<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE QUARTER ENDED OCTOBER 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
COMMISSION FILE NUMBER 0-13608
INNOSERV TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
CALIFORNIA 95-3619990
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
320 WESTWAY, SUITE 530, ARLINGTON, TEXAS 76018
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (817) 468-3377
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 twelve 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 ___
At December 13, 1996, the Registrant had outstanding 5,035,833 shares of its
common stock, $.01 par value.
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INNOSERV TECHNOLOGIES, INC.
FORM 10-Q
OCTOBER 31, 1996
TABLE OF CONTENTS
PAGE
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of October 31, 1996,
and April 30, 1996 3
Consolidated Statements of Operations for the three
months ended October 31, 1996 and 1995 4
Consolidated Statements of Operations for the six months
ended October 31, 1996 and 1995 5
Consolidated Statements of Cash Flows for the six months
ended October 31, 1996 and 1995 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II - OTHER INFORMATION
Item 2. Changes in Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 6. Exhibits and Report on Form 8-K 14
SIGNATURES 15
INDEX TO EXHIBITS 16
2
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INNOSERV TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
October 31,
1996 April 30,
(Unaudited) 1996
----------- ---------
ASSETS
Current assets
Cash and cash equivalents $1,166 $ 941
Receivables 4,214 5,238
Inventory:
Spare parts and supplies, net 5,209 5,580
Inventory held for sale 1,059 1,878
Prepaid expenses 419 350
------- -------
Total current assets 12,067 13,987
Equipment, net 5,407 6,186
Goodwill, net 3,469 3,544
Other assets 85 123
------- -------
$21,028 $23,840
------- -------
------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term debt $ 1,050 $ 862
Accounts payable 4,125 4,613
Accrued liabilities 2,480 3,090
Deferred revenues 3,857 4,399
------- -------
Total current liabilities 11,512 12,964
Long-term debt 633 910
Shareholders' equity
Preferred stock, $.01 par value: 5,000,000
shares authorized; no shares issued -- --
Common stock, $.01 par value: 10,000,000
shares authorized; 5,035,833 issued 51 51
Paid-in capital 17,303 17,303
Accumulated deficit (8,471) (7,388)
------- -------
Total shareholders' equity 8,883 9,966
------- -------
$21,028 $23,840
------- -------
------- -------
The accompanying notes are an integral part of these financial statements.
3
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INNOSERV TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
Three Months Ended
October 31,
-----------------------
1996 1995
-------- -------
Revenues $10,684 $11,898
Costs and expenses:
Cost of operations 9,121 9,247
Depreciation and amortization 505 501
Selling and administrative 1,445 1,807
Interest expense, net 69 35
-------- -------
Total costs and expenses 11,140 11,590
-------- -------
Income (loss) before income taxes (456) 308
Provision for income taxes -- 123
-------- -------
Net income (loss) $ (456) $ 185
-------- -------
-------- -------
Per share information:
Net income (loss) $ (.09) $ .04
-------- -------
-------- -------
Weighted average shares outstanding 5,036 5,036
-------- -------
-------- -------
The accompanying notes are an integral part of these financial statements.
4
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INNOSERV TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
Six Months Ended
October 31,
------------------------
1996 1995
-------- -------
Revenues $22,472 $23,866
Costs and expenses:
Cost of operations 19,144 18,713
Depreciation and amortization 1,016 986
Selling and administrative 3,299 3,963
Interest expense, net 96 84
-------- -------
Total costs and expenses 23,555 23,746
-------- -------
Income (loss) before income taxes (1,083) 120
Provision for income taxes -- 49
-------- -------
Net income (loss) $(1,083) $ 71
-------- -------
-------- -------
Per share information:
Net income (loss) $ (.22) $ .01
-------- -------
-------- -------
Weighted average shares outstanding 5,036 5,038
-------- -------
-------- -------
The accompanying notes are an integral part of these financial statements.
5
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INNOSERV TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Six Months Ended
October 31,
--------------------
1996 1995
-------- -------
Cash flows from:
Operations -
Net income (loss) $ (1,083) $ 71
Adjustments to reconcile net income (loss) to
net cash flows from operations:
Depreciation and amortization 1,016 986
Gain on disposal of equipment -- (67)
Deferred income taxes -- (57)
Changes in assets and liabilities:
Receivables 1,025 1,224
Inventory 1,189 (1,381)
Prepaid expenses (68) 30
Other assets 37 (327)
Accounts payable (488) 721
Accrued liabilities (609) (607)
Deferred revenues (542) 217
-------- -------
Net cash provided by operations 477 810
Investments and acquisitions -
Sale of equipment -- 180
Purchase of equipment (163) (887)
-------- -------
Net cash used for investments and acquisitions (163) (707)
Financing activities -
Borrowings from line of credit 242 --
Principal payments of long-term debt (331) (1,799)
-------- -------
Net cash used for financing activities (89) (1,799)
-------- -------
Net increase (decrease) in cash and cash equivalents 225 (1,696)
Cash and cash equivalents at beginning of period 941 1,827
-------- -------
Cash and cash equivalents at end of period $ 1,166 $ 131
-------- -------
-------- -------
The accompanying notes are an integral part of these financial statements.
6
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INNOSERV TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1996
(UNAUDITED)
1. GENERAL
The consolidated financial statements included herein have been prepared by
InnoServ Technologies, Inc. ("InnoServ") without audit, include all adjustments
which are, in the opinion of management, necessary for a fair presentation of
the results of operations for the three months and six months ended October 31,
1996 and 1995, pursuant to the rules and regulations of the Securities and
Exchange Commission, and include the accounts of InnoServ and its consolidated
subsidiaries. All significant intercompany accounts and transactions have been
eliminated. Any and all adjustments made are of a normal and recurring nature in
accordance with Rule 10-01(b)(8) of Regulation S-X. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulation, however, InnoServ believes that
the disclosures in such financial statements are adequate to make the
information presented not misleading. These financial statements should be read
in conjunction with InnoServ's annual report on Form 10-K for the fiscal year
ended April 30, 1996, filed with the Securities and Exchange Commission. The
results of operations for the six months ended October 31, 1996, are not
necessarily indicative of the results that may be expected for the year ending
April 30, 1997.
2. INTEREST EXPENSE, NET
Interest expense is net of interest income of $8,000 and $16,000 for the
three months ended October 31, 1996 and 1995, respectively.
Interest expense is net of interest income of $23,000 and $16,000 for the
six months ended October 31, 1996 and 1995, respectively.
