the Repayment Date for such Advance,
subject to and in accordance with the terms and conditions of this Note;
PROVIDED, HOWEVER, in the case of Quoted Rate Advances, in no event shall
the Repayment Date in respect thereof be less than thirty (30) days from
the date of the respective Advance, and in no event shall any Repayment
Date extend beyond the Maturity Date, and in the event that any Repayment
Date occurs on any day which is not a Business Day, such Repayment Date
shall be extended to the next succeeding Business Day, except that, as to
any outstanding Quoted Rate Advances, if the next succeeding Business Day
falls in another calendar month, the Repayment Date applicable thereto
shall occur on the next preceding Business Day, and, to the extend
applicable, interest shall continue to accrue and be payable during any
such extensions of any Repayment Date.
This Note amends, restates, supersedes and replaces that certain
Revolving Credit Note dated as of March 18, 1996, made in the principal
amount of Five Million Dollars ($5,000,000.00) by Borrower payable to Bank,
and the initial Advance(s) under this Note shall be deemed to be first
applied, to the extent necessary, to repay the existing indebtedness of
Borrower to Bank under said Revolving Credit Note; provided, however, the
execution and delivery by Borrower of this Note unto Bank shall not, in any
manner or circumstance, be deemed to be a novation of or to have
terminated, extinguished or discharged any of Borrower's indebtedness
evidenced by said Revolving Credit Note, all of which indebtedness shall
continue under and shall hereinafter be evidenced and governed by this
Note.
BORROWER AND BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A
CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER
CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF
THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT,
WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE
PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS NOTE OR THE
INDEBTEDNESS.
Nothing herein shall limit any right granted Bank by other instrument
or by law.
MANATRON, INC.
By: /S/ PAUL R. SYLVESTER
Paul R. Sylvester
Its: President
6
<PAGE>
EXHIBIT 10.24
COMERICA GUARANTY
- ---------------------------------------------------------------------------
As of October 9, 1998, the undersigned, MANATRON, INC., a Michigan
corporation, for value received, unconditionally and absolutely guarantees
to COMERICA BANK, a Michigan banking corporation ("Bank"), payment when
due, whether by stated maturity, demand, acceleration or otherwise, of all
existing and future indebtedness ("Indebtedness") to the Bank of the
MANATRON, INC. EMPLOYEE STOCK OPTION AND SALARY DEFERRAL PLAN ("Borrower").
Indebtedness includes, without limit, any and all obligations or
liabilities of the Borrower to the Bank, whether absolute or contingent,
direct or indirect, voluntary or involuntary, liquidated or unliquidated,
joint or several, known or unknown; any and all indebtedness, obligations
or liabilities for which Borrower would otherwise be liable to the Bank
were it not for the invalidity, irregularity or unenforceability of them by
reason of any bankruptcy, insolvency or other law or order of any kind, or
for any other reason; any and all amendments, modifications, renewals
and/or extensions of any of the above; and all costs of collecting
Indebtedness, including, without limit, attorney fees. Any reference in
this Guaranty to attorney fees shall be deemed a reference to reasonable
fees, charges, costs and expenses of both in-house and outside counsel and
paralegals, whether or not a suit or action is instituted, and to court
costs if a suit or action is instituted, and whether attorney fees or court
costs are incurred at the trial court level, on appeal, in a bankruptcy,
administrative or probate proceeding or otherwise. All costs shall be
payable immediately by the undersigned when incurred by the Bank, without
demand, and until paid shall bear interest a the highest per annum rate
applicable to any of the Indebtedness, but not in excess of the maximum
rate permitted by law.
1. UNLIMITED OBLIGATION: The total obligation of the undersigned under
this Guaranty is UNLIMITED, and this obligation shall include all
principal of Borrower at any time owing to the Bank, all interest
thereon, and all costs incurred by the Bank in collection efforts
against the Borrower and/or the undersigned or otherwise incurred by
the Bank in any way relating to the Indebtedness or this Guaranty,
including, without limit, attorney fees. The undersigned agrees that
(a) nothing set forth in this Guaranty shall be a limitation on the
amount of Borrower's Indebtedness to the Bank; (b) any payments by the
undersigned shall not reduce the maximum liability of the undersigned
under this Guaranty, unless written notice to that effect is actually
received by the Bank at, or prior to, the time of payment; and (c) the
liability of the undersigned to the Bank shall at all times be deemed
to be the aggregate liability of the undersigned under this Guaranty
and any other guaranties previously or subsequently given to the Bank
by the undersigned and not expressly revoked, modified or invalidated
in writing.
<PAGE>
2. NATURE OF GUARANTY: This is a continuing Guaranty of payment and not
of collection and remains effective whether the Indebtedness is from
time to time reduced and later increased or entirely extinguished and
later reincurred. The undersigned delivers this Guaranty based solely
on the undersigned's independent investigation of (or decision not to
investigate) the financial condition of Borrower and is not relying on
any information furnished by the Bank. The undersigned assumes full
responsibility for obtaining any further information concerning the
Borrower's financial condition, the status of the Indebtedness or any
other matter which the undersigned may deem necessary or appropriate
now or later. The undersigned knowingly accepts the full range of
risk encompassed in this Guaranty, which risk includes, without limit,
the possibility that Borrower may incur Indebtedness to the Bank after
the financial condition of the Borrower, or the Borrower's ability to
pay debts as the mature, has deteriorated.
3. APPLICATION OF PAYMENTS: The undersigned authorizes the Bank, either
before or after termination of this Guaranty, without notice to or
demand on the undersigned and without affecting the undersigned's
liability under this Guaranty, from time to time to: (a) apply any
security and direct the order or manner of sale; and (b) apply
payments received by the Bank from the Borrower to any indebtedness of
the Borrower to the Bank, in such order as the Bank shall determine in
its sole discretion, whether or not this indebtedness is covered by
this Guaranty, and the undersigned waives any provision of law
regarding application of payments which specifies otherwise. The
undersigned agrees to provide to the Bank copies of the undersigned's
financial statements upon request.
4. SECURITY: The undersigned grants to the Bank a security interest in
and the right of setoff as to any and all property of the undersigned
now or later in the possession of the Bank. The undersigned further
assigns to the Bank as collateral for the obligations of the
undersigned under this Guaranty all claims of any nature that the
undersigned now or later has against the Borrower (other than any
claim under a deed of trust or mortgage covering California real
property) with full right on the part of the Bank, in its own name or
in the name of the undersigned, to collect and enforce these claims.
The undersigned agrees that no security now or later held by the Bank
for the payment of any Indebtedness, whether from the Borrower, any
guarantor, or otherwise, and whether in the nature of a security
interest, pledge, lien, assignment, setoff, suretyship, guaranty,
indemnity, insurance or otherwise, shall affect in any manner the
unconditional obligation of the undersigned under this Guaranty, and
the Bank, in its sole discretion, without notice to the undersigned,
may release, exchange, enforce and otherwise deal with any security,
without affecting in any manner the unconditional obligation of the
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<PAGE>
undersigned under this Guaranty. The undersigned acknowledges and
agrees that the Bank has no obligation to acquire or perfect any lien
on or security interest in any asset(s), whether realty or personalty,
to secure payment of the Indebtedness, and the undersigned is not
relying upon any asset(s) in which the Bank has or may have a lien or
security interest for payment of the Indebtedness.
5. OTHER GUARANTORS: If any Indebtedness is guaranteed by two or more
guarantors, the obligation of the undersigned shall be several and
also joint, each with all and also each with any one or more of the
others, and may be enforced at the option of the Bank against each
severally, any two or more jointly, or some severally and some
jointly. The Bank, in its sole discretion, may release any one or
more of the guarantors for any consideration which it deems adequate,
and may fail or elect not to prove a claim against the estate of any
bankrupt, insolvent, incompetent or deceased guarantor; and after
that, without notice to any guarantor, the Bank may extend or renew
any or all Indebtedness and may permit the Borrower to incur
additional Indebtedness, without affecting in any manner the
unconditional obligation of the remaining guarantor(s). The
undersigned acknowledges that the effectiveness of this Guaranty is
not conditioned on any or all of the indebtedness being guaranteed by
anyone else.
6. TERMINATION: The undersigned may terminate its obligation under this
Guaranty as to future Indebtedness (except as provided below) by (and
only by) delivering written notice of termination to an officer of the
Bank and receiving from an officer of the Bank written acknowledgment
of delivery; provided, however, the termination shall not be effective
until the opening of business on the fifth (5th) day ("effective
date") following written acknowledgement of delivery. Any termination
shall not affect in any way the unconditional obligations of any
remaining guarantor(s), whether or not the termination is known to the
remaining guarantor(s). Any termination shall not affect in any way
the unconditional obligations of the undersigned as to any
Indebtedness existing at the effective date of termination or any
Indebtedness created after that pursuant to any commitment or
agreement of the Bank or pursuant to any Borrower loan with the Bank
existing at the effective date of termination (whether advances or
readvances by the Bank after the effective date of termination are
optional or obligatory), or any modifications, extensions or renewals
of any of this Indebtedness, whether in whole or in part, and as to
all of this Indebtedness and modifications, extensions or renewals of
it, this Guaranty shall continue effective until the same shall have
been fully paid. The Bank has no duty to give notice of termination
by any guarantor(s) to any remaining guarantor(s). The undersigned
shall indemnify the Bank against all claims, damages, costs and
3
<PAGE>
expenses, including, without limit, attorney fees, incurred by the
Bank in connection with any suit, claim or action against the Bank
arising out of any modification or termination of a Borrower loan or
any refusal by the Bank to extend additional credit in connection with
the termination of this Guaranty.
7. REINSTATEMENT: Notwithstanding any prior revocation, termination,
surrender or discharge of this Guaranty (or of any lien, pledge or
security interest securing this Guaranty) in whole or in part, the
effectiveness of this Guaranty, and of all liens, pledges and security
interests securing this Guaranty, shall automatically continue or be
reinstated, as the case may be, in the event that any payment received
or credit given by the Bank in respect of the Indebtedness is
returned, disgorged or rescinded under any applicable state or federal
law, including, without limitation, laws pertaining to bankruptcy or
insolvency, in which case, this Guaranty, and all liens, pledges and
security interests securing this Guaranty, shall be enforceable
against the undersigned as if the returned, disgorged or rescinded
payment or credit had not been received or given by the Bank, and
whether or not the Bank relied upon this payment or credit or changed
its position as a consequence of it. In the event of continuation or
reinstatement of this Guaranty and the liens, pledges and security
interests securing it, the undersigned agrees, upon demand by the
Bank, to execute and deliver to the Bank those documents which the
Bank determines are appropriate to further evidence (in the public
records or otherwise) this continuation or reinstatement, although the
failure of the undersigned to do so shall not affect in any way the
reinstated or continuation. If the undersigned does not execute and
deliver to the Bank upon demand such documents, the Bank and each Bank
officer is irrevocably appointed (which appointment is coupled with an
interest) the true and lawful attorney of the undersigned (with full
power of substitution) to execute and deliver such documents in the
name and on behalf of the undersigned.
8. WAIVERS: The undersigned waives any right to require the Bank to:
(a) proceed against any person or property; (b) give notice of the
terms, time and place of any public or private sale of personal
property security held from the Borrower or any other person, or
otherwise comply with the provisions of Section 9-504 of the Michigan
or other applicable Uniform Commercial Code; or (c) pursue any other
remedy in the Bank's power. The undersigned waives notice of
acceptance of this Guaranty and presentment, demand, protest, notice
of protest, dishonor, notice of dishonor, notice of default, notice of
intent to accelerate or demand payment of any Indebtedness, any and
all other notices to which the undersigned might otherwise be
entitled, and diligence in collecting any Indebtedness, and agrees
that the Bank may, once or any number of times, modify the terms of
4
<PAGE>
any Indebtedness, compromise, extend, increase, accelerate, renew or
forbear to enforce payment of any or all Indebtedness, or permit the
Borrower to incur additional Indebtedness, all without notice to the
undersigned and without affecting in any manner the unconditional
obligation of the undersigned under this Guaranty.
The undersigned unconditionally and irrevocably waives each and every
defense and setoff of any nature which, under principles of guaranty
or otherwise, would operate to impair or diminish in any way the
obligation of the undersigned under this Guaranty, and acknowledges
that each such waiver is by this reference incorporated into each
security agreement, collateral assignment, pledge and/or other
document from the undersigned now or later securing this Guaranty
and/or the Indebtedness, and acknowledges that as of the date of this
Guaranty no such defense or setoff exists.
9. WAIVER OF SUBROGATION: The undersigned waives any and all rights
(whether by subrogation, indemnity, reimbursement, or otherwise) to
recover from the Borrower any amounts paid by the undersigned pursuant
to this Guaranty.
10. SALE/ASSIGNMENT: The undersigned acknowledges that the Bank has the
right to sell, assign, transfer, negotiate, or grant participations in
all or any part of the Indebtedness and any related obligations,
including, without limit, this Guaranty, without notice to the
undersigned and that the Bank may disclose any documents and
information which the Bank now has or later acquires relating to the
undersigned or to the Borrower in connection with such sale,
assignment, transfer, negotiation, or grant. The undersigned agrees
that the Bank may provide information relating to this Guaranty or
relating to the undersigned to the Bank's parent, affiliates,
subsidiaries and service providers.
11. GENERAL: This Guaranty constitutes the entire agreement of the
undersigned and the Bank with respect to the subject matter of this
Guaranty. No waiver, consent, modification or change of the terms of
the Guaranty shall bind any of the undersigned or the Bank unless in
writing and signed by the waiving party or an authorized officer of
the waiving party, and then this waiver, consent, modification or
change shall be effective only in the specific instance and for the
specific purpose given. This Guaranty shall inure to the benefit of
the Bank and its successors and assigns and shall be binding on the
undersigned and the undersigned's heirs, legal representatives,
successors and assigns including, without limit, any debtor in
possession or trustee in bankruptcy for any of the undersigned. The
undersigned has (have) knowingly and voluntarily entered into this
Guaranty in good faith for the purpose of inducing the Bank to extend
5
<PAGE>
credit or make other financial accommodations to the Borrower. If any
provision of this Guaranty is unenforceable in whole or in part for
any reason, the remaining provisions shall continue to be effective.
THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS OF THE STATE OF MICHIGAN, WITHOUT REGARD TO CONFLICT
OF LAWS PRINCIPLES.
12. HEADINGS: Headings in this Agreement are included for the convenience
of reference only and shall not constitute a part of this Agreement
for any purpose.
13. JURY TRIAL WAIVER: THE UNDERSIGNED AND BANK ACKNOWLEDGE THAT THE
RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE
WAIVED. EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY
TO CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY,
AND FOR THEIR MUTUAL BENEFIT WAIVES ANY RIGHT TO TRIAL BY JURY IN THE
EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN
ANY WAY RELATED TO, THIS GUARANTY OR THE INDEBTEDNESS.
IN WITNESS WHEREOF, the undersigned has signed and delivered this Guaranty
the day and year first written above.
GUARANTOR:
WITNESSES: MANATRON, INC.
/S/ ROBERT W. CARPENTER By: /S/ PAUL R. SYLVESTER
SIGNATURE OF: ROBERT W. CARPENTER SIGNATURE OF: PAUL R. SYLVESTER
Its: PRESIDENT
TITLE
/S/ C.E. CRONER By:________________________________
SIGNATURE OF C.E. CRONER SIGNATURE OF
Its:_______________________________
TITLE
GUARANTOR'S ADDRESS:
2970 S. 9TH STREET
KALAMAZOO MI 49009
6
<PAGE>
EXHIBIT 10.25
COMERICA GUARANTY
- ---------------------------------------------------------------------------
As of October 9, 1998, the undersigned, SPECIALIZED DATA SYSTEMS, INC., a
North Carolina corporation, for value received, unconditionally and
absolutely guarantees to COMERICA BANK, a Michigan banking corporation
("Bank"), payment when due, whether by stated maturity, demand,
acceleration or otherwise, of all existing and future indebtedness
("Indebtedness") to the Bank of MANATRON, INC., a Michigan corporation
("Borrower"). Indebtedness includes, without limit, any and all
obligations or liabilities of the Borrower to the Bank, whether absolute or
contingent, direct or indirect, voluntary or involuntary, liquidated or
unliquidated, joint or several, known or unknown; any and all indebtedness,
obligations or liabilities for which Borrower would otherwise be liable to
the Bank were it not for the invalidity, irregularity or unenforceability
of them by reason of any bankruptcy, insolvency or other law or order of
any kind, or for any other reason; any and all amendments, modifications,
renewals and/or extensions of any of the above; and all costs of collecting
Indebtedness, including, without limit, attorney fees. Any reference in
this Guaranty to attorney fees shall be deemed a reference to reasonable
fees, charges, costs and expenses of both in-house and outside counsel and
paralegals, whether or not a suit or action is instituted, and to court
costs if a suit or action is instituted, and whether attorney fees or court
costs are incurred at the trial court level, on appeal, in a bankruptcy,
administrative or probate proceeding or otherwise. All costs shall be
payable immediately by the undersigned when incurred by the Bank, without
demand, and until paid shall bear interest a the highest per annum rate
applicable to any of the Indebtedness, but not in excess of the maximum
rate permitted by law.
