LOAN AGREEMENT
BORROWER BANK
INNOSERV TECHNOLOGIES, INC. OVERTON BANK & TRUST, NATIONAL
4330 BELTWAY SUITE 300 ASSOCIATION
ARLINGTON, TEXAS 76017 PO BOX 150049
ARLINGTON, TEXAS 76015
THIS LOAN AGREEMENT ("Agreement") is made and entered into this 15TH day of
DECEMBER, 1995, by and between the Borrower and Bank named above.
IN CONSIDERATION OF THE MUTUAL COVENANTS AND AGREEMENTS CONTAINED HEREIN, IT IS
AGREED AS FOLLOWS:
1. THE LOAN.
Subject to the terms and conditions of this Agreement, and in reliance upon
the representations and warranties of Borrower contained herein, Bank
agrees to lend an amount not to exceed the sum of FOUR MILLION FIVE
HUNDRED THOUSAND AND NO/100 DOLLARS ($4,500,000.00 ) (the "Loan"). The
Loan will be evidenced by Borrower's note (the "Note") payable to the
order of Bank, with interest and principal being payable as therein
provided.
2. PURPOSE OF LOAN.
Advances against the Note may only be requested and used by Borrower for
the following purposes: WORKING CAPITAL AND EQUIPMENT PURCHASES.
3. COLLATERAL.
The Note and all other obligations of Borrower to Bank shall be secured by,
among other things, a first and superior security interest in the following
property (collectively, the "Collateral")
ACCOUNTS RECEIVABLE, INVENTORY AND EQUIPMENT
Borrower shall execute such security agreements and other documents as Bank
may require, from time to time, to further describe, create and perfect
such security interests.
4. GUARANTIES.
The Loan will be unconditionally guaranteed as evidenced by guaranties
executed by N/A (collectively, "Guarantor", whether one or more).
/ / IF THIS BOX IS CHECKED, THE FOLLOWING PARAGRAPH 5 SHALL BE PART OF
THIS AGREEMENT.
5. BORROWING BASE.
The term "Borrowing Base" means an amount determined at any time as the sum
of ______% of the Eligible Accounts Receivable of Borrower and ______% of
Borrower's Eligible Inventory. As used herein, the term "Eligible Accounts
Receivable" shall mean, at any particular time, all accounts receivable of
Borrower which are subject to a perfected first priority security interest
in favor of Bank, excluding (i) all accounts receivable that are greater
than ______(____) days old from the original date of the invoice, and (ii)
any account that is subject to any dispute, offset, counterclaim or other
claim or defense on the part of the account debtor denying liability under
such account, and (iii) the amount of all such accounts arising out of
contracts or orders which, by their terms, forbid an assignment or which
make such an assignment void and unenforceable, and (iv) any account
receivable of Borrower from any officer, stockholder, director or related
company of Borrower. As used herein, the term "Eligible Inventory" shall
mean, at any particular time, all salable inventory then owned by Borrower
and held for sale or disposition in the ordinary course of business, in
which Bank has a perfected first priority security interest, valued at the
lower of cost or market, EXCLUDING any work-in-process. For purposes of
determining the Borrowing Base, the Eligible Inventory shall not exceed at
any time the sum of $____________________.
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Borrower shall at all times maintain a Borrowing Base of not less than the
outstanding balance owing on the Note. If, as a result of Bank's
determination, the Borrowing Base should ever become less than the
outstanding balance owing under the Note, or any renewals or extensions
thereof, Bank may notify Borrower of the insufficiency, and within
_________(_____) days of Bank's giving notice, Borrower shall either pay
the indebtedness down to the Borrowing Base or increase the Borrowing Base
up to the amount of the outstanding balance of the Note. Bank's
determination of the Borrowing Base and whether Collateral qualifies for
inclusion in such Borrowing Base, will be final.
6. REPRESENTATIONS AND WARRANTIES.
To induce Bank to enter into this Agreement and to advance funds from time
to time, and for Bank's reliance in so doing, Borrower warrants and
represents to Bank as follows:
A. GOOD STANDING. Borrower is a corporation duly organized and in good
standing under the laws of the State of California, and has the power
to own its properties and carry on its business in each jurisdiction
in which Borrower operates.