3. SUPPLEMENTAL CASH FLOW DISCLOSURE
Interest and income taxes paid in the six months ended October 31, 1996 and
1995 were as follows:
Six Months Ended
October 31,
-----------------------
1996 1995
-------- --------
Interest $124,000 $100,000
Income taxes $ 53,000 $ 8,000
7
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INNOSERV TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1996
(UNAUDITED)
4. LONG-TERM DEBT
InnoServ has a loan agreement which contains a $1,500,000 term loan
expiring January 30, 1999, and a $500,000 revolving line of credit for working
capital, against which InnoServ had outstanding borrowings of $1,125,000 and
$498,000, respectively, at October 31, 1996. Obligations under the loan
agreement are secured by a security interest in InnoServ's accounts receivable,
inventory and equipment. The principal of the term loan is payable in equal
quarterly installments of $125,000. Interest on the obligations under the term
loan is payable quarterly and is payable monthly under the revolving line of
credit based on varying interest rates above the prime rate. The interest rate
at October 31, 1996, on the term loan was 9.25 percent and was 8.75 percent on
the revolving line of credit. The loan agreement contains financial covenants
including maintenance of certain financial ratios, net worth requirements and
restrictions on future borrowings and payment of dividends. As a result of the
net loss for the period, InnoServ failed to meet the net worth covenant under
the loan agreement as of October 31, 1996. InnoServ's bank waived this event of
default and has amended the net worth covenant effective October 31, 1996,
through the expiration date of the loan agreement of January 30, 1999. InnoServ
was in compliance with the financial covenants, as amended, at October 31, 1996.
Subsequent to October 31, 1996, the expiration date of the revolving line
of credit was extended from November 12, 1996, to March 12, 1997, and the
interest rate was increased from 0.5 percent to 1.0 percent above the prime
rate.
5. RESTRUCTURING
In the fourth quarter of fiscal 1996, InnoServ adopted a plan to reorganize
its operations in order to strategically focus on its comprehensive asset
management services business ("Asset Management"). As a result of this
reorganization, InnoServ recorded restructuring charges in the fourth quarter of
fiscal 1996 of $154,000 for employee termination benefits for 25 employees. As
of October 31, 1996, $108,000 of this amount had been paid to 21 employees. The
reorganization is expected to be completed by the end of the third quarter of
fiscal 1997.
8
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INNOSERV TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1996
(UNAUDITED)
In the third quarter of fiscal 1996, InnoServ relocated its headquarters
from Corona, California to Arlington, Texas and recorded restructuring charges
of $411,000. As of October 31, 1996, this restructuring and the associated
payments were complete. The major components of these charges, the amounts
paid, and the adjustments to the liability as of October 31, 1996, were as
follows (in thousands):
Amounts
Paid as of Adjustments
Total October 31, to the
Charges 1996 Liability
------- ----------- -----------
Employee termination benefits $115 $(115) $ --
Employee relocation 169 (164) (5)
Employee training 67 (67) --
Office equipment relocation 30 (30) --
Facility closing costs 30 (7) (23)
---- ----- ----
$411 $(383) $(28)
---- ----- ----
---- ----- ----
The termination benefits were related to 12 employees.
9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
SECOND QUARTER FISCAL 1997 COMPARED TO SECOND QUARTER FISCAL 1996
Consolidated revenues for the second quarter of fiscal 1997 were
$10,684,000 as compared to $11,898,000 in the same period of fiscal 1996, a
decline of $1,214,000, or 10 percent. Revenues from computerized tomography
("CT") maintenance service agreements decreased approximately $2,000,000
primarily as a result of the continued decline in the number and average
contract amount of CT maintenance service agreements in effect as older
equipment is being upgraded or removed from service by customers and
InnoServ's decision to not renew certain CT maintenance agreements in
unprofitable locations. Revenues from equipment sales decreased
approximately $250,000. Revenues at Advanced Imaging Technologies, Inc.
("AIT") were approximately $210,000 lower than the revenues in the same
period in fiscal 1996 as a result of lower sales of x-ray film, chemistry and
related accessories. Offsetting these declines, revenues from Asset
Management and multi-vendor services increased approximately $1,400,000 as
InnoServ continues to focus on the growing market for these type services.
Cost of operations decreased $126,000 from the same period in the prior
fiscal year primarily as a result of the decline in revenues, however, as a
percent of revenues, cost of operations increased from 78 percent to 85
percent. This increase as a percent of revenues was a result of costs
required to provide services for Asset Management agreements, while InnoServ
was not able to reduce its costs to service CT maintenance agreements
proportionately due to certain fixed support costs and the need to retain
field service technicians in certain locations despite a declining revenue
base in those locations. Selling and administrative expenses decreased
$362,000, or 20 percent, from the prior year primarily as a result of savings
from the consolidation of InnoServ's administrative functions and lower
selling expenses. Depreciation and amortization expenses did not change
significantly quarter to quarter.
The loss before income taxes for the second quarter of fiscal 1997 was
$456,000 as compared to income of $308,000 in the first quarter of fiscal
1996. The loss for fiscal 1997 was primarily the result of unfavorable
operating margins associated with InnoServ's maintenance business. Because
InnoServ employs field service engineers over a wide geographic area, the
current level of revenues are not sufficient in certain locations to cover
the direct and indirect costs of providing maintenance and repair services.
10
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InnoServ did not recognize a tax benefit from the operating loss for the
second quarter of fiscal 1997. Under Statement of Financial Accounting
Standard No. 109 ("SFAS 109"), "Accounting for Income Taxes," net operating
losses enter into the calculation of deferred tax assets and liabilities. At
October 31, 1996, InnoServ had an estimated net deferred tax asset of
$6,100,000, primarily as a result of net operating losses. In accordance
with SFAS 109, InnoServ recorded a valuation allowance for the full amount of
the net deferred tax asset. The ultimate realization of the deferred tax
asset depends on the ability of InnoServ to generate sufficient taxable
income in the future. While InnoServ believes the deferred tax asset will be
substantially realized by future operating results, due to the cumulative
losses incurred in recent years the deferred tax assets do not currently meet
the criteria for recognition under SFAS 109. At October 31, 1995, the
effective tax rate for fiscal 1996 was estimated to be 40 percent and a
corresponding provision for income taxes was recorded for the three months
ended October 31, 1995.
SIX MONTHS FISCAL 1997 COMPARED TO SIX MONTHS FISCAL 1996
Consolidated revenues for the first six months of fiscal 1997 were
$22,472,000 as compared to $23,866,000 in the same period of fiscal 1996, a
decline of $1,394,000, or 6 percent. Revenues from CT maintenance service
agreements decreased approximately $3,900,000 primarily as a result of the
continued decline in the number and average contract amount of CT maintenance
service agreements in effect as older equipment is being upgraded or removed
from service by customers and InnoServ's decision to not renew certain CT
maintenance agreements in unprofitable locations. Revenues from InnoServ's
diagnostic mobile imaging operations were approximately $380,000 lower than
the revenues in the same period in fiscal 1996 as InnoServ discontinued its
shared services program at the end of the first quarter of fiscal 1996.
Additionally, revenues at AIT were approximately $350,000 lower as a result
of lower sales of x-ray film, chemistry and related accessories. Offsetting
these declines, revenues from Asset Management and multi-vendor services
increased approximately $3,200,000 as InnoServ continues to focus on the
growing market for these type services.