1. UNLIMITED OBLIGATION: The total obligation of the undersigned under
this Guaranty is UNLIMITED, and this obligation shall include all
principal of Borrower at any time owing to the Bank, all interest
thereon, and all costs incurred by the Bank in collection efforts
against the Borrower and/or the undersigned or otherwise incurred by
the Bank in any way relating to the Indebtedness or this Guaranty,
including, without limit, attorney fees. The undersigned agrees that
(a) nothing set forth in this Guaranty shall be a limitation on the
amount of Borrower's Indebtedness to the Bank; (b) any payments by the
undersigned shall not reduce the maximum liability of the undersigned
under this Guaranty, unless written notice to that effect is actually
received by the Bank at, or prior to, the time of payment; and (c) the
liability of the undersigned to the Bank shall at all times be deemed
to be the aggregate liability of the undersigned under this Guaranty
and any other guaranties previously or subsequently given to the Bank
by the undersigned and not expressly revoked, modified or invalidated
in writing.
<PAGE>
2. NATURE OF GUARANTY: This is a continuing Guaranty of payment and not
of collection and remains effective whether the Indebtedness is from
time to time reduced and later increased or entirely extinguished and
later reincurred. The undersigned delivers this Guaranty based solely
on the undersigned's independent investigation of (or decision not to
investigate) the financial condition of Borrower and is not relying on
any information furnished by the Bank. The undersigned assumes full
responsibility for obtaining any further information concerning the
Borrower's financial condition, the status of the Indebtedness or any
other matter which the undersigned may deem necessary or appropriate
now or later. The undersigned knowingly accepts the full range of
risk encompassed in this Guaranty, which risk includes, without limit,
the possibility that Borrower may incur Indebtedness to the Bank after
the financial condition of the Borrower, or the Borrower's ability to
pay debts as the mature, has deteriorated.
3. APPLICATION OF PAYMENTS: The undersigned authorizes the Bank, either
before or after termination of this Guaranty, without notice to or
demand on the undersigned and without affecting the undersigned's
liability under this Guaranty, from time to time to: (a) apply any
security and direct the order or manner of sale; and (b) apply
payments received by the Bank from the Borrower to any indebtedness of
the Borrower to the Bank, in such order as the Bank shall determine in
its sole discretion, whether or not this indebtedness is covered by
this Guaranty, and the undersigned waives any provision of law
regarding application of payments which specifies otherwise. The
undersigned agrees to provide to the Bank copies of the undersigned's
financial statements upon request.
4. SECURITY: The undersigned grants to the Bank a security interest in
and the right of setoff as to any and all property of the undersigned
now or later in the possession of the Bank. The undersigned further
assigns to the Bank as collateral for the obligations of the
undersigned under this Guaranty all claims of any nature that the
undersigned now or later has against the Borrower (other than any
claim under a deed of trust or mortgage covering California real
property) with full right on the part of the Bank, in its own name or
in the name of the undersigned, to collect and enforce these claims.
The undersigned agrees that no security now or later held by the Bank
for the payment of any Indebtedness, whether from the Borrower, any
guarantor, or otherwise, and whether in the nature of a security
interest, pledge, lien, assignment, setoff, suretyship, guaranty,
indemnity, insurance or otherwise, shall affect in any manner the
unconditional obligation of the undersigned under this Guaranty, and
the Bank, in its sole discretion, without notice to the undersigned,
may release, exchange, enforce and otherwise deal with any security,
without affecting in any manner the unconditional obligation of the
2
<PAGE>
undersigned under this Guaranty. The undersigned acknowledges and
agrees that the Bank has no obligation to acquire or perfect any lien
on or security interest in any asset(s), whether realty or personalty,
to secure payment of the Indebtedness, and the undersigned is not
relying upon any asset(s) in which the Bank has or may have a lien or
security interest for payment of the Indebtedness.
5. OTHER GUARANTORS: If any Indebtedness is guaranteed by two or more
guarantors, the obligation of the undersigned shall be several and
also joint, each with all and also each with any one or more of the
others, and may be enforced at the option of the Bank against each
severally, any two or more jointly, or some severally and some
jointly. The Bank, in its sole discretion, may release any one or
more of the guarantors for any consideration which it deems adequate,
and may fail or elect not to prove a claim against the estate of any
bankrupt, insolvent, incompetent or deceased guarantor; and after
that, without notice to any guarantor, the Bank may extend or renew
any or all Indebtedness and may permit the Borrower to incur
additional Indebtedness, without affecting in any manner the
unconditional obligation of the remaining guarantor(s). The
undersigned acknowledges that the effectiveness of this Guaranty is
not conditioned on any or all of the indebtedness being guaranteed by
anyone else.
6. TERMINATION: The undersigned may terminate its obligation under this
Guaranty as to future Indebtedness (except as provided below) by (and
only by) delivering written notice of termination to an officer of the
Bank and receiving from an officer of the Bank written acknowledgment
of delivery; provided, however, the termination shall not be effective
until the opening of business on the fifth (5th) day ("effective
date") following written acknowledgement of delivery. Any termination
shall not affect in any way the unconditional obligations of any
remaining guarantor(s), whether or not the termination is known to the
remaining guarantor(s). Any termination shall not affect in any way
the unconditional obligations of the undersigned as to any
Indebtedness existing at the effective date of termination or any
Indebtedness created after that pursuant to any commitment or
agreement of the Bank or pursuant to any Borrower loan with the Bank
existing at the effective date of termination (whether advances or
readvances by the Bank after the effective date of termination are
optional or obligatory), or any modifications, extensions or renewals
of any of this Indebtedness, whether in whole or in part, and as to
all of this Indebtedness and modifications, extensions or renewals of
it, this Guaranty shall continue effective until the same shall have
been fully paid. The Bank has no duty to give notice of termination
by any guarantor(s) to any remaining guarantor(s). The undersigned
shall indemnify the Bank against all claims, damages, costs and
3
<PAGE>
expenses, including, without limit, attorney fees, incurred by the
Bank in connection with any suit, claim or action against the Bank
arising out of any modification or termination of a Borrower loan or
any refusal by the Bank to extend additional credit in connection with
the termination of this Guaranty.
7. REINSTATEMENT: Notwithstanding any prior revocation, termination,
surrender or discharge of this Guaranty (or of any lien, pledge or
security interest securing this Guaranty) in whole or in part, the
effectiveness of this Guaranty, and of all liens, pledges and security
interests securing this Guaranty, shall automatically continue or be
reinstated, as the case may be, in the event that any payment received
or credit given by the Bank in respect of the Indebtedness is
returned, disgorged or rescinded under any applicable state or federal
law, including, without limitation, laws pertaining to bankruptcy or
insolvency, in which case, this Guaranty, and all liens, pledges and
security interests securing this Guaranty, shall be enforceable
against the undersigned as if the returned, disgorged or rescinded
payment or credit had not been received or given by the Bank, and
whether or not the Bank relied upon this payment or credit or changed
its position as a consequence of it. In the event of continuation or
reinstatement of this Guaranty and the liens, pledges and security
interests securing it, the undersigned agrees, upon demand by the
Bank, to execute and deliver to the Bank those documents which the
Bank determines are appropriate to further evidence (in the public
records or otherwise) this continuation or reinstatement, although the
failure of the undersigned to do so shall not affect in any way the
reinstated or continuation. If the undersigned does not execute and
deliver to the Bank upon demand such documents, the Bank and each Bank
officer is irrevocably appointed (which appointment is coupled with an
interest) the true and lawful attorney of the undersigned (with full
power of substitution) to execute and deliver such documents in the
name and on behalf of the undersigned.
8. WAIVERS: The undersigned waives any right to require the Bank to:
(a) proceed against any person or property; (b) give notice of the
terms, time and place of any public or private sale of personal
property security held from the Borrower or any other person, or
otherwise comply with the provisions of Section 9-504 of the Michigan
or other applicable Uniform Commercial Code; or (c) pursue any other
remedy in the Bank's power. The undersigned waives notice of
acceptance of this Guaranty and presentment, demand, protest, notice
of protest, dishonor, notice of dishonor, notice of default, notice of
intent to accelerate or demand payment of any Indebtedness, any and
all other notices to which the undersigned might otherwise be
entitled, and diligence in collecting any Indebtedness, and agrees
that the Bank may, once or any number of times, modify the terms of
4
<PAGE>
any Indebtedness, compromise, extend, increase, accelerate, renew or
forbear to enforce payment of any or all Indebtedness, or permit the
Borrower to incur additional Indebtedness, all without notice to the
undersigned and without affecting in any manner the unconditional
obligation of the undersigned under this Guaranty.
The undersigned unconditionally and irrevocably waives each and every
defense and setoff of any nature which, under principles of guaranty
or otherwise, would operate to impair or diminish in any way the
obligation of the undersigned under this Guaranty, and acknowledges
that each such waiver is by this reference incorporated into each
security agreement, collateral assignment, pledge and/or other
document from the undersigned now or later securing this Guaranty
and/or the Indebtedness, and acknowledges that as of the date of this
Guaranty no such defense or setoff exists.
9. WAIVER OF SUBROGATION: The undersigned waives any and all rights
(whether by subrogation, indemnity, reimbursement, or otherwise) to
recover from the Borrower any amounts paid by the undersigned pursuant
to this Guaranty.
10. SALE/ASSIGNMENT: The undersigned acknowledges that the Bank has the
right to sell, assign, transfer, negotiate, or grant participations in
all or any part of the Indebtedness and any related obligations,
including, without limit, this Guaranty, without notice to the
undersigned and that the Bank may disclose any documents and
information which the Bank now has or later acquires relating to the
undersigned or to the Borrower in connection with such sale,
assignment, transfer, negotiation, or grant. The undersigned agrees
that the Bank may provide information relating to this Guaranty or
relating to the undersigned to the Bank's parent, affiliates,
subsidiaries and service providers.
11. GENERAL: This Guaranty constitutes the entire agreement of the
undersigned and the Bank with respect to the subject matter of this
Guaranty. No waiver, consent, modification or change of the terms of
the Guaranty shall bind any of the undersigned or the Bank unless in
writing and signed by the waiving party or an authorized officer of
the waiving party, and then this waiver, consent, modification or
change shall be effective only in the specific instance and for the
specific purpose given. This Guaranty shall inure to the benefit of
the Bank and its successors and assigns and shall be binding on the
undersigned and the undersigned's heirs, legal representatives,
successors and assigns including, without limit, any debtor in
possession or trustee in bankruptcy for any of the undersigned. The
undersigned has (have) knowingly and voluntarily entered into this
Guaranty in good faith for the purpose of inducing the Bank to extend
5
<PAGE>
credit or make other financial accommodations to the Borrower. If any
provision of this Guaranty is unenforceable in whole or in part for
any reason, the remaining provisions shall continue to be effective.
THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS OF THE STATE OF MICHIGAN, WITHOUT REGARD TO CONFLICT
OF LAWS PRINCIPLES.
12. HEADINGS: Headings in this Agreement are included for the convenience
of reference only and shall not constitute a part of this Agreement
for any purpose.
13. JURY TRIAL WAIVER: THE UNDERSIGNED AND BANK ACKNOWLEDGE THAT THE
RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE
WAIVED. EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY
TO CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY,
AND FOR THEIR MUTUAL BENEFIT WAIVES ANY RIGHT TO TRIAL BY JURY IN THE
EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN
ANY WAY RELATED TO, THIS GUARANTY OR THE INDEBTEDNESS.
IN WITNESS WHEREOF, the undersigned has signed and delivered this Guaranty
the day and year first written above.
GUARANTOR:
WITNESSES: SPECIALIZED DATA SYSTEMS, INC.
/S/ ROBERT W. CARPENTER By: /S/ PAUL R. SYLVESTER
SIGNATURE OF: ROBERT W. CARPENTER SIGNATURE OF: PAUL R. SYLVESTER
Its: PRESIDENT
/S/ C.E. CRONER
SIGNATURE OF C.E. CRONER
GUARANTOR'S ADDRESS:
2970 S. 9TH STREET
STREET ADDRESS
KALAMAZOO MI 49009
CITY STATE ZIP CODE
6
<PAGE>
EXHIBIT 10.26
COMERICA GUARANTY
- ---------------------------------------------------------------------------
As of October 9, 1998, the undersigned, ATEK INFORMATION SYSTEMS, INC., an
Indiana corporation, for value received, unconditionally and absolutely
guarantees to COMERICA BANK, a Michigan banking corporation ("Bank"),
payment when due, whether by stated maturity, demand, acceleration or
otherwise, of all existing and future indebtedness ("Indebtedness") to the
Bank of MANATRON, INC., a Michigan corporation ("Borrower"). Indebtedness
includes, without limit, any and all obligations or liabilities of the
Borrower to the Bank, whether absolute or contingent, direct or indirect,
voluntary or involuntary, liquidated or unliquidated, joint or several,
known or unknown; any and all indebtedness, obligations or liabilities for
which Borrower would otherwise be liable to the Bank were it not for the
invalidity, irregularity or unenforceability of them by reason of any
bankruptcy, insolvency or other law or order of any kind, or for any other
reason; any and all amendments, modifications, renewals and/or extensions
of any of the above; and all costs of collecting Indebtedness, including,
without limit, attorney fees. Any reference in this Guaranty to attorney
fees shall be deemed a reference to reasonable fees, charges, costs and
expenses of both in-house and outside counsel and paralegals, whether or
not a suit or action is instituted, and to court costs if a suit or action
is instituted, and whether attorney fees or court costs are incurred at the
trial court level, on appeal, in a bankruptcy, administrative or probate
proceeding or otherwise. All costs shall be payable immediately by the
undersigned when incurred by the Bank, without demand, and until paid shall
bear interest a the highest per annum rate applicable to any of the
Indebtedness, but not in excess of the maximum rate permitted by law.
1. UNLIMITED OBLIGATION: The total obligation of the undersigned under
this Guaranty is UNLIMITED, and this obligation shall include all
principal of Borrower at any time owing to the Bank, all interest
thereon, and all costs incurred by the Bank in collection efforts
against the Borrower and/or the undersigned or otherwise incurred by
the Bank in any way relating to the Indebtedness or this Guaranty,
including, without limit, attorney fees. The undersigned agrees that
(a) nothing set forth in this Guaranty shall be a limitation on the
amount of Borrower's Indebtedness to the Bank; (b) any payments by the
undersigned shall not reduce the maximum liability of the undersigned
under this Guaranty, unless written notice to that effect is actually
received by the Bank at, or prior to, the time of payment; and (c) the
liability of the undersigned to the Bank shall at all times be deemed
to be the aggregate liability of the undersigned under this Guaranty
and any other guaranties previously or subsequently given to the Bank
by the undersigned and not expressly revoked, modified or invalidated
in writing.
<PAGE>
2. NATURE OF GUARANTY: This is a continuing Guaranty of payment and not
of collection and remains effective whether the Indebtedness is from
time to time reduced and later increased or entirely extinguished and
later reincurred. The undersigned delivers this Guaranty based solely
on the undersigned's independent investigation of (or decision not to
investigate) the financial condition of Borrower and is not relying on
any information furnished by the Bank. The undersigned assumes full
responsibility for obtaining any further information concerning the
Borrower's financial condition, the status of the Indebtedness or any
other matter which the undersigned may deem necessary or appropriate
now or later. The undersigned knowingly accepts the full range of
risk encompassed in this Guaranty, which risk includes, without limit,
the possibility that Borrower may incur Indebtedness to the Bank after
the financial condition of the Borrower, or the Borrower's ability to
pay debts as the mature, has deteriorated.