B. AUTHORITY AND COMPLIANCE. Borrower has full power and authority to
enter into this Agreement, to make the borrowing hereunder, to execute
and deliver the Note and to incur the obligations provided for herein,
all of which has been duly authorized by all proper and necessary
corporate action. No consent or approval of stockholders or of any
public authority is required as a condition to the validity of this
Agreement or the Note, and Borrower is in compliance with all laws and
regulatory requirements to which it is subject.
C. BINDING AGREEMENT. This Agreement constitutes, and the Note when
issued and delivered pursuant hereto for value received will
constitute, valid and legally binding obligations of Borrower
enforceable in accordance with their terms.
D. LITIGATION. There are no proceedings pending or, to the knowledge of
Borrower, threatened before any court or administrative agency which
will or may have a material adverse effect on the financial condition
or operations of Borrower or any subsidiary or any Guarantor, except
as disclosed to Bank in writing prior to the date of this Agreement.
E. NO CONFLICTING AGREEMENTS. There are no charter, bylaw or stock
provisions of Borrower and no provisions of any existing agreement,
mortgage, indenture or contract binding on Borrower or affecting its
property, which would conflict with or in any way prevent the
execution, delivery or carrying out of the terms of this Agreement and
the Note.
F. OWNERSHIP OF ASSETS. Borrower has good and marketable title to any
Collateral pledged and the Collateral is owned free and clear of
liens. Borrower will at all times maintain its tangible property,
real and personal, in good order and repair taking into consideration
reasonable wear and tear.
G. TAXES. All income taxes and other taxes due and payable by Borrower
to the date of this Agreement have been paid prior to becoming
delinquent.
H. FINANCIAL STATEMENTS. All financial statements and financial
information of Borrower and Guarantor which have been delivered to
Bank have been presented in conformity with generally accepted
accounting principles and fairly and accurately represent the
financial condition of the Borrower and Guarantor, as of the date of
such financial statements or reports, and since such dates, there has
been no material adverse changes in the financial condition of
Borrower or Guarantor.
I. NO DEFAULTS. Borrower and Guarantor are not in default with respect
to any obligation to which Borrower or Guarantor is a party or by
which Borrower or Guarantor, or any of Borrower's or Guarantor's
properties is bound.
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7. AFFIRMATIVE COVENANTS.
In addition to the other agreements contained herein, Borrower covenants
and agrees that from the date hereof and until payment in full of principal
and interest owing under the Note, unless Bank shall otherwise consent in
writing, Borrower will do the following:
A. BORROWER'S FINANCIAL STATEMENTS. Borrower shall furnish to Bank: (i)
as soon as available and in any event within ONE HUNDRED TWENTY (120)
days after the end of each fiscal year of Borrower, a copy of
Borrower's annual AUDITED financial statement consisting of at least a
balance sheet and statement of income and retained earnings; (ii) on a
QUARTERLY basis, financial statements, to include balance sheet and
profit and loss statement, within FORTY FIVE (45) days after the end
of each such accounting period; (iii) if Paragraph 5 above is
applicable to this Agreement, furnish Bank on a monthly basis a
Borrowing Base report in such form as Bank may require and an aging of
accounts receivable of Borrower, such report and aging to be delivered
to Bank not later than N/A (N/A) days after the end of each calendar
quarter; and (iv) promptly upon request, such additional information,
tax returns, officer's certificates, reports or statements respecting
its business operations and financial condition as Bank may reasonably
request from time to time.
B. Omitted
C. INSURANCE. Maintain insurance with responsible insurance companies on
such of its properties, in such amounts and against such risks as is
customarily maintained by similar businesses operating in the same
vicinity, specifically to include a policy of fire and extended
coverage insurance covering all assets, business interruption
insurance and liability insurance, all to be with such companies and
in such amounts satisfactory to Bank and to contain a mortgage clause
naming Bank as its interest may appear. Evidence of such insurance
shall be supplied to Bank.
D. CORPORATE EXISTENCE AND COMPLIANCE. Maintain its corporate existence
in good standing and comply with all laws, regulations and
governmental requirements applicable to it or to any of its property,
business operations and transactions.
E. ADVERSE CONDITIONS OR EVENTS. Promptly advise Bank in writing of any
condition, event or act which comes to its attention that would or
might materially affect Borrower's or any Guarantor's financial
condition, Bank's rights in or to the Collateral under this Agreement
or the Loan documents, and of any litigation filed against Borrower or
any Guarantor.