Cost of operations increased $431,000 from the same period in the prior
fiscal year. This increase was a result of costs required to provide
services for Asset Management agreements, while InnoServ was not able to
reduce its costs to service CT maintenance agreements proportionately due to
certain fixed support costs and the need to retain field service technicians
in certain locations despite a declining revenue base in those locations.
Selling and administrative expenses decreased $664,000, or 17 percent, from
the prior year primarily as a result of savings from the consolidation of
InnoServ's administrative functions and lower selling expenses. Depreciation
and amortization expenses did not change significantly between the two
periods.
The loss before income taxes for the first six months of fiscal 1997 was
$1,083,000 as compared to income of $120,000 in the first six months of
fiscal 1996. The loss in fiscal 1997 was primarily the result of unfavorable
operating margins associated with InnoServ's maintenance business. Because
InnoServ employs field service engineers over a wide geographic area, the
current level of revenues are not sufficient in certain locations to cover
the direct and indirect costs of providing maintenance and repair services.
InnoServ is continuing to implement plans to reorganize its service
operations to more cost effectively provide the services required by its
customers and to discontinue service in selected locations upon the
expiration of the existing maintenance agreements in those locations.
InnoServ believes these actions, coupled with strategic changes it is making
in the operations of the CT and Asset Management business and efforts to
expand the revenue base, will improve InnoServ's operations.
11
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InnoServ did not recognize a tax benefit from the operating loss for the
first six months of fiscal 1997. Under Statement of Financial Accounting
Standard No. 109 ("SFAS 109"), "Accounting for Income Taxes," net operating
losses enter into the calculation of deferred tax assets and liabilities. At
October 31, 1996, InnoServ had an estimated net deferred tax asset of
$6,100,000, primarily as a result of net operating losses. In accordance
with SFAS 109, InnoServ recorded a valuation allowance for the full amount of
the net deferred tax asset. The ultimate realization of the deferred tax
asset depends on the ability of InnoServ to generate sufficient taxable
income in the future. While InnoServ believes the deferred tax asset will be
substantially realized by future operating results, due to the cumulative
losses incurred in recent years the deferred tax assets do not currently meet
the criteria for recognition under SFAS 109. At October 31, 1995, the
effective tax rate for fiscal 1996 was estimated to be 40 percent and a
corresponding provision for income taxes was recorded for the six months
ended October 31, 1995.
LIQUIDITY AND CAPITAL RESOURCES
At October 31, 1996, InnoServ had working capital of $555,000, of which
$1,166,000 was in cash and cash equivalents. Operations provided $477,000 of
cash for the six months ended October 31, 1996, primarily as a result of a
$1,189,000 reduction in inventory due to a decline in CT tube inventory as a
result of lower requirements for inventory because of the declining number of
CT maintenance service agreements in effect and management controls on
purchases, the sale of refurbished CT and magnetic resonance imaging scanners,
and the amortization of spare parts inventory. Additionally, receivables
declined $1,025,000 due to successful collection activities and lower
revenues. These funds were used to reduce accounts payable by $488,000 and
liabilities accrued at April 30, 1996, by $609,000. Deferred revenues also
declined $542,000 as services were provided and refurbished scanners were
delivered in the six months for which payment had been received as of April
30, 1996.
InnoServ's allowance for doubtful accounts at October 31, 1996, was
$905,000, or 18 percent of gross accounts receivable. InnoServ's customers
include hospitals, physician practices, outpatient clinics and
entrepreneurial operations. Some of these customers are thinly capitalized,
operate on small margins and experience cash flow difficulties due to the
lengthy time required to receive reimbursements from Medicare and insurance
companies. The changes occurring in the healthcare industry, primarily the
move to managed care, has weakened healthcare providers' ability to honor
their debts and have forced some of the providers out of business. As a
result of these factors, InnoServ has experienced difficulty in collecting on
its accounts receivable.
InnoServ has a loan agreement which contains a $1,500,000 term loan
expiring January 30, 1999, and a $500,000 revolving line of credit for
working capital, against which InnoServ had outstanding borrowings of
$1,125,000 and $498,000, respectively, at October 31, 1996. Obligations under
the loan agreement are secured by a security interest in InnoServ's accounts
receivable, inventory and equipment. The principal of the term loan is
payable in equal quarterly installments of $125,000. Interest on the
obligations under the term loan is payable quarterly and is payable monthly
under the revolving line of credit based on varying interest rates above the
prime rate. The interest rate at October 31, 1996, on the term loan was 9.25
percent and was 8.75 percent on the revolving line of credit. The loan
agreement contains financial covenants including maintenance of certain
financial ratios, net worth requirements and restrictions on future
borrowings and payment of dividends. As a result of the net loss for the
period, InnoServ failed to meet the net
12
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worth covenant under the loan agreement as of October 31, 1996. InnoServ's
bank waived this event of default and has amended the net worth covenant
effective October 31, 1996, through the expiration date of the loan agreement
of January 30, 1999. InnoServ was in compliance with the financial
covenants, as amended, at October 31, 1996.
Subsequent to October 31, 1996, the expiration date of the revolving
line of credit was extended from November 12, 1996, to March 12, 1997, and
the interest rate was increased from 0.5 percent to 1.0 percent above the
prime rate. The previously announced negotiations with another financial
institution to secure financing to replace the bank loan agreement have been
discontinued. InnoServ is investigating alternative sources of financing. If
InnoServ is not successful in securing replacement financing by March 12,
1997, InnoServ believes the bank will extend the revolving line of credit
further.
InnoServ does not foresee the need to make any significant capital
purchases in the next twelve months and believes sufficient funds will be
available from its operations and line of credit to meet its working capital
requirements. If efforts to secure replacement financing are not successful
and the bank does not extend the line of credit, InnoServ will experience a
hardship in meeting its working capital requirements.
CAUTIONARY STATEMENT
The statements in this Management's Discussion and Analysis and
elsewhere in this report that are forward looking are based on current
expectations which involve numerous risks and uncertainties. InnoServ's
future results of operations and financial condition may differ materially
due to many factors including InnoServ's ability to attract and retain Asset
Management contracts, InnoServ's ability to implement its operating plan,
particularly as it relates to the CT maintenance business, competitive and
regulatory conditions in the healthcare industry generally, the availability
of financing, and other factors, many of which are beyond the control of
InnoServ.
13
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PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
In December 1995 InnoServ entered into a loan agreement with a bank.