3. APPLICATION OF PAYMENTS: The undersigned authorizes the Bank, either
before or after termination of this Guaranty, without notice to or
demand on the undersigned and without affecting the undersigned's
liability under this Guaranty, from time to time to: (a) apply any
security and direct the order or manner of sale; and (b) apply
payments received by the Bank from the Borrower to any indebtedness of
the Borrower to the Bank, in such order as the Bank shall determine in
its sole discretion, whether or not this indebtedness is covered by
this Guaranty, and the undersigned waives any provision of law
regarding application of payments which specifies otherwise. The
undersigned agrees to provide to the Bank copies of the undersigned's
financial statements upon request.
4. SECURITY: The undersigned grants to the Bank a security interest in
and the right of setoff as to any and all property of the undersigned
now or later in the possession of the Bank. The undersigned further
assigns to the Bank as collateral for the obligations of the
undersigned under this Guaranty all claims of any nature that the
undersigned now or later has against the Borrower (other than any
claim under a deed of trust or mortgage covering California real
property) with full right on the part of the Bank, in its own name or
in the name of the undersigned, to collect and enforce these claims.
The undersigned agrees that no security now or later held by the Bank
for the payment of any Indebtedness, whether from the Borrower, any
guarantor, or otherwise, and whether in the nature of a security
interest, pledge, lien, assignment, setoff, suretyship, guaranty,
indemnity, insurance or otherwise, shall affect in any manner the
unconditional obligation of the undersigned under this Guaranty, and
the Bank, in its sole discretion, without notice to the undersigned,
may release, exchange, enforce and otherwise deal with any security,
without affecting in any manner the unconditional obligation of the
2
<PAGE>
undersigned under this Guaranty. The undersigned acknowledges and
agrees that the Bank has no obligation to acquire or perfect any lien
on or security interest in any asset(s), whether realty or personalty,
to secure payment of the Indebtedness, and the undersigned is not
relying upon any asset(s) in which the Bank has or may have a lien or
security interest for payment of the Indebtedness.
5. OTHER GUARANTORS: If any Indebtedness is guaranteed by two or more
guarantors, the obligation of the undersigned shall be several and
also joint, each with all and also each with any one or more of the
others, and may be enforced at the option of the Bank against each
severally, any two or more jointly, or some severally and some
jointly. The Bank, in its sole discretion, may release any one or
more of the guarantors for any consideration which it deems adequate,
and may fail or elect not to prove a claim against the estate of any
bankrupt, insolvent, incompetent or deceased guarantor; and after
that, without notice to any guarantor, the Bank may extend or renew
any or all Indebtedness and may permit the Borrower to incur
additional Indebtedness, without affecting in any manner the
unconditional obligation of the remaining guarantor(s). The
undersigned acknowledges that the effectiveness of this Guaranty is
not conditioned on any or all of the indebtedness being guaranteed by
anyone else.
6. TERMINATION: The undersigned may terminate its obligation under this
Guaranty as to future Indebtedness (except as provided below) by (and
only by) delivering written notice of termination to an officer of the
Bank and receiving from an officer of the Bank written acknowledgment
of delivery; provided, however, the termination shall not be effective
until the opening of business on the fifth (5th) day ("effective
date") following written acknowledgement of delivery. Any termination
shall not affect in any way the unconditional obligations of any
remaining guarantor(s), whether or not the termination is known to the
remaining guarantor(s). Any termination shall not affect in any way
the unconditional obligations of the undersigned as to any
Indebtedness existing at the effective date of termination or any
Indebtedness created after that pursuant to any commitment or
agreement of the Bank or pursuant to any Borrower loan with the Bank
existing at the effective date of termination (whether advances or
readvances by the Bank after the effective date of termination are
optional or obligatory), or any modifications, extensions or renewals
of any of this Indebtedness, whether in whole or in part, and as to
all of this Indebtedness and modifications, extensions or renewals of
it, this Guaranty shall continue effective until the same shall have
been fully paid. The Bank has no duty to give notice of termination
by any guarantor(s) to any remaining guarantor(s). The undersigned
shall indemnify the Bank against all claims, damages, costs and
3
<PAGE>
expenses, including, without limit, attorney fees, incurred by the
Bank in connection with any suit, claim or action against the Bank
arising out of any modification or termination of a Borrower loan or
any refusal by the Bank to extend additional credit in connection with
the termination of this Guaranty.
7. REINSTATEMENT: Notwithstanding any prior revocation, termination,
surrender or discharge of this Guaranty (or of any lien, pledge or
security interest securing this Guaranty) in whole or in part, the
effectiveness of this Guaranty, and of all liens, pledges and security
interests securing this Guaranty, shall automatically continue or be
reinstated, as the case may be, in the event that any payment received
or credit given by the Bank in respect of the Indebtedness is
returned, disgorged or rescinded under any applicable state or federal
law, including, without limitation, laws pertaining to bankruptcy or
insolvency, in which case, this Guaranty, and all liens, pledges and
security interests securing this Guaranty, shall be enforceable
against the undersigned as if the returned, disgorged or rescinded
payment or credit had not been received or given by the Bank, and
whether or not the Bank relied upon this payment or credit or changed
its position as a consequence of it. In the event of continuation or
reinstatement of this Guaranty and the liens, pledges and security
interests securing it, the undersigned agrees, upon demand by the
Bank, to execute and deliver to the Bank those documents which the
Bank determines are appropriate to further evidence (in the public
records or otherwise) this continuation or reinstatement, although the
failure of the undersigned to do so shall not affect in any way the
reinstated or continuation. If the undersigned does not execute and
deliver to the Bank upon demand such documents, the Bank and each Bank
officer is irrevocably appointed (which appointment is coupled with an
interest) the true and lawful attorney of the undersigned (with full
power of substitution) to execute and deliver such documents in the
name and on behalf of the undersigned.
8. WAIVERS: The undersigned waives any right to require the Bank to:
(a) proceed against any person or property; (b) give notice of the
terms, time and place of any public or private sale of personal
property security held from the Borrower or any other person, or
otherwise comply with the provisions of Section 9-504 of the Michigan
or other applicable Uniform Commercial Code; or (c) pursue any other
remedy in the Bank's power. The undersigned waives notice of
acceptance of this Guaranty and presentment, demand, protest, notice
of protest, dishonor, notice of dishonor, notice of default, notice of
intent to accelerate or demand payment of any Indebtedness, any and
all other notices to which the undersigned might otherwise be
entitled, and diligence in collecting any Indebtedness, and agrees
that the Bank may, once or any number of times, modify the terms of
4
<PAGE>
any Indebtedness, compromise, extend, increase, accelerate, renew or
forbear to enforce payment of any or all Indebtedness, or permit the
Borrower to incur additional Indebtedness, all without notice to the
undersigned and without affecting in any manner the unconditional
obligation of the undersigned under this Guaranty.
The undersigned unconditionally and irrevocably waives each and every
defense and setoff of any nature which, under principles of guaranty
or otherwise, would operate to impair or diminish in any way the
obligation of the undersigned under this Guaranty, and acknowledges
that each such waiver is by this reference incorporated into each
security agreement, collateral assignment, pledge and/or other
document from the undersigned now or later securing this Guaranty
and/or the Indebtedness, and acknowledges that as of the date of this
Guaranty no such defense or setoff exists.
9. WAIVER OF SUBROGATION: The undersigned waives any and all rights
(whether by subrogation, indemnity, reimbursement, or otherwise) to
recover from the Borrower any amounts paid by the undersigned pursuant
to this Guaranty.
10. SALE/ASSIGNMENT: The undersigned acknowledges that the Bank has the
right to sell, assign, transfer, negotiate, or grant participations in
all or any part of the Indebtedness and any related obligations,
including, without limit, this Guaranty, without notice to the
undersigned and that the Bank may disclose any documents and
information which the Bank now has or later acquires relating to the
undersigned or to the Borrower in connection with such sale,
assignment, transfer, negotiation, or grant. The undersigned agrees
that the Bank may provide information relating to this Guaranty or
relating to the undersigned to the Bank's parent, affiliates,
subsidiaries and service providers.
11. GENERAL: This Guaranty constitutes the entire agreement of the
undersigned and the Bank with respect to the subject matter of this
Guaranty. No waiver, consent, modification or change of the terms of
the Guaranty shall bind any of the undersigned or the Bank unless in
writing and signed by the waiving party or an authorized officer of
the waiving party, and then this waiver, consent, modification or
change shall be effective only in the specific instance and for the
specific purpose given. This Guaranty shall inure to the benefit of
the Bank and its successors and assigns and shall be binding on the
undersigned and the undersigned's heirs, legal representatives,
successors and assigns including, without limit, any debtor in
possession or trustee in bankruptcy for any of the undersigned. The
undersigned has (have) knowingly and voluntarily entered into this
Guaranty in good faith for the purpose of inducing the Bank to extend
5
<PAGE>
credit or make other financial accommodations to the Borrower. If any
provision of this Guaranty is unenforceable in whole or in part for
any reason, the remaining provisions shall continue to be effective.
THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS OF THE STATE OF MICHIGAN, WITHOUT REGARD TO CONFLICT
OF LAWS PRINCIPLES.
12. HEADINGS: Headings in this Agreement are included for the convenience
of reference only and shall not constitute a part of this Agreement
for any purpose.
13. JURY TRIAL WAIVER: THE UNDERSIGNED AND BANK ACKNOWLEDGE THAT THE
RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE
WAIVED. EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY
TO CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY,
AND FOR THEIR MUTUAL BENEFIT WAIVES ANY RIGHT TO TRIAL BY JURY IN THE
EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN
ANY WAY RELATED TO, THIS GUARANTY OR THE INDEBTEDNESS.
IN WITNESS WHEREOF, the undersigned has signed and delivered this Guaranty
the day and year first written above.
GUARANTOR:
WITNESSES: ATEK INFORMATION SYSTEMS, INC.
/S/ ROBERT W. CARPENTER By: /S/ PAUL R. SYLVESTER
SIGNATURE OF: ROBERT W. CARPENTER SIGNATURE OF PAUL R. SYLVESTER
Its: PRESIDENT
/S/ C.E. CRONER
SIGNATURE OF C.E. CRONER
GUARANTOR'S ADDRESS:
2970 S. 9th Street
Kalamazoo, MI 49009
6
<PAGE>
EXHIBIT 10.27
COMERICA SECURITY AGREEMENT
(All Assets)
- ---------------------------------------------------------------------------
As of October 9, 1998, for value received, the undersigned MANATRON, INC.,
a Michigan corporation ("Debtor"), grants to COMERICA BANK, a Michigan
banking corporation ("Bank"), a continuing security interest in the
Collateral (as defined below), to secure payment, when due, whether by
stated maturity, demand, acceleration or otherwise, of all existing and
future indebtedness (as herein defined) of Debtor to the Bank.
"Indebtedness" shall mean any and all obligations, liabilities and
indebtedness of Debtor to the Bank, whether absolute or contingent, direct
or indirect, voluntary or involuntary, liquidated or unliquidated, joint or
several, known or unknown, and whether now existing or hereafter arising;
any and all obligations or liabilities for which Debtor would otherwise be
liable to the Bank were it not for the invalidity or unenforceability of
them by reason of any bankruptcy, insolvency or other law, or for any other
reason; any and all amendments, modifications, renewals and/or extensions
of any of the above; all costs incurred by Bank in establishing,
determining, continuing, or defending the validity or priority of its
security interest, or in pursuing its rights and remedies under this
Agreement or under any other agreement between Bank and Debtor or in
connection with any proceeding involving Bank as a result of any financial
accommodation to Debtor; and all other costs of collecting indebtedness,
including, without limit, attorney fees. Debtor agrees to pay Bank all
such costs incurred by the Bank, immediately upon demand, and until paid
all costs shall bear interest at the highest per annum rate applicable to
any of the Indebtedness, but not in excess of the maximum rate permitted by
law. Any reference in this Agreement to attorney fees shall be deemed a
reference to reasonable fees, costs, and expenses of both in-house and
outside counsel and paralegals, whether or not a suit or action is
instituted, and to court costs if a suit or action is instituted, and
whether attorney fees or court costs are incurred at the trial court level,
on appeal, in a bankruptcy, administrative or probate proceeding or
otherwise.
1. COLLATERAL shall mean all of the following property Debtor now or
later owns or has an interest in, wherever located:
(a) all Accounts Receivable (for purposes of this Agreement,
"Accounts Receivable" consists of all accounts, general
intangibles, chattel paper, contract rights, deposit accounts,
documents and instruments),
(b) all Inventory,
(c) all Equipment and Fixtures,
<PAGE>
(d) specific items listed below and/or on attached Schedule A, if
any, is/are also included in Collateral:
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
(e) all goods, instruments, documents, policies and certificates of
insurance, deposits, money, investment property or other property
(except real property which is not a fixture) which are now or
later in possession or control of Bank, or as to which Bank now
or later controls possession by documents or otherwise, and
(f) all additions, attachments, accessions, parts, replacements,
substitutions, renewals, interest, dividends, distributions,
rights of any kind (including but not limited to stock splits,
stock rights, voting and preferential rights), products, and
proceeds of or pertaining to the above including, without limit,
cash or other property which were proceeds and are recovered by a
bankruptcy trustee or otherwise as a preferential transfer by
Debtor.
2. WARRANTIES, COVENANTS AND AGREEMENTS. Debtor warrants, covenants and
agrees as follows:
2.1 Debtor shall furnish to Bank, in form and at intervals as Bank
may request, any information Bank may reasonably request and
allow Bank to examine, inspect, and copy any of Debtor's books
and records. Debtor shall, at the request of Bank, mark its
records and the Collateral to clearly indicate the security
interests of Bank under this Agreement.
2.2 At the time any Collateral becomes, or is represented to be,
subject to a security interest in favor of Bank, Debtor shall be
deemed to have warranted that (a) Debtor is the lawful owner of
the Collateral and has the right and authority to subject it to a
security interest granted to Bank; (b) none of the Collateral is
subject to any security interest, other than that in favor of
Bank, and there are no financing statements on file, other than
in favor of Bank; and (c) Debtor acquired its rights in the
Collateral in the ordinary course of its business.
2.3 Debtor will keep the Collateral free at all times from all
claims, liens, security interests and encumbrances, other than
those in favor of Bank. Debtor will not, without the prior
written consent of Bank, sell, transfer or lease, or permit to be
sold, transferred or leased, any or all of the Collateral, except
for Inventory in the ordinary course of its business, and will
not return any Inventory to its supplier. Bank, or its
2
<PAGE>
representatives, may, at all reasonable times, inspect the
Collateral and may enter upon all premises where the Collateral
is kept or might be located.
2.4 Debtor will do all acts and will execute or cause to be executed
all writings requested by Bank to establish, maintain and
continue a perfected and first security interest of Bank in the
Collateral. Debtor agrees that Bank has no obligation to acquire
or perfect any lien on or security interest in any asset(s),
whether realty or personalty, to secure payment of the
Indebtedness, and Debtor is not relying upon assets in which the
Bank may have a lien or security interest for payment of the
Indebtedness.
2.5 Debtor will pay, within the time that they can be paid without
interest or penalty, all taxes, assessments and similar charges
which at any time are or may become a lien, charge, or
encumbrance upon any Collateral, except to the extent contested
in good faith and bonded in a manner satisfactory to Bank. If
Debtor fails to pay any of these taxes, assessments, or other
charges in the time provided above, Bank has the option (but not
the obligation) to do so, and Debtor agrees to repay all amounts
so expended by Bank immediately upon demand, together with
interest at the highest lawful default rate which could be
charged by Bank on any Indebtedness.
2.6 Debtor will keep the Collateral in good condition and will
protect it from loss, damage, or deterioration from any cause.