F. TAXES. Pay all taxes as the same become due and payable.
G. MAINTENANCE. Maintain all of its tangible property in good condition
and repair and make all necessary replacements thereof, and preserve
and maintain all licenses, privileges, franchises, certificates and
the like necessary for the operation of its business.
H. INSPECTION. Permit Bank, its officers, employees and agents, to
inspect the Collateral and all records of Borrower pertaining to the
Collateral, at Borrower's place of business as set forth above, and to
make and remove copies of such records. Borrower shall promptly pay
to Bank the reasonable costs and expenses of any Collateral audit
performed by or for Bank.
I. PAYMENT OF DEBTS. Pay all indebtedness and obligations of Borrower as
the same become due in accordance with the terms of the instruments or
documents evidencing the same.
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J. FINANCIAL COVENANTS. In accordance with generally accepted accounting
principles, Borrower shall:
(a) maintain a tangible net worth of not less than $12,750,000;
(b) maintain a ratio of current assets to current liabilities of not
less than 1.10 to 1.0;
(c) not permit the ratio of Borrower's total liabilities to tangible
net worth to be more than N/A to 1.0;
(d) maintain a ratio of after tax net income plus depreciation to
current maturities of long-term debt of not less than N/A to 1.0;
and
(e) other financial covenants, if applicable:
1) No cash dividends dividends
2) No further notes receivable due from equipment sales, other
than those that are on the books as of 12-15-95.
3) The balance on the operating line shall never exceed the level
of net accounts receivable
8. NEGATIVE COVENANTS.
In addition to the other agreements contained herein, Borrower agrees that,
so long as the Loan pursuant to this Agreement is outstanding, Borrower
will not, unless Bank shall otherwise consent in writing:
A. Incur or suffer to exist any indebtedness except (i) indebtedness to
Bank, (ii) indebtedness to trade creditors incurred in the ordinary
course of its business, (iii) for purchase money on lease vehicles,
all of which are necessary to conduct the normal course of Borrower's
business, Above $500,000 on a cumulative basis per financial year;
B. Enter into any merger or consolidation, or sell, lease, assign or
otherwise dispose of or transfer any of its assets except in the
ordinary course of its business;
C. Become a guarantor, endorser or contingently liable on any debt;
D. Make any advances or loans (directly or indirectly) to any director,
officer, employee or shareholder of Borrower;
E. Engage in any business which differs substantially or materially from
the business which Borrower is presently engaged in;
F. Create or permit to exist any mortgage, lien or other encumbrance,
except as permitted herein, with respect to any assets now owned by
Borrower or hereafter acquired, except purchase money liens on
equipment and/or vehicles not currently owned by Borrower;
G. Substantially change its present executive or management personnel.
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9. EVENTS OF DEFAULT; REMEDIES.
The occurrence of any of the following shall constitute an event of default
hereunder: (i) the failure or refusal of Borrower to timely perform any
term, covenant or agreement contained herein, (ii) any representation or
warranty contained herein or in any financial statement, report or
certificate submitted to Bank in connection with the Loan or pursuant to
the requirements of this Agreement shall prove to have been incorrect or
misleading in any material respect when made, (iii) default shall occur
under the terms of the Note or any security document now or hereafter
securing payment of the Note or under any other promissory note executed by
Borrower and held by Bank, or (iv) if Bank, in good faith believes that the
prospect of payment or the prospect of performance by Borrower hereunder or
under the Note or security documents is impaired. Likewise, a default
hereunder shall constitute a default under the Note and all security
documents securing payment of the Note and all other promissory notes
executed by Borrower and held by Bank. Upon the occurrence of any such
default, Bank shall have the option to declare immediately due and payable
all outstanding principal plus unpaid interest on the Note, and Bank shall
have no further obligation to fund under this Agreement. Upon the
occurrence of a default, Bank shall be entitled to exercise any and all
remedies (i) under the Note and any security document securing payment of
the Note, and (ii) available to Bank at law or in equity.