The loan agreement contains financial covenants including the maintenance of
certain financial ratios, net worth requirements, and restrictions on future
borrowings and payment of dividends. In addition, the obligations under the
loan agreement are secured by a security interest in InnoServ's accounts
receivable, inventory and equipment. The line of credit facility contained
in the loan agreement was extended from October 12, 1996, to November 12,
1996, and subsequently extended to March 12, 1997.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of shareholders was held on September 17, 1996. At
the annual meeting the shareholders elected directors to hold office until
the 1997 annual meeting of shareholders and until their successors are
elected and qualified. The following directors were elected:
VOTES CAST
-------------------------
DIRECTOR FOR WITHHELD
-------- --------- --------
Thomas E. Carroll 3,985,133 3,282
Bernard J. Korman 3,985,133 3,282
Michael G. Puls 3,985,033 3,382
Dudley A. Rauch 3,985,133 3,282
Michael M. Sachs 3,985,233 3,182
Samuel Salen, M.D. 3,985,133 3,282
Michael F. Sandler 3,985,133 3,282
David A. Wegmann 3,985,133 3,282
ITEM 6. EXHIBITS AND REPORT ON FORM 8-K.
(a) Exhibits:
The information required by this portion of Item 6 is set forth in the
Index to Exhibits beginning on page 16.
(b) Reports on Form 8-K:
The Registrant filed a report on Form 8-K on October 31, 1996, to report
the extension of the bank line of credit from October 12, 1996, to November
12, 1996.
14
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant had duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATED: December 13, 1996
INNOSERV TECHNOLOGIES, INC.
By: /s/ Thomas Hoefert
--------------------------------
Thomas Hoefert
Vice President and Chief
Financial Officer (Duly
Authorized Officer and Principal
Financial and Accounting Officer)
15
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INDEX TO EXHIBITS
Exhibit
No. Description of Exhibit
------- ----------------------
10.1 Revolving Credit Agreement dated as of October 12, 1996, in the
principal amount of $500,000 payable by the Registrant to Overton
Bank & Trust, N.A.
10.2 Revolving Credit Agreement dated as of November 12, 1996, in the
principal amount of $500,000 payable by the Registrant to Overton
Bank & Trust, N.A.
10.3 Form of Security Agreement dated as of November 12, 1996, between
Overton Bank & Trust, N.A. and each of InnoServ Technologies,
Inc., InnoServ Technologies Maintenance Services, Inc., Advanced
Imaging Technologies, Inc. and Sietec, Inc.
10.4 Letter Agreement dated December 12, 1996, amending the Loan
Agreement dated as of December 15, 1995, by and between Registrant
and Overton Bank & Trust, N.A.
11.1 Computation of Per Share Earnings.
27.1 Financial Data Schedule.
16
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Exhibit 10.1 - Revolving Credit Agreement
<TABLE>
<S> <C> <C>
INNOSERV TECHNOLOGIES, INC. OVERTON BANK & TRUST, N.A. ACCOUNT #: CFV/JF
4330 BELTWAY, SUITE 300 SOUTH ARLINGTON Loan Number 78000415
ARLINGTON, TX 76018 PO BOX 150049 Date: OCTOBER 12, 1996
ARLINGTON, TX 76015 Maturity Date: NOVEMBER 12,1996
BORROWER'S NAME AND ADDRESS LENDER'S NAME AND ADDRESS Loan Amount: $500,000.00
"I" includes each borrower "You" means the lender, its Renewal of 78000415
above, joint and severally. successors and assigns.
</TABLE>
For value received, I promise to pay to you, or your order, at your address
listed above the PRINCIPAL sum of FIVE HUNDRED THOUSAND AND NO/100****Dollars
$500,000.00
SINGLE ADVANCE: I will receive all of this principal sum on_______________.
No additional advances are contemplated under this note.
XX MULTIPLE ADVANCE: The principal sum shown above is the maximum amount of
principal I can borrow under this note. On OCTOBER 12, 1996 I will
receive the amount of $____________ and future principal advances are
contemplated.
CONDITIONS: The conditions for future advances are___________.
XX OPEN END CREDIT: You and I agree that I may borrow up to the maximum
amount of principal more than one time. This feature is subject to all
other conditions and expire on NOVEMBER 12, 1996.
CLOSED END CREDIT: You and I agree that I may borrow up to the maximum
only one time (and subject to all other conditions).
INTEREST: I agree to pay interest on the outstanding principal balance from
OCTOBER 12, 1996 at the rate of 8.750% per year until FIRST CHANGE DATE.
XX VARIABLE RATE: This rate may then change as stated below.
X INDEX RATE: The future rate will be .500% Over the following index rate:
WALL STREET JOURNAL BASE RATE AS ESTABLISHED BY THE MINIMUM PRIME
LENDING RATE FOR LARGE U.S. MONEY CENTER COMM. BANKS AS PUBLISHED IN MONEY
RATES SEC. OF W.S.J.
X CEILING RATE: The interest rate ceiling for this note is the QUARTERLY
ceiling rate announced by the Credit Commissioner from time to time.
X FREQUENCY AND TIMING: The rate on this note may change as often as
DAILY.
A change in the interest rate will take effect ON THE SAME DAY
LIMITATIONS: During the term of this loan, the applicable annual
interest rate will not be more than ________________% or less than
___%.
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EFFECT OF VARIABLE RATE: A change in the interest rate will have the
following effect on the payments:
The amount of each scheduled payment will change.
The amount of the final payment will change.
XX THE AMOUNT DUE AT MATURITY WILL CHANGE.
ACCRUAL METHOD: Interest will be calculated on a ACTUAL/360 basis.
POST MATURITY RATE: I agree to pay interest on the unpaid balance of this
note owing after maturity, and until paid in full, as stated below:
on the same fixed or variable rate basis in effect before maturity (as
indicated above).
X at a rate equal to HIGHEST RATE PERMITTED BY LAW.
LATE CHARGE: If a payment is made more than _______ days after it is due, I
agree to pay a late charge of____________.
ADDITIONAL CHARGES: In addition to interest, I agree to pay the following
charges which ___ are ___ are not included in the principal amount
above:_________________________________
PAYMENTS: I agree to pay this note as follows:
XX INTEREST: I agree to pay accrued interest AT MATURITY
XX PRINCIPAL: I agree to pay the principal NOVEMBER 12, 1996
INSTALLMENTS: I agree to pay this note in _____ payments. The first
payment will be in the amount of $_________ and will be due ___________.
A payment of $_______________will be due ____________________
thereafter. The final payment of the entire unpaid balance of principal
and interest will be due ___________________.
ADDITIONAL TERMS:
SEE SEPARATE SECURITY AGREEMENT DATED SAME
THIS WRITTEN LOAN AGREEMENT
REPRESENTS THE FINAL AGREEMENT PURPOSE: The purpose of this loan is
BETWEEN THE PARTIES AND MAY BUSINESS: WORKING CAPITAL
NOT BE CONTRADICTED BY EVIDENCE ------------------------------------
OF PRIOR, CONTEMPORANEOUS OR ------------------------------------
SUBSEQUENT ORAL AGREEMENTS OF
THE PARTIES. SIGNATURES: I agree to the terms of this
note (including those on Page 2). I have
Received a copy on today's date.
THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
Signature for Lender
INNOSERV TECHNOLOGIES, INC.