Debtor has and will maintain at all times (a) with respect to the
Collateral, insurance under an "all risk" policy against fire and
other risks customarily insured against, and (b) public liability
insurance and other insurance as may be required by law or
reasonably required by Bank, all of which insurance shall be in
amount, form and content, and written by companies, as may be
satisfactory to Bank, and shall contain a lender's loss payable
endorsement acceptable to Bank. Debtor will deliver to Bank,
immediately upon demand, evidence satisfactory to Bank that the
required insurance has been procured. If Debtor fails to
maintain satisfactory insurance, Bank has the option (but not the
obligation) to do so, and Debtor agrees to repay all amounts so
expended by Bank immediately upon demand, together with interest
at the highest lawful default rate which could be charged by Bank
on any Indebtedness.
2.7 On each occasion on which Debtor evidences to Bank the account
balances on and the nature and extent of the Accounts Receivable,
Debtor shall be deemed to have warranted that, except as
otherwise indicated (a) each of those Accounts Receivable is
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valid and enforceable without performance by Debtor of any act,
(b) each of those account balances are in fact owing, (c) there
are no setoffs, recoupments, credits, contra accounts,
counterclaims or defenses against any of those Accounts
Receivable, (d) as to any Accounts Receivable represented by a
note, trade acceptance, draft or other instrument or by any
chattel paper or document, the same have been endorsed and/or
delivered by Debtor to Bank, (e) Debtor has not received with
respect to any Account Receivable, any notice of the death of the
related account debtor, nor of the dissolution, liquidation,
termination of existence, insolvency, business failure,
appointment of a receiver for, assignment for the benefit of
creditors by, or filing of a petition in bankruptcy by or
against, the account debtor, and (f) as to each Account
Receivable, the account debtor is not an affiliate of Debtor, the
United States of America or any department, agency or
instrumentality of it, or a citizen or resident of any
jurisdiction outside of the United States. Debtor will do all
acts and will execute all writings requested by Bank to perform,
enforce performance of, and collect all Accounts Receivables.
Debtor shall neither make nor permit any modification, compromise
or substitution for any Account Receivable without the prior
written consent of Bank. Debtor shall, at Bank's request,
arrange for verification of Accounts Receivable directly with
account debtors or by other methods acceptable to Bank.
2.8 Debtor, at all times, shall be in strict compliance with all
applicable laws, including, without limit any laws, ordinances,
directives, orders, statutes, or regulations an object of which
is to regulate or improve health, safety, or the environment
("Environmental Laws").
2.9 If Bank, acting in its sole discretion, redelivers Collateral to
Debtor or Debtor's designee for the purpose of (a) the ultimate
sale or exchange thereof; or (b) presentation, collection,
renewal, or registration of transfer thereof; or (c) loading,
unloading, storing, shipping, transshipping, manufacturing,
processing or otherwise dealing with it preliminary to sale or
exchange; such redelivery shall be in trust for the benefit of
Bank and shall not constitute a release of Bank's security
interest in it or in the proceeds or products of it, unless Bank
specifically so agrees in writing. If Debtor requests any such
redelivery, Debtor will deliver with such request a duly executed
financing statement in form and substance satisfactory to Bank.
Any proceeds of Collateral coming into Debtor's possession as a
result of any such redelivery shall be held in trust for Bank and
immediately delivered to Bank for application on the
Indebtedness. Bank may (in its sole discretion) deliver any or
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all of the Collateral to Debtor, and such delivery by Bank shall
discharge Bank from all liability or responsibility for such
Collateral. Bank, at its option, may require delivery of any
Collateral to Bank at any time with such endorsements or
assignments of the Collateral as Bank may request.
2.10 At any time and without notice, Bank may (a) cause any or all of
the Collateral to be transferred to its name or to the name of
its nominees; (b) receive or collect, by legal proceedings or
otherwise, all dividends, interest, principal payments and other
sums and all other distributions at any time payable or
receivable on account of the Collateral, and hold the same as
Collateral, or apply the same to the Indebtedness, the manner and
distribution of the application to be in the sole discretion of
the Bank; (c) enter into any extension, subordination,
reorganization, deposit, merger or consolidation agreement or any
other agreement relating to or affecting the Collateral, and
deposit or surrender control of the Collateral, and accept other
property in exchange for the Collateral and hold or apply the
property or money so received pursuant to this Agreement.
2.11 Bank may assign any of the Indebtedness and deliver any or all of
the Collateral to its assignee, who then shall have with respect
to Collateral so delivered all the rights and powers of Bank
under this Agreement, and after that, Bank shall be fully
discharged from all liability and responsibility with respect to
Collateral so delivered.
2.12 Debtor shall defend, indemnify and hold harmless Bank, its
employees, agents, shareholders, affiliates, officers, and
directors, from and against any and all claims, damages, fines,
expenses, liabilities or causes of action of whatever kind,
including, without limit, consultant fees, legal expenses, and
attorney fees, suffered by any of them as a direct or indirect
result of any actual or asserted violation of any law, including,
without limit, Environmental Laws, or of any remediation relating
to any property required by any law, including, without limit,
Environmental Laws.
3. COLLECTION OF PROCEEDS.
3.1 Debtor agrees to collect and enforce payment of all Collateral
until Bank shall direct Debtor to the contrary. Immediately upon
notice to Debtor by Bank and at all times after that, Debtor
agrees to fully and promptly cooperate and assist Bank in the
collection and enforcement of all Collateral and to hold in trust
for Bank all payments received in connection with Collateral and
from the sale, lease or other disposition of any Collateral, all
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rights by way of suretyship or guaranty and all rights in the
nature of a lien or security interest which Debtor now or later
has regarding Collateral. Immediately upon and after such
notice, Debtor agrees to (a) endorse to Bank and immediately
deliver to Bank all payments received on Collateral or from the
sale, lease or other disposition of any Collateral or arising
from any other rights or interests of Debtor in the Collateral,
in the form received by Debtor without commingling with any other
funds, and (b) immediately deliver to Bank all property in
Debtor's possession or later coming into Debtor's possession
through enforcement of Debtor's rights or interests in the
Collateral. Debtor irrevocably authorizes Bank, or any Bank
employee or agent, to endorse the name of Debtor upon any checks
or other items which are received in payment for any Collateral,
and to do any and all things necessary in order to reduce these
items to money. Bank shall have no duty as to the collection or
protection of Collateral or the proceeds of it, nor as to the
preservation of any related rights, beyond the use of reasonable
care in the custody and preservation of Collateral in the
possession of Bank. Debtor agrees to take all steps necessary to
preserve rights against prior parties with respect to the
Collateral. Nothing in this Section 3.1 shall be deemed a
consent by Bank to any sale, lease or other disposition of any
Collateral.
3.2 Debtor agrees that immediately upon Bank's request (whether or
not any Event of Default exists), the Indebtedness shall be on a
"remittance basis" as follows: Debtor shall, at its sole
expense, establish and maintain (and Bank, at Bank's option may
establish and maintain at Debtor's expense): (a) an United
States Post Office lock box (the "Lock Box"), to which Bank shall
have exclusive access and control. Debtor expressly authorizes
Bank, from time to time, to remove contents from the Lock Box,
for disposition in accordance with this Agreement. Debtor agrees
to notify all account debtors and other parties obligated to
Debtor that all payments made to Debtor (other than payments by
electronic funds transfer) shall be remitted, for the credit of
Debtor, to the Lock Box, and Debtor shall include a like
statement on all invoices; and (b) a non-interest bearing deposit
account with Bank which shall be titled as designated by Bank
(the "Cash Collateral Account") to which Bank shall have
exclusive access and control. Debtor agrees to notify all
account debtors and other parties obligated to Debtor that all
payments made to Debtor by electronic funds transfer shall be
remitted to the Cash Collateral Account, and Debtor, at Bank's
request, shall include a like statement on all invoices. Debtor
shall execute all documents and authorizations as required by
Bank to establish and maintain the Lock Box and the Cash
Collateral Account.
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3.3 All items or amounts which are remitted to the Lock Box, to the
Cash Collateral Account, or otherwise delivered by or for the
benefit of Debtor to Bank on account of partial or full payment
of, or with respect to, any Collateral shall, at Bank's option,
(i) be applied to the payment of the Indebtedness, whether then
due or not, in such order or at such time of application as Bank
may determine in its sole discretion or, (ii) be deposited to the
Cash Collateral Account. Debtor agrees that Bank shall not be
liable for any loss or damage which Debtor may suffer as a result
of Bank's processing of items or its exercise of any other rights
or remedies under this Agreement, including, without limitation,
indirect, special or consequential damages, loss of revenues or
profits, or any claim, demand or action by any third party
arising out of or in connection with the processing of items or
the exercise of any other rights or remedies under this
Agreement. Debtor agrees to indemnify and hold Bank harmless
from and against all such third party claims, demands or actions,
and all related expenses or liabilities, including, without
limitation, attorney fees.
4. DEFAULTS, ENFORCEMENT AND APPLICATION OF PROCEEDS.
4.1 The occurrence or existence of any of the following conditions or
events shall constitute an "Event of Default" under this
Agreement:
(a) Any failure to pay the Indebtedness or any other
indebtedness when due, or such portion of it as may be due,
by acceleration or otherwise; or
(b) Any failure or neglect to comply with, or breach of or
default under, any term of this Agreement, or any other
agreement or commitment between Debtor or any guarantor of
any of the Indebtedness ("Guarantor") and Bank; or
(c) Any warranty, representation, financial statement, or other
information made, given or furnished to Bank by or on behalf
of Debtor or any Guarantor shall be, or shall prove to have
been, false or materially misleading when made, given, or
furnished; or
(d) Any loss, theft, substantial damage or destruction to or of
any Collateral, or the issuance or filing of any attachment,
levy, garnishment, or the commencement of any proceeding in
connection with any Collateral or of any other judicial
process of, upon or in respect of Debtor, any Guarantor, or
any Collateral; or
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(e) Sale or other disposition by Debtor or any Guarantor of any
substantial portion of its assets or property or voluntary
suspension of the transaction of business by Debtor or any
Guarantor, or death, dissolution, termination of existence,
merger, consolidation, insolvency, business failure, or
assignment for the benefit of creditors of or by Debtor or
any Guarantor; or commencement of any proceedings under any
state or federal bankruptcy or insolvency laws or laws for
the relief of debtors by or against Debtor or any Guarantor;
or the appointment of a receiver, trustee, court appointee,
sequestrator or otherwise, for all or any part of the
property of Debtor or any Guarantor; or
(f) Bank deems the margin of Collateral insufficient or itself
insecure, in good faith believing that the prospect of
payment of the Indebtedness or performance of this Agreement
is impaired or shall fear deterioration, removal, or waste
of Collateral.
4.2 Upon the occurrence and at any time during the continuance or
existence of any Event of Default, Bank may, at its discretion
and without prior notice to Debtor, declare any or all of the
Indebtedness to be immediately due and payable, and shall have
and may exercise any one or more of the following rights and
remedies:
(a) Exercise all the rights and remedies upon default, in
foreclosure and otherwise, available to secured parties
under the provisions of the Uniform Commercial Code and
other applicable law;
(b) Institute legal proceedings to foreclose upon the lien and
security interest granted by this Agreement, to recover
judgment for all amounts then due and owing as Indebtedness,
and to collect the same out of any Collateral or the
proceeds of any sale of it;
(c) Institute legal proceedings for the sale, under the judgment
or decree of any court of competent jurisdiction, of any or
all Collateral; and/or
(d) Personally or by agents, attorneys, or appointment of a
receiver, enter upon any premises where Collateral may then
be located, and take possession of all or any of it and/or
render it unusable; and without being responsible for loss
or damage to such Collateral, hold, operate, sell, lease, or
dispose of all or any Collateral at one or more public or
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private sales, leasings or other disposition, at places and
times and on terms and conditions as Bank may deem fit,
without any previous demand or advertisement; and except as
provided in this Agreement, all notice of sale, lease or
other disposition, and advertisement, and other notice or
demand, any right or equity of redemption, and any
obligation of a prospective purchaser or lessee to inquire
as to the power and authority of Bank to sell, lease, or
otherwise dispose of the Collateral or as to the application
by Bank of the proceeds of sale or otherwise, which would
otherwise be required by, or available to Debtor under,
applicable law are expressly waived by Debtor to the fullest
extent permitted.
At any sale pursuant to this Section 4.2, whether under the
power of sale, by virtue of judicial proceedings or
otherwise, it shall not be necessary for Bank or a public
officer under order of a court to have present physical or
constructive possession of Collateral to be sold. The
recitals contained in any conveyances and receipts made and
given by Bank or the public officer to any purchaser at any
sale made pursuant to this Agreement shall, to the extent
permitted by applicable law, conclusively establish the
truth and accuracy of the matters stated (including, without
limit, as to the amounts of the principal of and interest on
the Indebtedness, the accrual and nonpayment of it and
advertisement and conduct of the sale); and all
prerequisites to the sale shall be presumed to have been
satisfied and performed. Upon any sale of any Collateral,
the receipt of the officer making the sale under judicial
proceedings or of Bank shall be sufficient discharge to the
purchase for the purchase money, and the purchaser shall not
be obligated to see to the application of the money. Any
sale of any Collateral under this Agreement shall be a
perpetual bar against Debtor with respect to that
Collateral.
4.3 Debtor shall, at the request of Bank, notify the account debtors
or obligors of Bank's security interest in the Collateral and
direct payment of it to Bank, Bank may, itself, upon the
occurrence and at any time during the continuance or existence of
any Event of Default, so notify and direct any account debtor or
obligor.
4.4 The proceeds of any sale or other disposition of Collateral
authorized by this Agreement shall be applied by Bank first upon
all expenses authorized by the Uniform Commercial Code and all
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reasonable attorney fees and legal expenses incurred by Bank; the
balance of the proceeds of the sale or other disposition shall be
applied in the payment of the Indebtedness, first to interest,
then to principal, then to remaining Indebtedness and the
surplus, if any, shall be paid over to Debtor or to such other
person(s) as may be entitled to it under applicable law. Debtor
shall remain liable for any deficiency, which it shall pay to
Bank immediately upon demand.
4.5 Nothing in this Agreement is intended, nor shall it be construed,
to preclude Bank from pursuing any other remedy provided by law
for the collection of the Indebtedness or for the recovery of any
other sum to which Bank may be entitled for the breach of this
Agreement by Debtor. Nothing in this Agreement shall reduce or
release in any way any rights or security interests of Bank
contained in any existing agreement between Borrower, Debtor, or
any Guarantor and Bank.
4.6 No waiver of default or consent to any act by Debtor shall be
effective unless in writing and signed by an authorized officer
of Bank. No waiver of any default or forbearance on the part of
Bank in enforcing any of its rights under this Agreement shall
operate as a waiver of any other default or of the same default
on a future occasion or of any rights.
4.7 Debtor irrevocably appoints Bank or any agent of Bank (which
appointment is coupled with an interest) the true and lawful
attorney of Debtor (with full power of substitution) in the name,
place and stead of, and at the expense of, Debtor:
(a) to demand, receive, sue for, and give receipts or
acquittances for any moneys due or to become due on any
Collateral and to endorse any item representing any payment
on or proceeds of the Collateral;
(b) to execute and file in the name of and on behalf of Debtor
all financing statements or other filings deemed necessary
or desirable by Bank to evidence, perfect, or continue the
security interests granted in this Agreement; and
(c) to do and perform any act on behalf of Debtor permitted or
required under this Agreement.
4.8 Upon the occurrence and at any time during the continuance or
existence of an Event of Default, Debtor also agrees, upon
request of Bank, to assemble the Collateral and make it available
to Bank at any place designated by Bank which is reasonably
convenient to Bank and Debtor.
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5. MISCELLANEOUS.
5.1 Until Bank is advised in writing by Debtor to the contrary, all
notices, requests and demands required under this Agreement or by
law shall be given to, or made upon, Debtor at the first address
indicated in Section 5.14 below.
5.2 Debtor will give Bank not less than ninety (90) days prior
written notice of all contemplated changes in Debtor's name,
chief executive office location, and/or location of any
Collateral, but the giving of this notice shall not cure any
Event of Default caused by this change.
5.3 Bank assumes no duty of performance or other responsibility under
any contracts contained within the Collateral.
5.4 Bank has the right to sell, assign, transfer, negotiate or grant
participations or any interest in, any or all of the Indebtedness
and any related obligations, including, without limit, this
Agreement. In connection with the above, but without limiting
its ability to make other disclosures to the full extent
allowable, Bank may disclose all documents and information which
Bank now or later has relating to Debtor, the Indebtedness or
this Agreement, however obtained. Debtor further agrees that
Bank may provide information relating to this Agreement or
relating to Debtor to the Bank's parent, affiliates,
subsidiaries, and service providers.