10. MISCELLANEOUS.
A. CUMULATIVE RIGHTS AND NO WAIVER. Each and every right granted to Bank
hereunder or under any other document delivered hereunder or in
connection herewith, or allowed by law or equity shall be cumulative
of and may be exercised in addition to any and all other rights of
Bank, and no delay in exercising any right shall operate as a waiver
thereof, nor shall any single or partial exercise by Bank of any right
preclude any other or future exercise thereof, or the exercise of any
other right. Any of the foregoing covenants and agreements may be
waived by Bank, but only in writing, signed by a vice president or
higher level officer of Bank. Borrower expressly waives any
presentment, demand, protest, notice of intent to accelerate, notice
of acceleration or other notice of any kind. No notice to or demand
on Borrower in any case shall, of itself, entitle Borrower to any
other or further notice or demand in similar or other circumstances.
B. GOVERNING LAW. THIS AGREEMENT IS BEING DELIVERED AND IS INTENDED TO
BE PERFORMED IN THE STATE OF TEXAS AND SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. ALL OBLIGATIONS
HEREUNDER ARE PERFORMABLE IN TARRANT COUNTY, TEXAS.
C. BINDING EFFECT. This Agreement shall inure to the benefit of and be
enforceable by Bank and any assignee or participant of Bank, and shall
bind Borrower and its successors and assigns; provided, however, that
Borrower may not assign its rights or obligations hereunder without
the prior written approval of Bank.
D. TEXAS CREDIT CODE. Chapter 15 of the Texas Credit Code shall not
apply to the Loan contemplated hereby.
E. EXPENSES. Borrower agrees to pay all out-of-pocket expenses of Bank
in connection with this Agreement and the collection of the Note.
F. RENEWAL. While the Bank is under no obligation to renew any
indebtedness incurred pursuant to the terms of this Agreement at
maturity (or any renewal or extension term), in the event the Note is
renewed, this Agreement shall apply to said renewal and the
representations and warranties made by Borrower herein shall be deemed
to be made again as of the date of any such renewal. The term "Note"
shall include any renewal note.
G. TIME OF ESSENCE. Time is of the essence of this Agreement.
H. NO FIDUCIARY RELATIONSHIP. Borrower acknowledges and agrees that the
relationship between Borrower and Bank is solely that of
debtor/creditor and in no event shall Bank be considered as a partner
of Borrower or otherwise have any fiduciary duties to Borrower or
Guarantor.
I. USURY SAVINGS. The parties hereto intend to comply with all usury
laws applicable to national banks and the subject Loan. Nothing
contained herein, in the Note or in any of the security documents
shall authorize the collection or constitute charging of interest in
excess of that permitted by applicable law.
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J. INDEMNIFICATION OF BANK. BORROWER SHALL INDEMNIFY AND HOLD BANK
HARMLESS AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES,
DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, CLAIMS, COSTS, EXPENSES
AND DISBURSEMENTS OR ANY KIND OR NATURE WHATSOEVER, WHICH MAY BE
IMPOSED ON, INCURRED BY OR ASSERTED AGAINST BANK, IN ANY WAY RELATING
TO OR ARISING OUT OF THIS AGREEMENT OR ANY INSTRUMENT EXECUTED
PURSUANT HERETO, OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN, TO
THE EXTENT THAT ANY SUCH INDEMNIFIED MATTERS RESULT, DIRECTLY OR
INDIRECTLY, FROM ANY CLAIMS MADE OR ACTIONS, SUITS OR PROCEEDINGS
COMMENCED BY OR ON BEHALF OF ANY PERSON OR ENTITY OTHER THAN BANK;
PROVIDED, THAT BANK SHALL NOT HAVE THE RIGHT TO BE INDEMNIFIED
HEREUNDER FOR ITS GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
K. NO ORAL AGREEMENTS. THIS WRITTEN AGREEMENT REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
L. ADDITIONAL PROVISIONS (WHICH SHALL CONTROL IN THE EVENT OF ANY
CONFLICT WITH THE PRECEDING PROVISIONS):
EXECUTED as of the day and year first above written.
BANK: BORROWER:
OVERTON BANK & TRUST, INNOSERV TECHNOLOGIES,INC.
NATIONAL ASSOCIATION
By: /s/ CURTIS F. VON DER AHE By: /s/ MICHAEL G. PULS
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Name Printed: CURTIS F. VON DER AHE Name Printed: MICHAEL PULS
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Title: PRESIDENT Title: PRESIDENT
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