/s/ CURTIS F. VON DER AHE BY: /s/ MICHAEL G. PULS
- ------------------------------- ------------------------------------------
CURTIS F. VON DER AHE, PRESIDENT MICHAEL PULS, PRESIDENT
<PAGE>
APPLICABLE LAW: The law of the state of Texas will govern this note. Any term
of this note which is contrary to applicable law will not be effective, unless
the law permits you and me to agree to such a variation. If any provision of
this agreement cannot be enforced according to its terms, this fact will not
affect the enforceability of the remainder of this agreement. No modification
of this agreement may be made without your express written consent. Time is of
the essence in this agreement.
PAYMENTS: Each payment I make on this not will first reduce the amount I owe
you for charges which are neither interest nor principal. The remainder of
each payment will then reduce accrued unpaid interest, and then unpaid
principal. If you and I agree to a different application of payments, we will
describe our agreement on this note. I may prepay a part of, or the entire
balance of this loan without penalty, unless we specify to the contrary on this
note. I may prepay a part of, or the entire balance of the loan without
penalty, unless we specify to the contrary on this note. Any partial prepayment
will not excuse or reduce any later scheduled payment until this note is paid in
full (unless, when I make the prepayment, you and I agree in writing to the
contrary).
INTEREST: If I receive the principal in more than one advance, each advance
will start to earn interest only when I receive the advance. The interest rate
in effect on this note at any given time will apply to the entire principal
advanced at that time. Notwithstanding anything to the contrary, I do not agree
to pay and you do not intend to charge any rate of interest that is higher than
the maximum rate of interest you could charge under applicable law for the
extension of credit that is agreed to here (either before or after maturity).
If any notice of interest accrual is sent and is in error, we mutually agree to
correct it, and if you actually collect more interest than allowed by law and
this agreement, you agree to refund it to me.
INDEX RATE: The index will serve only as a device for setting the rate on this
note. You do not guarantee by selecting this index, or the margin, that the
rate on this note will be the same rate you charge on any other loans or class
of loans to me or other borrowers.
ACCRUAL METHOD: The amount of interest that I will pay on this loan will be
calculated using the interest rate and accrual method stated on page 1 of this
note. For the purpose of interest calculation, the accrual method will
determine the number of days in a "year." If no accrual method is stated, then
you may use any reasonable accrual method for calculating interest.
POST MATURITY RATE: For purposes of deciding when the "Post Maturity Rate"
(shown on page 1) applies, the term "maturity" means the date of the last
scheduled payment indicated on page 1 of this note or the date you accelerate
payment on the note, whichever is earlier.
SINGLE ADVANCE LOANS: If this is a single advance loan, you and I expect that
you will make only one advance of principal. However, you may add other amounts
to the principal if you make any payments described in the "PAYMENTS BY LENDER"
paragraph below.
MULTIPLE ADVANCE LOANS: If this is a multiple advance loan, you and I expect
that you will make more than one advance of principal. If this is closed and
credit, repaying a part of the principal will not entitle me to additional
credit.
<PAGE>
PAYMENT BY LENDER: If you are authorized to pay, on my behalf, charges I am
obligated to pay (such as property insurance premiums), then you may treat those
payments made by you as advances and add them to the unpaid principal under this
note, or you may demand immediate payment of the charges.
SET-OFF: I agree that you may set off any amount due and payable under this
note against any right I have to receive money from you. "Right to receive
money from you" means:
(1) any deposit account balance I have with you;
(2) any money owed to me on an item presented to you or in your possession
for collection or exchange; and
(3) any repurchase agreement or other non deposit obligation.
"Any amount due and payable under this note" means the total amount of which
you are entitled to demand payment under the terms of this note at the time you
set off. This total includes any balance the due date for which you properly
accelerate under this note.
If my right to receive money from you is also owned by someone who has not
agreed to pay this note, your right of set-off will apply to my interest in the
obligation and to any other amounts I could withdraw on my sole request or
endorsement. Your right of set-off does not apply to an account or other
obligation where my rights are only as a representative. It also does not apply
to any Individual Retirement Account or other tax-deferred retirement account.
You will not be liable for the dishonor of any check when the dishonor occurs
because you set off this debt against any of my accounts. I agree to hold you
harmless from any such claims arising as a result of your exercise of your right
of set-off.
REAL ESTATE OR RESIDENCE SECURITY: If this note is secured by real estate or
a residence that is personal property, the existence of a default and your
remedies for such a default will be determined by applicable law, by the terms
of any separate instrument creating the security interest and, to the extent not
prohibited by the law and not contrary to the terms of the separate security
instrument, by the "Default" and "Remedies" paragraph herein.
DEFAULT: I will be in default on this loan and any agreement securing this loan
if any one or more of the following occurs:
(1) I fail to perform any obligation which I have undertaken in this note or
any agreement securing this note; or
**(2) you, in good faith, believe that the prospect of payment or the prospect
of my performance of any other of my obligations under this note or any
agreement securing this note is implied.
If any of us are in default on this note or any security agreement, you may
exercise your remedies against any or all of us.
REMEDIES: If I am in default on this note you have, but are not limited to the
following remedies:
(1) You may demand immediate payment of my debt under this note (principal,
accrued unpaid interest and other accrued charges).
(2) You may set off this debt against any right I have to the payment of
money from you, subject to the terms of the "Set-Off" paragraph herein.
(3) You may demand security, additional security, or additional parties to
be obligated to pay this note as a condition for not using any other
remedy.
<PAGE>
(4) You may refuse to make advances to me or allow purchases on credit by
me.
(5) You may use any remedy you have under state or federal law.
By selecting any one or more of these remedies you do not give up your right
to later use any other remedy. By waiving you right to declare an event to be a
default, you do not waive your right to later consider the event as a default if
it continues or happens again.
COLLECTION COSTS AND ATTORNEY'S FEES: I agree to pay all costs of collection,
replevin or any other similar type of cost if I am in default. In addition, if
you hire an attorney to collect this note, I also agree to pay any fee you incur
with such attorney plus court costs (except where prohibited by law). To the
extent permitted by the United States Bankruptcy Code, I also agree to pay the
reasonable attorney's fees and costs you incur to collect this debt as awarded
by any court exercising jurisdiction under the Bankruptcy Code.
WAIVER: I give up my rights to require you to do certain things. I will not
require you to:
(1) demand payment of amounts due (presentment);
(2) obtain official certification of nonpayment (protest);
(3) give notice that amounts due have not been paid (notice of dishonor);
(4) give notice of intent to accelerate; or
(5) give notice of acceleration.
OBLIGATIONS INDEPENDENT: I understand that I must pay this note even if someone
else has also agreed to pay it (by, for example, signing this form or a separate
guarantee or endorsement). You may sue me alone, or anyone else who is
obligated on this note, or any number of us together, to collect this note. You
may without notice release any party to this agreement without releasing any
other party. If you give up any of your rights, with or without notice, it will
not affect my duty to pay this note. Any extension of new credit to any of us,
or renewal of this note by all or less than all of us will not release me from
my duty to pay it. (Of course, you are entitled to only one payment in full.)