5.5 In addition to Bank's other rights, any indebtedness owing from
Bank to Debtor can be set off and applied by Bank on any
Indebtedness at any time (s) either before or after maturity or
demand without notice to anyone.
5.6 Debtor waives any right to require the Bank to: (a) proceed
against any person or property; (b) give notice of the terms,
time and place of any public or private sale of personal property
security held from any other person, or otherwise comply with the
provisions of Section 9-504 of the Uniform Commercial Code or
(c) pursue any other remedy in the Bank's power. Debtor waives
notice of acceptance of this Agreement and presentment, demand,
protest, notice of protest, dishonor, notice of dishonor, notice
of default, notice of intent to accelerate or demand payment of
any Indebtedness, any and all other notices to which the
undersigned might otherwise be entitled, and diligence in
collecting any Indebtedness, and agree(s) that the Bank may, once
or any number of times, modify the terms of any Indebtedness,
compromise, extend, increase, accelerate, renew or forbear to
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enforce payment of any or all Indebtedness, or permit any other
person to incur additional Indebtedness, all without notice to
Debtor and without affecting in any manner the unconditional
obligation of Debtor under this Agreement. Debtor
unconditionally and irrevocably waives each and every defense and
setoff of any nature which, under principles of guaranty or
otherwise, would operate to impair or diminish in any way the
obligation of Debtor under this Agreement, and acknowledges that
such waiver is by this reference incorporated into each security
agreement, collateral assignment, pledge and/or other document
from Debtor now or later securing the Indebtedness, and
acknowledges that as of the date of this Agreement no such
defense or setoff exists.
5.7 In the event that applicable law shall obligate Bank to give
prior notice to Debtor of any action to be taken under this
Agreement, Debtor agrees that a written notice given to Debtor at
least five (5) days before the date of the act shall be
reasonable notice of the act and, specifically, reasonable
notification of the time and place of any public sale or of the
time after which any private sale, lease, or other disposition is
to be made, unless a shorter notice period is reasonable under
the circumstances. A notice shall be deemed to be given under
this Agreement when delivered to Debtor or when placed in an
envelope addressed to Debtor and deposited, with postage prepaid,
in a post office or official depository under the exclusive care
and custody of the Untied States Postal Service or delivered to
an overnight courier. The mailing shall be by overnight courier,
certified, or first class mail.
5.8 Notwithstanding any prior revocation, termination, surrender, or
discharge of this Agreement in whole or in part, the
effectiveness of this Agreement shall automatically continue or
be reinstated, as the case may be, in the event that any payment
received or credit given by Bank in respect of the Indebtedness
is returned, disgorged, or rescinded under any applicable law,
including, without limitation, bankruptcy or insolvency laws, in
which case, this Agreement, shall be enforceable against Debtor
as if the returned, disgorged, or rescinded payment or credit had
not been received or given by Bank, and whether or not Bank
relied upon this payment or credit or changed its position as a
consequence of it. In the event of continuation or reinstatement
of this Agreement, Debtor agrees, upon demand by Bank, to execute
and deliver to Bank those documents which Bank determines are
appropriate to further evidence (in the public records or
otherwise) this continuation or reinstatement, although the
failure of Debtor to do so shall not affect in any way the
reinstatement or continuation.
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5.9 This Agreement and all the rights and remedies of Bank under this
Agreement shall inure to the benefit of Bank's successors and
assigns and to any other holder who derives from Bank title to or
an interest in the Indebtedness or any portion of it, and shall
bind Debtor and the heirs, legal representatives, successors, and
assigns of Debtor. Nothing in this Section 5.9 is deemed a
consent by Bank to any assignment by Debtor.
5.10 If there is more than one Debtor, all undertakings, warranties
and covenants made by Debtor and all rights, powers and
authorities given to or conferred upon Bank are made or given
jointly and severally.
5.11 Except as otherwise provided in this Agreement, all terms in this
Agreement have the meanings assigned to them in Article 9 (or,
absent definition in Article 9, in any other Article) of the
Uniform Commercial Code. "Uniform Commercial Code" means Act
No. 174 of the Michigan Public Acts of 1962, as amended.
5.12 No single or partial exercise, or delay in the exercise, of any
right or power under this Agreement, shall preclude other or
further exercise of the rights and powers under this Agreement.
The unenforceability of any provision of this Agreement shall not
affect the enforceability of the remainder of this Agreement.
This Agreement constitutes the entire agreement of Debtor and
Bank with respect to the subject matter of this Agreement. No
amendment or modification of this Agreement shall be effective
unless the same shall be in writing and signed by Debtor and an
authorized officer of Bank. This Agreement shall be governed by
and construed in accordance with the internal laws of the State
of Michigan, without regard to conflict of laws principles.
5.13 To the extent that any of the Indebtedness is payable upon
demand, nothing contained in this Agreement shall modify the
terms and conditions of that Indebtedness nor shall anything
contained in this Agreement prevent Bank from making demand,
without notice and with or without reason, for immediate payment
of any or all of that Indebtedness at any time(s), whether or not
an Event of Default has occurred.
5.14 Debtor's chief executive office is located and shall be
maintained at 2970 S. 9th Street, Kalamazoo, Michigan 49009. If
Collateral is located at other than the chief executive office,
such Collateral's location shall be made available upon the
Bank's request.
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5.15 A carbon, photographic or other reproduction of this Agreement
shall be sufficient as a financing statement under the Uniform
Commercial Code and may be filed by Bank in any filing office.
5.16 This Agreement shall be terminated only by the filing of a
termination statement in accordance with the applicable
provisions of the Uniform Commercial Code, but the obligations
contained in Section 2.12 of this Agreement shall survive
termination.
6. DEBTOR AND BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A
CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER
CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF
THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT
WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING
THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS
AGREEMENT OR THE INDEBTEDNESS.
DEBTOR:
MANATRON, INC.
By: /S/ PAUL R. SYLVESTER
SIGNATURE OF: Paul R. Sylvester
Its: PRESIDENT
TITLE
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EXHIBIT 10.28
COMERICA SECURITY AGREEMENT
(All Assets)
- ---------------------------------------------------------------------------
As of October 9, 1998, for value received, the undersigned, SPECIALIZED
DATA SYSTEMS, INC., a North Carolina corporation ("Debtor"), grants to
COMERICA BANK, a Michigan banking corporation ("Bank"), a continuing
security interest in the Collateral (as defined below), to secure payment,
when due, whether by stated maturity, demand, acceleration or otherwise, of
all existing and future indebtedness (as herein defined) of Debtor and/or
MANATRON, INC., a Michigan corporation ("Borrower"), to the Bank.
"Indebtedness" shall mean any and all obligations, liabilities and
indebtedness of Debtor to the Bank, whether absolute or contingent, direct
or indirect, voluntary or involuntary, liquidated or unliquidated, joint or
several, known or unknown, and whether now existing or hereafter arising;
any and all obligations or liabilities for which Debtor would otherwise be
liable to the Bank were it not for the invalidity or unenforceability of
them by reason of any bankruptcy, insolvency or other law, or for any other
reason; any and all amendments, modifications, renewals and/or extensions
of any of the above; all costs incurred by Bank in establishing,
determining, continuing, or defending the validity or priority of its
security interest, or in pursuing its rights and remedies under this
Agreement or under any other agreement between Bank and Debtor or in
connection with any proceeding involving Bank as a result of any financial
accommodation to Debtor; and all other costs of collecting indebtedness,
including, without limit, attorney fees. Debtor agrees to pay Bank all
such costs incurred by the Bank, immediately upon demand, and until paid
all costs shall bear interest at the highest per annum rate applicable to
any of the Indebtedness, but not in excess of the maximum rate permitted by
law. Any reference in this Agreement to attorney fees shall be deemed a
reference to reasonable fees, costs, and expenses of both in-house and
outside counsel and paralegals, whether or not a suit or action is
instituted, and to court costs if a suit or action is instituted, and
whether attorney fees or court costs are incurred at the trial court level,
on appeal, in a bankruptcy, administrative or probate proceeding or
otherwise.
1. COLLATERAL shall mean all of the following property Debtor now or
later owns or has an interest in, wherever located:
(a) all Accounts Receivable (for purposes of this Agreement,
"Accounts Receivable" consists of all accounts, general
intangibles, chattel paper, contract rights, deposit accounts,
documents and instruments),
(b) all Inventory,
(c) all Equipment and Fixtures,
<PAGE>
(d) specific items listed below and/or on attached Schedule A, if
any, is/are also included in Collateral:
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
(e) all goods, instruments, documents, policies and certificates of
insurance, deposits, money, investment property or other property
(except real property which is not a fixture) which are now or
later in possession or control of Bank, or as to which Bank now
or later controls possession by documents or otherwise, and
(f) all additions, attachments, accessions, parts, replacements,
substitutions, renewals, interest, dividends, distributions,
rights of any kind (including but not limited to stock splits,
stock rights, voting and preferential rights), products, and
proceeds of or pertaining to the above including, without limit,
cash or other property which were proceeds and are recovered by a
bankruptcy trustee or otherwise as a preferential transfer by
Debtor.
2. WARRANTIES, COVENANTS AND AGREEMENTS. Debtor warrants, covenants and
agrees as follows:
2.1 Debtor shall furnish to Bank, in form and at intervals as Bank
may request, any information Bank may reasonably request and
allow Bank to examine, inspect, and copy any of Debtor's books
and records. Debtor shall, at the request of Bank, mark its
records and the Collateral to clearly indicate the security
interests of Bank under this Agreement.
2.2 At the time any Collateral becomes, or is represented to be,
subject to a security interest in favor of Bank, Debtor shall be
deemed to have warranted that (a) Debtor is the lawful owner of
the Collateral and has the right and authority to subject it to a
security interest granted to Bank; (b) none of the Collateral is
subject to any security interest, other than that in favor of
Bank, and there are no financing statements on file, other than
in favor of Bank; and (c) Debtor acquired its rights in the
Collateral in the ordinary course of its business.
2.3 Debtor will keep the Collateral free at all times from all
claims, liens, security interests and encumbrances, other than
those in favor of Bank. Debtor will not, without the prior
written consent of Bank, sell, transfer or lease, or permit to be
sold, transferred or leased, any or all of the Collateral, except
for Inventory in the ordinary course of its business, and will
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not return any Inventory to its supplier. Bank, or its
representatives, may, at all reasonable times, inspect the
Collateral and may enter upon all premises where the Collateral
is kept or might be located.
2.4 Debtor will do all acts and will execute or cause to be executed
all writings requested by Bank to establish, maintain and
continue a perfected and first security interest of Bank in the
Collateral. Debtor agrees that Bank has no obligation to acquire
or perfect any lien on or security interest in any asset(s),
whether realty or personalty, to secure payment of the
Indebtedness, and Debtor is not relying upon assets in which the
Bank may have a lien or security interest for payment of the
Indebtedness.
2.5 Debtor will pay, within the time that they can be paid without
interest or penalty, all taxes, assessments and similar charges
which at any time are or may become a lien, charge, or
encumbrance upon any Collateral, except to the extent contested
in good faith and bonded in a manner satisfactory to Bank. If
Debtor fails to pay any of these taxes, assessments, or other
charges in the time provided above, Bank has the option (but not
the obligation) to do so, and Debtor agrees to repay all amounts
so expended by Bank immediately upon demand, together with
interest at the highest lawful default rate which could be
charged by Bank on any Indebtedness.
2.6 Debtor will keep the Collateral in good condition and will
protect it from loss, damage, or deterioration from any cause.
Debtor has and will maintain at all times (a) with respect to the
Collateral, insurance under an "all risk" policy against fire and
other risks customarily insured against, and (b) public liability
insurance and other insurance as may be required by law or
reasonably required by Bank, all of which insurance shall be in
amount, form and content, and written by companies, as may be
satisfactory to Bank, and shall contain a lender's loss payable
endorsement acceptable to Bank. Debtor will deliver to Bank,
immediately upon demand, evidence satisfactory to Bank that the
required insurance has been procured. If Debtor fails to
maintain satisfactory insurance, Bank has the option (but not the
obligation) to do so, and Debtor agrees to repay all amounts so
expended by Bank immediately upon demand, together with interest
at the highest lawful default rate which could be charged by Bank
on any Indebtedness.
2.7 On each occasion on which Debtor evidences to Bank the account
balances on and the nature and extent of the Accounts Receivable,
Debtor shall be deemed to have warranted that, except as
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otherwise indicated (a) each of those Accounts Receivable is
valid and enforceable without performance by Debtor of any act,
(b) each of those account balances are in fact owing, (c) there
are no setoffs, recoupments, credits, contra accounts,
counterclaims or defenses against any of those Accounts
Receivable, (d) as to any Accounts Receivable represented by a
note, trade acceptance, draft or other instrument or by any
chattel paper or document, the same have been endorsed and/or
delivered by Debtor to Bank, (e) Debtor has not received with
respect to any Account Receivable, any notice of the death of the
related account debtor, nor of the dissolution, liquidation,
termination of existence, insolvency, business failure,
appointment of a receiver for, assignment for the benefit of
creditors by, or filing of a petition in bankruptcy by or
against, the account debtor, and (f) as to each Account
Receivable, the account debtor is not an affiliate of Debtor, the
United States of America or any department, agency or
instrumentality of it, or a citizen or resident of any
jurisdiction outside of the United States. Debtor will do all
acts and will execute all writings requested by Bank to perform,
enforce performance of, and collect all Accounts Receivables.
Debtor shall neither make nor permit any modification, compromise
or substitution for any Account Receivable without the prior
written consent of Bank. Debtor shall, at Bank's request,
arrange for verification of Accounts Receivable directly with
account debtors or by other methods acceptable to Bank.
2.8 Debtor, at all times, shall be in strict compliance with all
applicable laws, including, without limit any laws, ordinances,
directives, orders, statutes, or regulations an object of which
is to regulate or improve health, safety, or the environment
("Environmental Laws").
2.9 If Bank, acting in its sole discretion, redelivers Collateral to
Debtor or Debtor's designee for the purpose of (a) the ultimate
sale or exchange thereof; or (b) presentation, collection,
renewal, or registration of transfer thereof; or (c) loading,
unloading, storing, shipping, transshipping, manufacturing,
processing or otherwise dealing with it preliminary to sale or
exchange; such redelivery shall be in trust for the benefit of
Bank and shall not constitute a release of Bank's security
interest in it or in the proceeds or products of it, unless Bank
specifically so agrees in writing. If Debtor requests any such
redelivery, Debtor will deliver with such request a duly executed
financing statement in form and substance satisfactory to Bank.
Any proceeds of Collateral coming into Debtor's possession as a
result of any such redelivery shall be held in trust for Bank and
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immediately delivered to Bank for application on the
Indebtedness. Bank may (in its sole discretion) deliver any or
all of the Collateral to Debtor, and such delivery by Bank shall
discharge Bank from all liability or responsibility for such
Collateral. Bank, at its option, may require delivery of any
Collateral to Bank at any time with such endorsements or
assignments of the Collateral as Bank may request.
2.10 At any time and without notice, Bank may (a) cause any or all of
the Collateral to be transferred to its name or to the name of
its nominees; (b) receive or collect, by legal proceedings or
otherwise, all dividends, interest, principal payments and other
sums and all other distributions at any time payable or
receivable on account of the Collateral, and hold the same as
Collateral, or apply the same to the Indebtedness, the manner and
distribution of the application to be in the sole discretion of
the Bank; (c) enter into any extension, subordination,
reorganization, deposit, merger or consolidation agreement or any
other agreement relating to or affecting the Collateral, and
deposit or surrender control of the Collateral, and accept other
property in exchange for the Collateral and hold or apply the
property or money so received pursuant to this Agreement.
2.11 Bank may assign any of the Indebtedness and deliver any or all of
the Collateral to its assignee, who then shall have with respect
to Collateral so delivered all the rights and powers of Bank
under this Agreement, and after that, Bank shall be fully
discharged from all liability and responsibility with respect to
Collateral so delivered.