I agree that you may at your option extend this note or the debt represented by
this note, or any portion of the note or debt, from time to time without limit
or notice and for any term without affecting my liability for payment of the
note. I will not assign my obligation under this agreement without your prior
written approval.
CREDIT INFORMATION: I agree and authorize you to obtain credit information
about me from time to time (for example, by requesting a credit report) and to
report to others your credit experience with me (such as a credit reporting
agency). I agree to provide you, upon request, any financial statement or
information you may deem necessary. I warrant that the financial statements and
information I provide to you are or will be accurate, correct and complete.
NOTICE: Unless otherwise required by law, any notice to me shall be given by
delivering it or by mailing it by first class mail addressed to me at my last
known address. My current address is on page 1. I agree to inform you in
writing of any change in my address. I will give any notice to you by mailing
it first class to your address stated on page 1 of this agreement, or to any
other address that you have designated.
<PAGE>
**(2) you, after due inquiry and ten days' opportunity to cure following prior
written notice to me by you of the basis of your good faith belief, in good
faith, believe that the prospect of payment or the prospect of my performance of
any other of my obligations under this note or any agreement securing this note
impaired.
<PAGE>
Exhibit 10.2 - Revolving Credit Agreement
INNOSERV OVERTON BANK & ACCOUNT #: CFV/JF
TECHNOLOGIES, INC. TRUST, N.A. Loan Number 78000415
4330 BELTWAY, SUITE SOUTH ARLINGTON Date: NOVEMBER 12, 1996
300 PO BOX 150049 Maturity Date: MARCH 12, 1997
ARLINGTON, TX 76018 ARLINGTON, TX 76015 Loan Amount $500,000.00
LENDER'S NAME AND Renewal of 78000415
BORROWER'S NAME AND ADDRESS
ADDRESS "You" means the
"I" includes each lender, its
borrower above, successors and
joint and assigns.
severally.
For value received, I promise to pay to you, or your order, at your address
listed above the PRINCIPAL sum of FIVE HUNDRED THOUSAND AND NO/100****Dollars
$500,000.00
SINGLE ADVANCE: I will receive all of this principal sum on_______________.
No additional advances are contemplated under this note.
XX MULTIPLE ADVANCE: The principal sum shown above is the maximum amount of
principal I can borrow under this note. On NOV. 12, 1996 I will receive
the amount of $____________ and future principal advances are
contemplated.
CONDITIONS: The conditions for future advances are___________.
XX OPEN END CREDIT: You and I agree that I may borrow up to the maximum
amount of principal more than one time. This feature is subject to all
other conditions and expire on MARCH 12, 1997.
CLOSED END CREDIT: You and I agree that I may borrow up to the maximum
only one time (and subject to all other conditions).
INTEREST: I agree to pay interest on the outstanding principal balance from NOV.
12, 1996 at the rate of 9.250% per year until FIRST CHANGE DATE.
XX VARIABLE RATE: This rate may then change as stated below.
X INDEX RATE: The future rate will be 1.000% OVER the following index rate:
WALL STREET JOURNAL BASE RATE AS ESTABLISHED BY THE MINIMUM PRIME
LENDING RATE FOR LARGE U.S. MONEY CENTER COMM. BANKS AS PUBLISHED IN MONEY
RATES SEC. OF W.S.J.
X CEILING RATE: The interest rate ceiling for this note is the QUARTERLY
ceiling rate announced by the Credit Commissioner from time to time.
X FREQUENCY AND TIMING: The rate on this note may change as often as
DAILY.
A change in the interest rate will take effect ON THE SAME DAY
LIMITATIONS: During the term of this loan, the applicable annual
interest rate will not be more than ________________% or less than
___%.
<PAGE>
EFFECT OF VARIABLE RATE: A change in the interest rate will have the
following effect on the payments:
XX The amount of each scheduled payment will change.
XX The amount of the final payment will change.
ACCRUAL METHOD: Interest will be calculated on a ACTUAL/360 basis.
POST MATURITY RATE: I agree to pay interest on the unpaid balance of this
note owing after maturity, and until paid in full, as stated below:
on the same fixed or variable rate basis in effect before maturity (as
indicated above).
XX at a rate equal to_HIGHEST RATE PERMITTED BY LAW.
LATE CHARGE: If a payment is made more than _______ days after it is due, I
agree to pay a late charge of____________.
ADDITIONAL CHARGES: In addition to interest, I agree to pay the following
charges which ___ are ___ are not included in the principal amount
above:_________________________________
PAYMENTS: I agree to pay this note as follows:
XX INTEREST: I agree to pay accrued interest ON THE 12TH DAY OF EACH MONTH
BEGINNING DECEMBER 12, 1996
XX PRINCIPAL: I agree to pay the principal MARCH 12, 1997
INSTALLMENTS: I agree to pay this note in _____ payments. The first
payment will be in the amount of $_________ and will be due ___________.
A payment of $_______________will be due ____________________
thereafter. The final payment of the entire unpaid balance of principal
and interest will be due ___________________.
ADDITIONAL TERMS:
SEE SEPARATE SECURITY AGREEMENT DATED SAME
THIS WRITTEN LOAN AGREEMENT
REPRESENTS THE FINAL AGREEMENT PURPOSE: The purpose of this loan is
BETWEEN THE PARTIES AND MAY BUSINESS: PURCHASE EQUIPMENT
NOT BE CONTRADICTED BY EVIDENCE -----------------------------
OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF -----------------------------
THE PARTIES.
SIGNATURES: I agree to the terms of
this note (including those on Page
2). I have Received a copy on
today's date.
THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
Signature for Lender
INNOSERV TECHNOLOGIES, INC.
/s/ CURTIS F. VON DER AHE BY: /s/ MICHAEL G. PULS
- ------------------------------- ------------------------------------
CURTIS F. VON DER AHE, PRESIDENT MICHAEL PULS, PRESIDENT
<PAGE>
APPLICABLE LAW: The law of the state of Texas will govern this note. Any
term of this note which is contrary to applicable law will not be effective,
unless the law permits you and me to agree to such a variation. If any
provision of this agreement cannot be enforced according to its terms, this
fact will not affect the enforceability of the remainder of this agreement.
No modification of this agreement may be made without your express written
consent. Time is of the essence in this agreement.
PAYMENTS: Each payment I make on this not will first reduce the amount I owe
you for charges which are neither interest nor principal. The remainder of
each payment will then reduce accrued unpaid interest, and then unpaid
principal. If you and I agree to a different application of payments, we
will describe our agreement on this note. I may prepay a part of, or the
entire balance of this loan without penalty, unless we specify to the
contrary on this note. I may prepay a part of, or the entire balance of the
loan without penalty, unless we specify to the contrary on this note. Any
partial prepayment will not excuse or reduce any later scheduled payment
until this note is paid in full (unless, when I make the prepayment, you and
I agree in writing to the contrary).