2.12 Debtor shall defend, indemnify and hold harmless Bank, its
employees, agents, shareholders, affiliates, officers, and
directors, from and against any and all claims, damages, fines,
expenses, liabilities or causes of action of whatever kind,
including, without limit, consultant fees, legal expenses, and
attorney fees, suffered by any of them as a direct or indirect
result of any actual or asserted violation of any law, including,
without limit, Environmental Laws, or of any remediation relating
to any property required by any law, including, without limit,
Environmental Laws.
2.13 Debtor delivers this Agreement based solely on Debtor's
independent investigation of (or decision not to investigate) the
financial condition of Borrower and is not relying on any
information furnished by Bank. Debtor assumes full
responsibility for obtaining any further information concerning
the Borrower's financial condition, the status of the
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Indebtedness or any other matter which Debtor may deem necessary
or appropriate now or later. Debtor waives any duty on the part
of Bank, and agrees that Debtor is not relying upon nor expecting
Bank to disclose to Debtor any fact now or later known by Bank,
whether relating to the operations or condition of Borrower, the
existence, liabilities or financial condition of any guarantor of
the Indebtedness, the occurrence of any default with respect to
the Indebtedness, or otherwise, notwithstanding any effect such
fact may have upon Debtor's risk or Debtor's rights against
Borrower. Debtor knowingly accepts the full range of risk
encompassed in this Agreement, which risk includes, without
limit, the possibility that Borrower may incur Indebtedness to
Bank after the financial condition of Borrower, or Borrower's
ability to pay debts as they mature, has deteriorated.
3. COLLECTION OF PROCEEDS.
3.1 Debtor agrees to collect and enforce payment of all Collateral
until Bank shall direct Debtor to the contrary. Immediately upon
notice to Debtor by Bank and at all times after that, Debtor
agrees to fully and promptly cooperate and assist Bank in the
collection and enforcement of all Collateral and to hold in trust
for Bank all payments received in connection with Collateral and
from the sale, lease or other disposition of any Collateral, all
rights by way of suretyship or guaranty and all rights in the
nature of a lien or security interest which Debtor now or later
has regarding Collateral. Immediately upon and after such
notice, Debtor agrees to (a) endorse to Bank and immediately
deliver to Bank all payments received on Collateral or from the
sale, lease or other disposition of any Collateral or arising
from any other rights or interests of Debtor in the Collateral,
in the form received by Debtor without commingling with any other
funds, and (b) immediately deliver to Bank all property in
Debtor's possession or later coming into Debtor's possession
through enforcement of Debtor's rights or interests in the
Collateral. Debtor irrevocably authorizes Bank, or any Bank
employee or agent, to endorse the name of Debtor upon any checks
or other items which are received in payment for any Collateral,
and to do any and all things necessary in order to reduce these
items to money. Bank shall have no duty as to the collection or
protection of Collateral or the proceeds of it, nor as to the
preservation of any related rights, beyond the use of reasonable
care in the custody and preservation of Collateral in the
possession of Bank. Debtor agrees to take all steps necessary to
preserve rights against prior parties with respect to the
Collateral. Nothing in this Section 3.1 shall be deemed a
consent by Bank to any sale, lease or other disposition of any
Collateral.
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3.2 Debtor agrees that immediately upon Bank's request (whether or
not any Event of Default exists), the Indebtedness shall be on a
"remittance basis" as follows: Debtor shall, at its sole
expense, establish and maintain (and Bank, at Bank's option may
establish and maintain at Debtor's expense): (a) an United
States Post Office lock box (the "Lock Box"), to which Bank shall
have exclusive access and control. Debtor expressly authorizes
Bank, from time to time, to remove contents from the Lock Box,
for disposition in accordance with this Agreement. Debtor agrees
to notify all account debtors and other parties obligated to
Debtor that all payments made to Debtor (other than payments by
electronic funds transfer) shall be remitted, for the credit of
Debtor, to the Lock Box, and Debtor shall include a like
statement on all invoices; and (b) a non-interest bearing deposit
account with Bank which shall be titled as designated by Bank
(the "Cash Collateral Account") to which Bank shall have
exclusive access and control. Debtor agrees to notify all
account debtors and other parties obligated to Debtor that all
payments made to Debtor by electronic funds transfer shall be
remitted to the Cash Collateral Account, and Debtor, at Bank's
request, shall include a like statement on all invoices. Debtor
shall execute all documents and authorizations as required by
Bank to establish and maintain the Lock Box and the Cash
Collateral Account.
3.3 All items or amounts which are remitted to the Lock Box, to the
Cash Collateral Account, or otherwise delivered by or for the
benefit of Debtor to Bank on account of partial or full payment
of, or with respect to, any Collateral shall, at Bank's option,
(i) be applied to the payment of the Indebtedness, whether then
due or not, in such order or at such time of application as Bank
may determine in its sole discretion or, (ii) be deposited to the
Cash Collateral Account. Debtor agrees that Bank shall not be
liable for any loss or damage which Debtor may suffer as a result
of Bank's processing of items or its exercise of any other rights
or remedies under this Agreement, including, without limitation,
indirect, special or consequential damages, loss of revenues or
profits, or any claim, demand or action by any third party
arising out of or in connection with the processing of items or
the exercise of any other rights or remedies under this
Agreement. Debtor agrees to indemnify and hold Bank harmless
from and against all such third party claims, demands or actions,
and all related expenses or liabilities, including, without
limitation, attorney fees.
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4. DEFAULTS, ENFORCEMENT AND APPLICATION OF PROCEEDS.
4.1 The occurrence or existence of any of the following conditions or
events shall constitute an "Event of Default" under this
Agreement:
(a) Any failure to pay the Indebtedness or any other
indebtedness when due, or such portion of it as may be due,
by acceleration or otherwise; or
(b) Any failure or neglect to comply with, or breach of or
default under, any term of this Agreement, or any other
agreement or commitment between Debtor or any guarantor of
any of the Indebtedness ("Guarantor") and Bank; or
(c) Any warranty, representation, financial statement, or other
information made, given or furnished to Bank by or on behalf
of Debtor or any Guarantor shall be, or shall prove to have
been, false or materially misleading when made, given, or
furnished; or
(d) Any loss, theft, substantial damage or destruction to or of
any Collateral, or the issuance or filing of any attachment,
levy, garnishment, or the commencement of any proceeding in
connection with any Collateral or of any other judicial
process of, upon or in respect of Debtor, any Guarantor, or
any Collateral; or
(e) Sale or other disposition by Debtor or any Guarantor of any
substantial portion of its assets or property or voluntary
suspension of the transaction of business by Debtor or any
Guarantor, or death, dissolution, termination of existence,
merger, consolidation, insolvency, business failure, or
assignment for the benefit of creditors of or by Debtor or
any Guarantor; or commencement of any proceedings under any
state or federal bankruptcy or insolvency laws or laws for
the relief of debtors by or against Debtor or any Guarantor;
or the appointment of a receiver, trustee, court appointee,
sequestrator or otherwise, for all or any part of the
property of Debtor or any Guarantor; or
(f) Bank deems the margin of Collateral insufficient or itself
insecure, in good faith believing that the prospect of
payment of the Indebtedness or performance of this Agreement
is impaired or shall fear deterioration, removal, or waste
of Collateral.
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4.2 Upon the occurrence and at any time during the continuance or
existence of any Event of Default, Bank may, at its discretion
and without prior notice to Debtor, declare any or all of the
Indebtedness to be immediately due and payable, and shall have
and may exercise any one or more of the following rights and
remedies:
(a) Exercise all the rights and remedies upon default, in
foreclosure and otherwise, available to secured parties
under the provisions of the Uniform Commercial Code and
other applicable law;
(b) Institute legal proceedings to foreclose upon the lien and
security interest granted by this Agreement, to recover
judgment for all amounts then due and owing as Indebtedness,
and to collect the same out of any Collateral or the
proceeds of any sale of it;
(c) Institute legal proceedings for the sale, under the judgment
or decree of any court of competent jurisdiction, of any or
all Collateral; and/or
(d) Personally or by agents, attorneys, or appointment of a
receiver, enter upon any premises where Collateral may then
be located, and take possession of all or any of it and/or
render it unusable; and without being responsible for loss
or damage to such Collateral, hold, operate, sell, lease, or
dispose of all or any Collateral at one or more public or
private sales, leasings or other disposition, at places and
times and on terms and conditions as Bank may deem fit,
without any previous demand or advertisement; and except as
provided in this Agreement, all notice of sale, lease or
other disposition, and advertisement, and other notice or
demand, any right or equity of redemption, and any
obligation of a prospective purchaser or lessee to inquire
as to the power and authority of Bank to sell, lease, or
otherwise dispose of the Collateral or as to the application
by Bank of the proceeds of sale or otherwise, which would
otherwise be required by, or available to Debtor under,
applicable law are expressly waived by Debtor to the fullest
extent permitted.
At any sale pursuant to this Section 4.2, whether under the
power of sale, by virtue of judicial proceedings or
otherwise, it shall not be necessary for Bank or a public
officer under order of a court to have present physical or
constructive possession of Collateral to be sold. The
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recitals contained in any conveyances and receipts made and
given by Bank or the public officer to any purchaser at any
sale made pursuant to this Agreement shall, to the extent
permitted by applicable law, conclusively establish the
truth and accuracy of the matters stated (including, without
limit, as to the amounts of the principal of and interest on
the Indebtedness, the accrual and nonpayment of it and
advertisement and conduct of the sale); and all
prerequisites to the sale shall be presumed to have been
satisfied and performed. Upon any sale of any Collateral,
the receipt of the officer making the sale under judicial
proceedings or of Bank shall be sufficient discharge to the
purchase for the purchase money, and the purchaser shall not
be obligated to see to the application of the money. Any
sale of any Collateral under this Agreement shall be a
perpetual bar against Debtor with respect to that
Collateral.
4.3 Debtor shall, at the request of Bank, notify the account debtors
or obligors of Bank's security interest in the Collateral and
direct payment of it to Bank, Bank may, itself, upon the
occurrence and at any time during the continuance or existence of
any Event of Default, so notify and direct any account debtor or
obligor.
4.4 The proceeds of any sale or other disposition of Collateral
authorized by this Agreement shall be applied by Bank first upon
all expenses authorized by the Uniform Commercial Code and all
reasonable attorney fees and legal expenses incurred by Bank; the
balance of the proceeds of the sale or other disposition shall be
applied in the payment of the Indebtedness, first to interest,
then to principal, then to remaining Indebtedness and the
surplus, if any, shall be paid over to Debtor or to such other
person(s) as may be entitled to it under applicable law. Debtor
shall remain liable for any deficiency, which it shall pay to
Bank immediately upon demand.
4.5 Nothing in this Agreement is intended, nor shall it be construed,
to preclude Bank from pursuing any other remedy provided by law
for the collection of the Indebtedness or for the recovery of any
other sum to which Bank may be entitled for the breach of this
Agreement by Debtor. Nothing in this Agreement shall reduce or
release in any way any rights or security interests of Bank
contained in any existing agreement between Borrower, Debtor, or
any Guarantor and Bank.
4.6 No waiver of default or consent to any act by Debtor shall be
effective unless in writing and signed by an authorized officer
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of Bank. No waiver of any default or forbearance on the part of
Bank in enforcing any of its rights under this Agreement shall
operate as a waiver of any other default or of the same default
on a future occasion or of any rights.
4.7 Debtor irrevocably appoints Bank or any agent of Bank (which
appointment is coupled with an interest) the true and lawful
attorney of Debtor (with full power of substitution) in the name,
place and stead of, and at the expense of, Debtor:
(a) to demand, receive, sue for, and give receipts or
acquittances for any moneys due or to become due on any
Collateral and to endorse any item representing any payment
on or proceeds of the Collateral;
(b) to execute and file in the name of and on behalf of Debtor
all financing statements or other filings deemed necessary
or desirable by Bank to evidence, perfect, or continue the
security interests granted in this Agreement; and
(c) to do and perform any act on behalf of Debtor permitted or
required under this Agreement.
4.8 Upon the occurrence and at any time during the continuance or
existence of an Event of Default, Debtor also agrees, upon
request of Bank, to assemble the Collateral and make it available
to Bank at any place designated by Bank which is reasonably
convenient to Bank and Debtor.
5. MISCELLANEOUS.
5.1 Until Bank is advised in writing by Debtor to the contrary, all
notices, requests and demands required under this Agreement or by
law shall be given to, or made upon, Debtor at the first address
indicated in Section 5.14 below.
5.2 Debtor will give Bank not less than ninety (90) days prior
written notice of all contemplated changes in Debtor's name,
chief executive office location, and/or location of any
Collateral, but the giving of this notice shall not cure any
Event of Default caused by this change.
5.3 Bank assumes no duty of performance or other responsibility under
any contracts contained within the Collateral.
5.4 Bank has the right to sell, assign, transfer, negotiate or grant
participations or any interest in, any or all of the Indebtedness
and any related obligations, including, without limit, this
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Agreement. In connection with the above, but without limiting
its ability to make other disclosures to the full extent
allowable, Bank may disclose all documents and information which
Bank now or later has relating to Debtor, the Indebtedness or
this Agreement, however obtained. Debtor further agrees that
Bank may provide information relating to this Agreement or
relating to Debtor to the Bank's parent, affiliates,
subsidiaries, and service providers.
5.5 In addition to Bank's other rights, any indebtedness owing from
Bank to Debtor can be set off and applied by Bank on any
Indebtedness at any time (s) either before or after maturity or
demand without notice to anyone.
5.6 Debtor waives any right to require the Bank to: (a) proceed
against any person or property; (b) give notice of the terms,
time and place of any public or private sale of personal property
security held from any other person, or otherwise comply with the
provisions of Section 9-504 of the Uniform Commercial Code or
(c) pursue any other remedy in the Bank's power. Debtor waives
notice of acceptance of this Agreement and presentment, demand,
protest, notice of protest, dishonor, notice of dishonor, notice
of default, notice of intent to accelerate or demand payment of
any Indebtedness, any and all other notices to which the
undersigned might otherwise be entitled, and diligence in
collecting any Indebtedness, and agree(s) that the Bank may, once
or any number of times, modify the terms of any Indebtedness,
compromise, extend, increase, accelerate, renew or forbear to
enforce payment of any or all Indebtedness, or permit any other
person to incur additional Indebtedness, all without notice to
Debtor and without affecting in any manner the unconditional
obligation of Debtor under this Agreement. Debtor
unconditionally and irrevocably waives each and every defense and
setoff of any nature which, under principles of guaranty or
otherwise, would operate to impair or diminish in any way the
obligation of Debtor under this Agreement, and acknowledges that
such waiver is by this reference incorporated into each security
agreement, collateral assignment, pledge and/or other document
from Debtor now or later securing the Indebtedness, and
acknowledges that as of the date of this Agreement no such
defense or setoff exists.
5.7 Debtor waives any and all rights (whether by subrogation,
indemnity, reimbursement, or otherwise) to recover from Borrower
any amounts paid or the value of any Collateral given by Debtor
pursuant to this Agreement.
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5.8 In the event that applicable law shall obligate Bank to give
prior notice to Debtor of any action to be taken under this
Agreement, Debtor agrees that a written notice given to Debtor at
least five (5) days before the date of the act shall be
reasonable notice of the act and, specifically, reasonable
notification of the time and place of any public sale or of the
time after which any private sale, lease, or other disposition is
to be made, unless a shorter notice period is reasonable under
the circumstances. A notice shall be deemed to be given under
this Agreement when delivered to Debtor or when placed in an
envelope addressed to Debtor and deposited, with postage prepaid,
in a post office or official depository under the exclusive care
and custody of the Untied States Postal Service or delivered to
an overnight courier. The mailing shall be by overnight courier,
certified, or first class mail.
5.9 Notwithstanding any prior revocation, termination, surrender, or
discharge of this Agreement in whole or in part, the
effectiveness of this Agreement shall automatically continue or
be reinstated, as the case may be, in the event that any payment
received or credit given by Bank in respect of the Indebtedness
is returned, disgorged, or rescinded under any applicable law,
including, without limitation, bankruptcy or insolvency laws, in
which case, this Agreement, shall be enforceable against Debtor
as if the returned, disgorged, or rescinded payment or credit had
not been received or given by Bank, and whether or not Bank
relied upon this payment or credit or changed its position as a
consequence of it. In the event of continuation or reinstatement
of this Agreement, Debtor agrees, upon demand by Bank, to execute
and deliver to Bank those documents which Bank determines are
appropriate to further evidence (in the public records or
otherwise) this continuation or reinstatement, although the
failure of Debtor to do so shall not affect in any way the
reinstatement or continuation.