INTEREST: If I receive the principal in more than one advance, each advance
will start to earn interest only when I receive the advance. The interest
rate in effect on this note at any given time will apply to the entire
principal advanced at that time. Notwithstanding anything to the contrary, I
do not agree to pay and you do not intend to charge any rate of interest that
is higher than the maximum rate of interest you could charge under applicable
law for the extension of credit that is agreed to here (either before or
after maturity). If any notice of interest accrual is sent and is in error,
we mutually agree to correct it, and if you actually collect more interest
than allowed by law and this agreement, you agree to refund it to me.
INDEX RATE: The index will serve only as a device for setting the rate on this
note. You do not guarantee by selecting this index, or the margin, that the
rate on this note will be the same rate you charge on any other loans or class
of loans to me or other borrowers.
ACCRUAL METHOD: The amount of interest that I will pay on this loan will be
calculated using the interest rate and accrual method stated on page 1 of this
note. For the purpose of interest calculation, the accrual method will
determine the number of days in a "year." If no accrual method is stated, then
you may use any reasonable accrual method for calculating interest.
POST MATURITY RATE: For purposes of deciding when the "Post Maturity Rate"
(shown on page 1) applies, the term "maturity" means the date of the last
scheduled payment indicated on page 1 of this note or the date you accelerate
payment on the note, whichever is earlier.
SINGLE ADVANCE LOANS: If this is a single advance loan, you and I expect that
you will make only one advance of principal. However, you may add other amounts
to the principal if you make any payments described in the "PAYMENTS BY LENDER"
paragraph below.
MULTIPLE ADVANCE LOANS: If this is a multiple advance loan, you and I expect
that you will make more than one advance of principal. If this is closed and
credit, repaying a part of the principal will not entitle me to additional
credit.
<PAGE>
PAYMENT BY LENDER: If you are authorized to pay, on my behalf, charges I am
obligated to pay (such as property insurance premiums), then you may treat those
payments made by you as advances and add them to the unpaid principal under this
note, or you may demand immediate payment of the charges.
SET-OFF: I agree that you may set off any amount due and payable under this
note against any right I have to receive money from you. "Right to receive
money from you" means:
(1) any deposit account balance I have with you;
(2) any money owed to me on an item presented to you or in your possession
for collection or exchange; and
(3) any repurchase agreement or other non deposit obligation.
"Any amount due and payable under this note" means the total amount of which
you are entitled to demand payment under the terms of this note at the time you
set off. This total includes any balance the due date for which you properly
accelerate under this note.
If my right to receive money from you is also owned by someone who has not
agreed to pay this note, your right of set-off will apply to my interest in the
obligation and to any other amounts I could withdraw on my sole request or
endorsement. Your right of set-off does not apply to an account or other
obligation where my rights are only as a representative. It also does not apply
to any Individual Retirement Account or other tax-deferred retirement account.
You will not be liable for the dishonor of any check when the dishonor occurs
because you set off this debt against any of my accounts. I agree to hold you
harmless from any such claims arising as a result of your exercise of your right
of set-off.
REAL ESTATE OR RESIDENCE SECURITY: If this note is secured by real estate or
a residence that is personal property, the existence of a default and your
remedies for such a default will be determined by applicable law, by the terms
of any separate instrument creating the security interest and, to the extent not
prohibited by the law and not contrary to the terms of the separate security
instrument, by the "Default" and "Remedies" paragraph herein.
DEFAULT: I will be in default on this loan and any agreement securing this loan
if any one or more of the following occurs:
(1) I fail to perform any obligation which I have undertaken in this note or
any agreement securing this note; or
**(2) you, in good faith, believe that the prospect of payment or the prospect
of my performance of any other of my obligations under this note or any
agreement securing this note is implied.
If any of us are in default on this note or any security agreement, you may
exercise your remedies against any or all of us.
REMEDIES: If I am in default on this note you have, but are not limited to the
following remedies:
(1) You may demand immediate payment of my debt under this note (principal,
accrued unpaid interest and other accrued charges).
(2) You may set off this debt against any right I have to the payment of
money from you, subject to the terms of the "Set-Off" paragraph herein.
(3) You may demand security, additional security, or additional parties to
be obligated to pay this note as a condition for not using any other
remedy.
<PAGE>
(4) You may refuse to make advances to me or allow purchases on credit by
me.
(5) You may use any remedy you have under state or federal law.
By selecting any one or more of these remedies you do not give up your
right to later use any other remedy. By waiving you right to declare an
event to be a default, you do not waive your right to later consider the
event as a default if it continues or happens again.
COLLECTION COSTS AND ATTORNEY'S FEES: I agree to pay all costs of
collection, replevin or any other similar type of cost if I am in default.
In addition, if you hire an attorney to collect this note, I also agree to
pay any fee you incur with such attorney plus court costs (except where
prohibited by law). To the extent permitted by the United States Bankruptcy
Code, I also agree to pay the reasonable attorney's fees and costs you incur
to collect this debt as awarded by any court exercising jurisdiction under
the Bankruptcy Code.
WAIVER: I give up my rights to require you to do certain things. I will not
require you to:
(1) demand payment of amounts due (presentment);
(2) obtain official certification of nonpayment (protest);
(3) give notice that amounts due have not been paid (notice of dishonor);
(4) give notice of intent to accelerate; or
(5) give notice of acceleration.
OBLIGATIONS INDEPENDENT: I understand that I must pay this note even if
someone else has also agreed to pay it (by, for example, signing this form or
a separate guarantee or endorsement). You may sue me alone, or anyone else
who is obligated on this note, or any number of us together, to collect this
note. You may without notice release any party to this agreement without
releasing any other party. If you give up any of your rights, with or
without notice, it will not affect my duty to pay this note. Any extension
of new credit to any of us, or renewal of this note by all or less than all
of us will not release me from my duty to pay it. (Of course, you are
entitled to only one payment in full.) I agree that you may at your option
extend this note or the debt represented by this note, or any portion of the
note or debt, from time to time without limit or notice and for any term
without affecting my liability for payment of the note. I will not assign my
obligation under this agreement without your prior written approval.
CREDIT INFORMATION: I agree and authorize you to obtain credit information
about me from time to time (for example, by requesting a credit report) and
to report to others your credit experience with me (such as a credit
reporting agency). I agree to provide you, upon request, any financial
statement or information you may deem necessary. I warrant that the financial
statements and information I provide to you are or will be accurate, correct
and complete.
NOTICE: Unless otherwise required by law, any notice to me shall be given by
delivering it or by mailing it by first class mail addressed to me at my last
known address. My current address is on page 1. I agree to inform you in
writing of any change in my address. I will give any notice to you by
mailing it first class to your address stated on page 1 of this agreement,
or to any other address that you have designated.