5.10 This Agreement and all the rights and remedies of Bank under this
Agreement shall inure to the benefit of Bank's successors and
assigns and to any other holder who derives from Bank title to or
an interest in the Indebtedness or any portion of it, and shall
bind Debtor and the heirs, legal representatives, successors, and
assigns of Debtor. Nothing in this Section 5.9 is deemed a
consent by Bank to any assignment by Debtor.
5.11 If there is more than one Debtor, all undertakings, warranties
and covenants made by Debtor and all rights, powers and
authorities given to or conferred upon Bank are made or given
jointly and severally.
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5.12 Except as otherwise provided in this Agreement, all terms in this
Agreement have the meanings assigned to them in Article 9 (or,
absent definition in Article 9, in any other Article) of the
Uniform Commercial Code. "Uniform Commercial Code" means Act
No. 174 of the Michigan Public Acts of 1962, as amended.
5.13 No single or partial exercise, or delay in the exercise, of any
right or power under this Agreement, shall preclude other or
further exercise of the rights and powers under this Agreement.
The unenforceability of any provision of this Agreement shall not
affect the enforceability of the remainder of this Agreement.
This Agreement constitutes the entire agreement of Debtor and
Bank with respect to the subject matter of this Agreement. No
amendment or modification of this Agreement shall be effective
unless the same shall be in writing and signed by Debtor and an
authorized officer of Bank. This Agreement shall be governed by
and construed in accordance with the internal laws of the State
of Michigan, without regard to conflict of laws principles.
5.14 To the extent that any of the Indebtedness is payable upon
demand, nothing contained in this Agreement shall modify the
terms and conditions of that Indebtedness nor shall anything
contained in this Agreement prevent Bank from making demand,
without notice and with or without reason, for immediate payment
of any or all of that Indebtedness at any time(s), whether or not
an Event of Default has occurred.
5.15 Debtor's chief executive office is located and shall be
maintained at 2970 S. 9th Street, Kalamazoo, Michigan 49009. If
Collateral is located at other than the chief executive office,
such Collateral's location shall be made available upon the
Bank's request.
5.16 A carbon, photographic or other reproduction of this Agreement
shall be sufficient as a financing statement under the Uniform
Commercial Code and may be filed by Bank in any filing office.
5.17 This Agreement shall be terminated only by the filing of a
termination statement in accordance with the applicable
provisions of the Uniform Commercial Code, but the obligations
contained in Section 2.12 of this Agreement shall survive
termination.
6. DEBTOR AND BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A
CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER
CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF
THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT
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WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING
THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS
AGREEMENT OR THE INDEBTEDNESS.
DEBTOR:
SPECIALIZED DATA SYSTEMS, INC.
By: /S/ PAUL R. SYLVESTER
SIGNATURE OF: Paul R. Sylvester
Its: PRESIDENT
______________________________________
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EXHIBIT 10.29
COMERICA SECURITY AGREEMENT
(All Assets)
- ---------------------------------------------------------------------------
As of October 9, 1998, for value received, the undersigned, ATEK
INFORMATION SYSTEMS, INC., an Indiana corporation ("Debtor"), grants to
COMERICA BANK, a Michigan banking corporation ("Bank"), a continuing
security interest in the Collateral (as defined below), to secure payment,
when due, whether by stated maturity, demand, acceleration or otherwise, of
all existing and future indebtedness (as herein defined) of Debtor and/or
MANATRON, INC., a Michigan corporation ("Borrower"), to the Bank.
"Indebtedness" shall mean any and all obligations, liabilities and
indebtedness of Debtor to the Bank, whether absolute or contingent, direct
or indirect, voluntary or involuntary, liquidated or unliquidated, joint or
several, known or unknown, and whether now existing or hereafter arising;
any and all obligations or liabilities for which Debtor would otherwise be
liable to the Bank were it not for the invalidity or unenforceability of
them by reason of any bankruptcy, insolvency or other law, or for any other
reason; any and all amendments, modifications, renewals and/or extensions
of any of the above; all costs incurred by Bank in establishing,
determining, continuing, or defending the validity or priority of its
security interest, or in pursuing its rights and remedies under this
Agreement or under any other agreement between Bank and Debtor or in
connection with any proceeding involving Bank as a result of any financial
accommodation to Debtor; and all other costs of collecting indebtedness,
including, without limit, attorney fees. Debtor agrees to pay Bank all
such costs incurred by the Bank, immediately upon demand, and until paid
all costs shall bear interest at the highest per annum rate applicable to
any of the Indebtedness, but not in excess of the maximum rate permitted by
law. Any reference in this Agreement to attorney fees shall be deemed a
reference to reasonable fees, costs, and expenses of both in-house and
outside counsel and paralegals, whether or not a suit or action is
instituted, and to court costs if a suit or action is instituted, and
whether attorney fees or court costs are incurred at the trial court level,
on appeal, in a bankruptcy, administrative or probate proceeding or
otherwise.
1. COLLATERAL shall mean all of the following property Debtor now or
later owns or has an interest in, wherever located:
(a) all Accounts Receivable (for purposes of this Agreement,
"Accounts Receivable" consists of all accounts, general
intangibles, chattel paper, contract rights, deposit accounts,
documents and instruments),
(b) all Inventory,
(c) all Equipment and Fixtures,
<PAGE>
(d) specific items listed below and/or on attached Schedule A, if
any, is/are also included in Collateral:
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
(e) all goods, instruments, documents, policies and certificates of
insurance, deposits, money, investment property or other property
(except real property which is not a fixture) which are now or
later in possession or control of Bank, or as to which Bank now
or later controls possession by documents or otherwise, and
(f) all additions, attachments, accessions, parts, replacements,
substitutions, renewals, interest, dividends, distributions,
rights of any kind (including but not limited to stock splits,
stock rights, voting and preferential rights), products, and
proceeds of or pertaining to the above including, without limit,
cash or other property which were proceeds and are recovered by a
bankruptcy trustee or otherwise as a preferential transfer by
Debtor.
2. WARRANTIES, COVENANTS AND AGREEMENTS. Debtor warrants, covenants and
agrees as follows:
2.1 Debtor shall furnish to Bank, in form and at intervals as Bank
may request, any information Bank may reasonably request and
allow Bank to examine, inspect, and copy any of Debtor's books
and records. Debtor shall, at the request of Bank, mark its
records and the Collateral to clearly indicate the security
interests of Bank under this Agreement.
2.2 At the time any Collateral becomes, or is represented to be,
subject to a security interest in favor of Bank, Debtor shall be
deemed to have warranted that (a) Debtor is the lawful owner of
the Collateral and has the right and authority to subject it to a
security interest granted to Bank; (b) none of the Collateral is
subject to any security interest, other than that in favor of
Bank, and there are no financing statements on file, other than
in favor of Bank; and (c) Debtor acquired its rights in the
Collateral in the ordinary course of its business.
2.3 Debtor will keep the Collateral free at all times from all
claims, liens, security interests and encumbrances, other than
those in favor of Bank. Debtor will not, without the prior
written consent of Bank, sell, transfer or lease, or permit to be
sold, transferred or leased, any or all of the Collateral, except
for Inventory in the ordinary course of its business, and will
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not return any Inventory to its supplier. Bank, or its
representatives, may, at all reasonable times, inspect the
Collateral and may enter upon all premises where the Collateral
is kept or might be located.
2.4 Debtor will do all acts and will execute or cause to be executed
all writings requested by Bank to establish, maintain and
continue a perfected and first security interest of Bank in the
Collateral. Debtor agrees that Bank has no obligation to acquire
or perfect any lien on or security interest in any asset(s),
whether realty or personalty, to secure payment of the
Indebtedness, and Debtor is not relying upon assets in which the
Bank may have a lien or security interest for payment of the
Indebtedness.
2.5 Debtor will pay, within the time that they can be paid without
interest or penalty, all taxes, assessments and similar charges
which at any time are or may become a lien, charge, or
encumbrance upon any Collateral, except to the extent contested
in good faith and bonded in a manner satisfactory to Bank. If
Debtor fails to pay any of these taxes, assessments, or other
charges in the time provided above, Bank has the option (but not
the obligation) to do so, and Debtor agrees to repay all amounts
so expended by Bank immediately upon demand, together with
interest at the highest lawful default rate which could be
charged by Bank on any Indebtedness.
2.6 Debtor will keep the Collateral in good condition and will
protect it from loss, damage, or deterioration from any cause.
Debtor has and will maintain at all times (a) with respect to the
Collateral, insurance under an "all risk" policy against fire and
other risks customarily insured against, and (b) public liability
insurance and other insurance as may be required by law or
reasonably required by Bank, all of which insurance shall be in
amount, form and content, and written by companies, as may be
satisfactory to Bank, and shall contain a lender's loss payable
endorsement acceptable to Bank. Debtor will deliver to Bank,
immediately upon demand, evidence satisfactory to Bank that the
required insurance has been procured. If Debtor fails to
maintain satisfactory insurance, Bank has the option (but not the
obligation) to do so, and Debtor agrees to repay all amounts so
expended by Bank immediately upon demand, together with interest
at the highest lawful default rate which could be charged by Bank
on any Indebtedness.
2.7 On each occasion on which Debtor evidences to Bank the account
balances on and the nature and extent of the Accounts Receivable,
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<PAGE>
Debtor shall be deemed to have warranted that, except as
otherwise indicated (a) each of those Accounts Receivable is
valid and enforceable without performance by Debtor of any act,
(b) each of those account balances are in fact owing, (c) there
are no setoffs, recoupments, credits, contra accounts,
counterclaims or defenses against any of those Accounts
Receivable, (d) as to any Accounts Receivable represented by a
note, trade acceptance, draft or other instrument or by any
chattel paper or document, the same have been endorsed and/or
delivered by Debtor to Bank, (e) Debtor has not received with
respect to any Account Receivable, any notice of the death of the
related account debtor, nor of the dissolution, liquidation,
termination of existence, insolvency, business failure,
appointment of a receiver for, assignment for the benefit of
creditors by, or filing of a petition in bankruptcy by or
against, the account debtor, and (f) as to each Account
Receivable, the account debtor is not an affiliate of Debtor, the
United States of America or any department, agency or
instrumentality of it, or a citizen or resident of any
jurisdiction outside of the United States. Debtor will do all
acts and will execute all writings requested by Bank to perform,
enforce performance of, and collect all Accounts Receivables.
Debtor shall neither make nor permit any modification, compromise
or substitution for any Account Receivable without the prior
written consent of Bank. Debtor shall, at Bank's request,
arrange for verification of Accounts Receivable directly with
account debtors or by other methods acceptable to Bank.
2.8 Debtor, at all times, shall be in strict compliance with all
applicable laws, including, without limit any laws, ordinances,
directives, orders, statutes, or regulations an object of which
is to regulate or improve health, safety, or the environment
("Environmental Laws").
2.9 If Bank, acting in its sole discretion, redelivers Collateral to
Debtor or Debtor's designee for the purpose of (a) the ultimate
sale or exchange thereof; or (b) presentation, collection,
renewal, or registration of transfer thereof; or (c) loading,
unloading, storing, shipping, transshipping, manufacturing,
processing or otherwise dealing with it preliminary to sale or
exchange; such redelivery shall be in trust for the benefit of
Bank and shall not constitute a release of Bank's security
interest in it or in the proceeds or products of it, unless Bank
specifically so agrees in writing. If Debtor requests any such
redelivery, Debtor will deliver with such request a duly executed
financing statement in form and substance satisfactory to Bank.
Any proceeds of Collateral coming into Debtor's possession as a
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<PAGE>
result of any such redelivery shall be held in trust for Bank and
immediately delivered to Bank for application on the
Indebtedness. Bank may (in its sole discretion) deliver any or
all of the Collateral to Debtor, and such delivery by Bank shall
discharge Bank from all liability or responsibility for such
Collateral. Bank, at its option, may require delivery of any
Collateral to Bank at any time with such endorsements or
assignments of the Collateral as Bank may request.
2.10 At any time and without notice, Bank may (a) cause any or all of
the Collateral to be transferred to its name or to the name of
its nominees; (b) receive or collect, by legal proceedings or
otherwise, all dividends, interest, principal payments and other
sums and all other distributions at any time payable or
receivable on account of the Collateral, and hold the same as
Collateral, or apply the same to the Indebtedness, the manner and
distribution of the application to be in the sole discretion of
the Bank; (c) enter into any extension, subordination,
reorganization, deposit, merger or consolidation agreement or any
other agreement relating to or affecting the Collateral, and
deposit or surrender control of the Collateral, and accept other
property in exchange for the Collateral and hold or apply the
property or money so received pursuant to this Agreement.
2.11 Bank may assign any of the Indebtedness and deliver any or all of
the Collateral to its assignee, who then shall have with respect
to Collateral so delivered all the rights and powers of Bank
under this Agreement, and after that, Bank shall be fully
discharged from all liability and responsibility with respect to
Collateral so delivered.
2.12 Debtor shall defend, indemnify and hold harmless Bank, its
employees, agents, shareholders, affiliates, officers, and
directors, from and against any and all claims, damages, fines,
expenses, liabilities or causes of action of whatever kind,
including, without limit, consultant fees, legal expenses, and
attorney fees, suffered by any of them as a direct or indirect
result of any actual or asserted violation of any law, including,
without limit, Environmental Laws, or of any remediation relating
to any property required by any law, including, without limit,
Environmental Laws.
2.13 Debtor delivers this Agreement based solely on Debtor's
independent investigation of (or decision not to investigate) the
financial condition of Borrower and is not relying on any
information furnished by Bank. Debtor assumes full
responsibility for obtaining any further information concerning
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<PAGE>
the Borrower's financial condition, the status of the
Indebtedness or any other matter which Debtor may deem necessary
or appropriate now or later. Debtor waives any duty on the part
of Bank, and agrees that Debtor is not relying upon nor expecting
Bank to disclose to Debtor any fact now or later known by Bank,
whether relating to the operations or condition of Borrower, the
existence, liabilities or financial condition of any guarantor of
the Indebtedness, the occurrence of any default with respect to
the Indebtedness, or otherwise, notwithstanding any effect such
fact may have upon Debtor's risk or Debtor's rights against
Borrower. Debtor knowingly accepts the full range of risk
encompassed in this Agreement, which risk includes, without
limit, the possibility that Borrower may incur Indebtedness to
Bank after the financial condition of Borrower, or Borrower's
ability to pay debts as they mature, has deteriorated.
3. COLLECTION OF PROCEEDS.
3.1 Debtor agrees to collect and enforce payment of all Collateral
until Bank shall direct Debtor to the contrary. Immediately upon
notice to Debtor by Bank and at all times after that, Debtor
agrees to fully and promptly cooperate and assist Bank in the
collection and enforcement of all Collateral and to hold in trust
for Bank all payments received in connection with Collateral and
from the sale, lease or other disposition of any Collateral, all
rights by way of suretyship or guaranty and all rights in the
nature of a lien or security interest which Debtor now or later
has regarding Collateral. Immediately upon and after such
notice, Debtor agrees to (a) endorse to Bank and immediately
deliver to Bank all payments received on Collateral or from the
sale, lease or other disposition of any Collateral or arising
from any other rights or interests of Debtor in the Collateral,
in the form received by Debtor without commingling with any other
funds, and (b) immediately deliver to Bank all property in
Debtor's possession or later coming into Debtor's possession
through enforcement of Debtor's rights or interests in the
Collateral. Debtor irrevocably authorizes Bank, or any Bank
employee or agent, to endorse the name of Debtor upon any checks
or other items which are received in payment for any Collateral,
and to do any and all things necessary in order to reduce these
items to money. Bank shall have no duty as to the collection or
protection of Collateral or the proceeds of it, nor as to the
preservation of any related rights, beyond the use of reasonable
care in the custody and preservation of Collateral in the
possession of Bank. Debtor agrees to take all steps necessary to
preserve rights against prior parties with respect to the
Collateral. Nothing in this Section 3.1 shall be deemed a
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consent by Bank to any sale, lease or other disposition of any
Collateral.
3.2 Debtor agrees that immediately upon Bank's request (whether or
not any Event of Default exists), the Indebtedness shall be on a
"remittance basis" as follows: Debtor shall, at its sole
expense, establish and maintain (and Bank, at Bank's option may
establish and maintain at Debtor's expense): (a) an United
States Post Office lock box (the "Lock Box"), to which Bank shall
have exclusive access and control. Debtor expressly authorizes
Bank, from time to time, to remove contents from the Lock Box,
for disposition in accordance with this Agreement. Debtor agrees
to notify all account debtors and other parties obligated to
Debtor that all payments made to Debtor (other than payments by
electronic funds transfer) shall be remitted, for the credit of
Debtor, to the Lock Box, and Debtor shall include a like
statement on all invoices; and (b) a non-interest bearing deposit
account with Bank which shall be titled as designated by Bank
(the "Cash Collateral Account") to which Bank shall have
exclusive access and control. Debtor agrees to notify all
account debtors and other parties obligated to Debtor that all
payments made to Debtor by electronic funds transfer shall be
remitted to the Cash Collateral Account, and Debtor, at Bank's
request, shall include a like statement on all invoices. Debtor
shall execute all documents and authorizations as required by
Bank to establish and maintain the Lock Box and the Cash
Collateral Account.
3.3 All items or amounts which are remitted to the Lock Box, to the
Cash Collateral Account, or otherwise delivered by or for the
benefit of Debtor to Bank on account of partial or full payment
of, or with respect to, any Collateral shall, at Bank's option,
(i) be applied to the payment of the Indebtedness, whether then
due or not, in such order or at such time of application as Bank
may determine in its sole discretion or, (ii) be deposited to the
Cash Collateral Account. Debtor agrees that Bank shall not be
liable for any loss or damage which Debtor may suffer as a result
of Bank's processing of items or its exercise of any other rights
or remedies under this Agreement, including, without limitation,
indirect, special or consequential damages, loss of revenues or
profits, or any claim, demand or action by any third party
arising out of or in connection with the processing of items or
the exercise of any other rights or remedies under this
Agreement. Debtor agrees to indemnify and hold Bank harmless
from and against all such third party claims, demands or actions,
and all related expenses or liabilities, including, without
limitation, attorney fees.
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4. DEFAULTS, ENFORCEMENT AND APPLICATION OF PROCEEDS.
4.1 The occurrence or existence of any of the following conditions or
events shall constitute an "Event of Default" under this
Agreement:
(a) Any failure to pay the Indebtedness or any other
indebtedness when due, or such portion of it as may be due,
by acceleration or otherwise; or
(b) Any failure or neglect to comply with, or breach of or
default under, any term of this Agreement, or any other
agreement or commitment between Debtor or any guarantor of
any of the Indebtedness ("Guarantor") and Bank; or
(c) Any warranty, representation, financial statement, or other
information made, given or furnished to Bank by or on behalf
of Debtor or any Guarantor shall be, or shall prove to have
been, false or materially misleading when made, given, or
furnished; or
(d) Any loss, theft, substantial damage or destruction to or of
any Collateral, or the issuance or filing of any attachment,
levy, garnishment, or the commencement of any proceeding in
connection with any Collateral or of any other judicial
process of, upon or in respect of Debtor, any Guarantor, or
any Collateral; or
(e) Sale or other disposition by Debtor or any Guarantor of any
substantial portion of its assets or property or voluntary
suspension of the transaction of business by Debtor or any
Guarantor, or death, dissolution, termination of existence,
merger, consolidation, insolvency, business failure, or
assignment for the benefit of creditors of or by Debtor or
any Guarantor; or commencement of any proceedings under any
state or federal bankruptcy or insolvency laws or laws for
the relief of debtors by or against Debtor or any Guarantor;
or the appointment of a receiver, trustee, court appointee,
sequestrator or otherwise, for all or any part of the
property of Debtor or any Guarantor; or
(f) Bank deems the margin of Collateral insufficient or itself
insecure, in good faith believing that the prospect of
payment of the Indebtedness or performance of this Agreement
is impaired or shall fear deterioration, removal, or waste
of Collateral.
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4.2 Upon the occurrence and at any time during the continuance or
existence of any Event of Default, Bank may, at its discretion
and without prior notice to Debtor, declare any or all of the
Indebtedness to be immediately due and payable, and shall have
and may exercise any one or more of the following rights and
remedies:
(a) Exercise all the rights and remedies upon default, in
foreclosure and otherwise, available to secured parties
under the provisions of the Uniform Commercial Code and
other applicable law;
(b) Institute legal proceedings to foreclose upon the lien and
security interest granted by this Agreement, to recover
judgment for all amounts then due and owing as Indebtedness,
and to collect the same out of any Collateral or the
proceeds of any sale of it;
(c) Institute legal proceedings for the sale, under the judgment
or decree of any court of competent jurisdiction, of any or
all Collateral; and/or
(d) Personally or by agents, attorneys, or appointment of a
receiver, enter upon any premises where Collateral may then
be located, and take possession of all or any of it and/or
render it unusable; and without being responsible for loss
or damage to such Collateral, hold, operate, sell, lease, or
dispose of all or any Collateral at one or more public or
private sales, leasings or other disposition, at places and
times and on terms and conditions as Bank may deem fit,
without any previous demand or advertisement; and except as
provided in this Agreement, all notice of sale, lease or
other disposition, and advertisement, and other notice or
demand, any right or equity of redemption, and any
obligation of a prospective purchaser or lessee to inquire
as to the power and authority of Bank to sell, lease, or
otherwise dispose of the Collateral or as to the application
by Bank of the proceeds of sale or otherwise, which would
otherwise be required by, or available to Debtor under,
applicable law are expressly waived by Debtor to the fullest
extent permitted.
At any sale pursuant to this Section 4.2, whether under the
power of sale, by virtue of judicial proceedings or
otherwise, it shall not be necessary for Bank or a public
officer under order of a court to have present physical or
constructive possession of Collateral to be sold. The
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recitals contained in any conveyances and receipts made and
given by Bank or the public officer to any purchaser at any
sale made pursuant to this Agreement shall, to the extent
permitted by applicable law, conclusively establish the
truth and accuracy of the matters stated (including, without
limit, as to the amounts of the principal of and interest on
the Indebtedness, the accrual and nonpayment of it and
advertisement and conduct of the sale); and all
prerequisites to the sale shall be presumed to have been
satisfied and performed. Upon any sale of any Collateral,
the receipt of the officer making the sale under judicial
proceedings or of Bank shall be sufficient discharge to the
purchase for the purchase money, and the purchaser shall not
be obligated to see to the application of the money. Any
sale of any Collateral under this Agreement shall be a
perpetual bar against Debtor with respect to that
Collateral.
4.3 Debtor shall, at the request of Bank, notify the account debtors
or obligors of Bank's security interest in the Collateral and
direct payment of it to Bank, Bank may, itself, upon the
occurrence and at any time during the continuance or existence of
any Event of Default, so notify and direct any account debtor or
obligor.
4.4 The proceeds of any sale or other disposition of Collateral
authorized by this Agreement shall be applied by Bank first upon
all expenses authorized by the Uniform Commercial Code and all
reasonable attorney fees and legal expenses incurred by Bank; the
balance of the proceeds of the sale or other disposition shall be
applied in the payment of the Indebtedness, first to interest,
then to principal, then to remaining Indebtedness and the
surplus, if any, shall be paid over to Debtor or to such other
person(s) as may be entitled to it under applicable law. Debtor
shall remain liable for any deficiency, which it shall pay to
Bank immediately upon demand.
4.5 Nothing in this Agreement is intended, nor shall it be construed,
to preclude Bank from pursuing any other remedy provided by law
for the collection of the Indebtedness or for the recovery of any
other sum to which Bank may be entitled for the breach of this
Agreement by Debtor. Nothing in this Agreement shall reduce or
release in any way any rights or security interests of Bank
contained in any existing agreement between Borrower, Debtor, or
any Guarantor and Bank.
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4.6 No waiver of default or consent to any act by Debtor shall be
effective unless in writing and signed by an authorized officer
of Bank. No waiver of any default or forbearance on the part of
Bank in enforcing any of its rights under this Agreement shall
operate as a waiver of any other default or of the same default
on a future occasion or of any rights.
4.7 Debtor irrevocably appoints Bank or any agent of Bank (which
appointment is coupled with an interest) the true and lawful
attorney of Debtor (with full power of substitution) in the name,
place and stead of, and at the expense of, Debtor:
(a) to demand, receive, sue for, and give receipts or
acquittances for any moneys due or to become due on any
Collateral and to endorse any item representing any payment
on or proceeds of the Collateral;
(b) to execute and file in the name of and on behalf of Debtor
all financing statements or other filings deemed necessary
or desirable by Bank to evidence, perfect, or continue the
security interests granted in this Agreement; and
(c) to do and perform any act on behalf of Debtor permitted or
required under this Agreement.
4.8 Upon the occurrence and at any time during the continuance or
existence of an Event of Default, Debtor also agrees, upon
request of Bank, to assemble the Collateral and make it available
to Bank at any place designated by Bank which is reasonably
convenient to Bank and Debtor.
5. MISCELLANEOUS.
5.1 Until Bank is advised in writing by Debtor to the contrary, all
notices, requests and demands required under this Agreement or by
law shall be given to, or made upon, Debtor at the first address
indicated in Section 5.14 below.
5.2 Debtor will give Bank not less than ninety (90) days prior
written notice of all contemplated changes in Debtor's name,
chief executive office location, and/or location of any
Collateral, but the giving of this notice shall not cure any
Event of Default caused by this change.
5.3 Bank assumes no duty of performance or other responsibility under
any contracts contained within the Collateral.
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5.4 Bank has the right to sell, assign, transfer, negotiate or grant
participations or any interest in, any or all of the Indebtedness
and any related obligations, including, without limit, this
Agreement. In connection with the above, but without limiting
its ability to make other disclosures to the full extent
allowable, Bank may disclose all documents and information which
Bank now or later has relating to Debtor, the Indebtedness or
this Agreement, however obtained. Debtor further agrees that
Bank may provide information relating to this Agreement or
relating to Debtor to the Bank's parent, affiliates,
subsidiaries, and service providers.
5.5 In addition to Bank's other rights, any indebtedness owing from
Bank to Debtor can be set off and applied by Bank on any
Indebtedness at any time (s) either before or after maturity or
demand without notice to anyone.
5.6 Debtor waives any right to require the Bank to: (a) proceed
against any person or property; (b) give notice of the terms,
time and place of any public or private sale of personal property
security held from any other person, or otherwise comply with the
provisions of Section 9-504 of the Uniform Commercial Code or
(c) pursue any other remedy in the Bank's power. Debtor waives
notice of acceptance of this Agreement and presentment, demand,
protest, notice of protest, dishonor, notice of dishonor, notice
of default, notice of intent to accelerate or demand payment of
any Indebtedness, any and all other notices to which the
undersigned might otherwise be entitled, and diligence in
collecting any Indebtedness, and agree(s) that the Bank may, once
or any number of times, modify the terms of any Indebtedness,
compromise, extend, increase, accelerate, renew or forbear to
enforce payment of any or all Indebtedness, or permit any other
person to incur additional Indebtedness, all without notice to
Debtor and without affecting in any manner the unconditional
obligation of Debtor under this Agreement. Debtor
unconditionally and irrevocably waives each and every defense and
setoff of any nature which, under principles of guaranty or
otherwise, would operate to impair or diminish in any way the
obligation of Debtor under this Agreement, and acknowledges that
such waiver is by this reference incorporated into each security
agreement, collateral assignment, pledge and/or other document
from Debtor now or later securing the Indebtedness, and
acknowledges that as of the date of this Agreement no such
defense or setoff exists.
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5.7 Debtor waives any and all rights (whether by subrogation,
indemnity, reimbursement, or otherwise) to recover from Borrower
any amounts paid or the value of any Collateral given by Debtor
pursuant to this Agreement.
5.8 In the event that applicable law shall obligate Bank to give
prior notice to Debtor of any action to be taken under this
Agreement, Debtor agrees that a written notice given to Debtor at
least five (5) days before the date of the act shall be
reasonable notice of the act and, specifically, reasonable
notification of the time and place of any public sale or of the
time after which any private sale, lease, or other disposition is
to be made, unless a shorter notice period is reasonable under
the circumstances. A notice shall be deemed to be given under
this Agreement when delivered to Debtor or when placed in an
envelope addressed to Debtor and deposited, with postage prepaid,
in a post office or official depository under the exclusive care
and custody of the Untied States Postal Service or delivered to
an overnight courier. The mailing shall be by overnight courier,
certified, or first class mail.
5.9 Notwithstanding any prior revocation, termination, surrender, or
discharge of this Agreement in whole or in part, the
effectiveness of this Agreement shall automatically continue or
be reinstated, as the case may be, in the event that any payment
received or credit given by Bank in respect of the Indebtedness
is returned, disgorged, or rescinded under any applicable law,
including, without limitation, bankruptcy or insolvency laws, in
which case, this Agreement, shall be enforceable against Debtor
as if the returned, disgorged, or rescinded payment or credit had
not been received or given by Bank, and whether or not Bank
relied upon this payment or credit or changed its position as a
consequence of it. In the event of continuation or reinstatement
of this Agreement, Debtor agrees, upon demand by Bank, to execute
and deliver to Bank those documents which Bank determines are
appropriate to further evidence (in the public records or
otherwise) this continuation or reinstatement, although the
failure of Debtor to do so shall not affect in any way the
reinstatement or continuation.
5.10 This Agreement and all the rights and remedies of Bank under this
Agreement shall inure to the benefit of Bank's successors and
assigns and to any other holder who derives from Bank title to or
an interest in the Indebtedness or any portion of it, and shall
bind Debtor and the heirs, legal representatives, successors, and
assigns of Debtor. Nothing in this Section 5.9 is deemed a
consent by Bank to any assignment by Debtor.
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5.11 If there is more than one Debtor, all undertakings, warranties
and covenants made by Debtor and all rights, powers and
authorities given to or conferred upon Bank are made or given
jointly and severally.
5.12 Except as otherwise provided in this Agreement, all terms in this
Agreement have the meanings assigned to them in Article 9 (or,
absent definition in Article 9, in any other Article) of the
Uniform Commercial Code. "Uniform Commercial Code" means Act
No. 174 of the Michigan Public Acts of 1962, as amended.
5.13 No single or partial exercise, or delay in the exercise, of any
right or power under this Agreement, shall preclude other or
further exercise of the rights and powers under this Agreement.
The unenforceability of any provision of this Agreement shall not
affect the enforceability of the remainder of this Agreement.
This Agreement constitutes the entire agreement of Debtor and
Bank with respect to the subject matter of this Agreement. No
amendment or modification of this Agreement shall be effective
unless the same shall be in writing and signed by Debtor and an
authorized officer of Bank. This Agreement shall be governed by
and construed in accordance with the internal laws of the State
of Michigan, without regard to conflict of laws principles.
5.14 To the extent that any of the Indebtedness is payable upon
demand, nothing contained in this Agreement shall modify the
terms and conditions of that Indebtedness nor shall anything
contained in this Agreement prevent Bank from making demand,
without notice and with or without reason, for immediate payment
of any or all of that Indebtedness at any time(s), whether or not
an Event of Default has occurred.
5.15 Debtor's chief executive office is located and shall be
maintained at 2970 S. 9th Street, Kalamazoo, Michigan 49009. If
Collateral is located at other than the chief executive office,
such Collateral's location shall be made available upon the
Bank's request.
5.16 A carbon, photographic or other reproduction of this Agreement
shall be sufficient as a financing statement under the Uniform
Commercial Code and may be filed by Bank in any filing office.
5.17 This Agreement shall be terminated only by the filing of a
termination statement in accordance with the applicable
provisions of the Uniform Commercial Code, but the obligations
contained in Section 2.12 of this Agreement shall survive
termination.
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6. DEBTOR AND BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A
CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER
CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF
THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT
WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING
THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS
AGREEMENT OR THE INDEBTEDNESS.
DEBTOR:
ATEK INFORMATION SERVICES, INC.
By: /S/ PAUL R. SYLVESTER
SIGNATURE OF: Paul R. Sylvester
Its: PRESIDENT
TITLE
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE THIRD QUARTER 1999 FORM 10-Q OF MANATRON, INC. AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
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