<PAGE>
**(2) you, after due inquiry and ten days' opportunity to cure following
prior written notice to me by you of the basis of your good faith belief, in
good faith, believe that the prospect of payment or the prospect of my
performance of any other of my obligations under this note or any agreement
securing this note impaired.
<PAGE>
Exhibit 10.3 Form of Security Agreement
INNOSERV TECHNOLOGIES, INC. OVERTON BANK AND TRUST, N.A.
4330 BELTWAY, SUITE 300 SOUTH ARLINGTON
ARLINGTON, TX 76018 PO BOX 150049
ARLINGTON, TX 76015
TAXPAYER I.D. NUMBER: 95-3619990
DEBTOR'S NAME, ADDRESS AND SSN OR TIN SECURED PARTY'S NAME AND
("I" MEANS EACH DEBTOR WHO SIGNS.) ADDRESS
("YOU" MEANS THE SECURED
PARTY, ITS SUCCESSORS AND
ASSIGNS.)
I am entering into this security agreement with you on NOVEMBER 12, 1996 (date).
SECURED DEBTS. I agree that this security agreement will secure the payment and
performance of the debts, liabilities or obligations described below that
(Check one) ___ I XX (name) INNOSERV TECHNOLOGIES, INC. owe(s) to you now or in
the future:
(Check one below):
____ Specific Debt(s). The debt(s), liability or obligations evidenced by
(describe):____________________________and all extensions, renewals,
refinancing, modifications and replacement of the debt, liability or
obligation.
XX All Debt(s). Except in those cases listed in the "LIMITATIONS" paragraph
on page 2, each and every debt, liability and obligation of every type and
description (whether such debt, liability or obligation now exists or is
incurred in the future and whether it is or may be direct or indirect, due or
to become due, absolute or contingent, primary or secondary, liquidated or
unliquidated, or joint, several or joint and several).
SECURITY INTEREST. To secure the payment and performance of the above described
Secured Debts, liabilities and obligations, I give you a security interest in
all of the property described below that I now own and that I may own in the
future (including, but not limited to, all parts, accessories, repairs,
improvements, and accessions to the property), wherever the property is or
may be located, and all proceeds and products from the property.
XX INVENTORY: All inventory which I hold for ultimate sale or lease, or
which has been or will be supplied under contracts of service, or which
are raw materials, work in process, or materials used or consumed in my
business.
XX EQUIPMENT: All equipment including, but not limited to, all machinery,
vehicles, furniture, fixtures, manufacturing equipment, farm machinery
and equipment, shop equipment, office and recordkeeping equipment, and
parts and tools. All equipment described in a list or schedule which I
give to you will also be included in the secured property, but such a list
is not necessary for a valid security interest in my equipment.
<PAGE>
__ FARM PRODUCTS: All farm products including, but not limited to:
(a) all poultry and livestock and their young, along with their products,
produce and replacements;
(b) all crops, annual or perennial, and all products of the crops; and
(c) all feed, seed, fertilizer, medicines, and other supplies used or
produced in my farming operations.
XX ACCOUNTS, INSTRUMENTS, DOCUMENTS, CHATTEL PAPER AND OTHER RIGHTS TO
PAYMENT: All right I have now and that I may have in the future to the
payment of money including, but not limited to:
(a) payment for goods and other property sold or leased or for services
rendered, whether or not I have earned such payment by performance;
and
(b) rights to payment arising out of all present and future debt
instruments, chattel paper and loans and obligations receivable.
The above include any right and interests (including all liens and
security interests) which I may have by law or agreement against any
account debtor or obligor of mine.
__ GENERAL INTANGIBLES: All general intangibles including, but not limited
to, tax refunds, applications for patents, patents, copyrights,
trademarks, trade secrets, good will, trade names, customer lists, permits
and franchises, and the right to use my name.
__ GOVERNMENT PAYMENTS AND PROGRAMS: All payments, accounts, general
intangibles, or other benefits (including, but not limited to, payments
in kind, deficiency payments, letters of entitlement, warehouse receipts,
storage payments, emergency assistance payments, diversion payments, and
conservation reserve payments) in which I now have and in the future may
have any rights or interest and which arise under or as a result of any
preexisting, current or future Federal or state governmental program
(including, but not limited to, all programs administered by the Commodity
Credit Corporation and the ASCS.
__ The secured property includes, but is not limited by, the following:
If this agreement covers timber to be cut, minerals (including oil and gas),
fixtures or crops growing or to be grown, the legal description is:
______________________________________________________________________
<PAGE>
I am a (n)__ individual __ partnership I AGREE TO THE TERMS SET OUT
XX corporation ON BOTH PAGE 1 AND PAGE 2
OF THIS AGREEMENT. I HAVE
__ If checked, file this agreement in RECEIVED A COPY OF THIS
the real estate record. DOCUMENT ON TODAY'S DATE.
Record Owner (if not me): ____________
The property will be used for __ personal XX business___ agricultural
___________reasons.
INNOSERV TECHNOLOGIES, INC.
---------------------------
(Debtor's Name)
By: /s/ Michael G. Puls
----------------------------
MICHAEL PULS
OVERTON BANK AND TRUST, N.A.
SOUTH ARLINGTON Title: PRESIDENT
- -------------------------------- -----------------------
(secured party's name)
By: /s/ CURTIS VON DER AHE
-----------------------------
CURTIS VON DER AHE, PRESIDENT
<PAGE>
GENERALLY - "You" means the Secured Party identified on page 1 of this
agreement. "I", "me" and "my" means each person who signs this security
agreement as Debtor and who agrees to give the property described in this
agreement as security for the Secured Debts. All terms and duties under this
agreement are joint and individual. No modification of this security agreement
is effective unless made in writing and signed by you and me. This security
agreement remains in effect, even if the note is paid and I owe no other debt
to you, until discharged in writing. Time is of the essence in this agreement.
APPLICABLE LAW - I agree that this security agreement will be governed by the
law of the state in which you are located. If property described in this
agreement is located in another state, this agreement may also, in some
circumstances, be governed by the law of the state in which the property is
located.
To the extent permitted by law, the terms of this agreement may vary
applicable law. If any provision of applicable law may not be varied by
agreement, any provision of this agreement that does not comply with the law
will not be effective. If any provision of this agreement cannot be enforced
according to its terms, this fact will not affect the enforceability of the
remainder of this agreement.
OWNERSHIP AND DUTIES TOWARD PROPERTY - I represent that I own all of the
property, or to the extend this is a purchase money security interest I will
acquire ownership of the property with the proceeds of the loan. I will defend
it against any other claim. Your claim to the property is ahead of the claims
of any other creditor. I agree to do whatever you require to protect your
security interest and to keep your claim in the property ahead of the claims of
other creditors. I will not do anything to harm your position.
I will keep books, records and accounts about the property and my business
in general. I will let you examine these records at any reasonable time. I
will prepare any report or accounting you request, which deals with the
property.
I will keep the property in my possession and will keep it in good repair and
use it only for the purpose(s) described on page 1 of this agreement. I will
not change this specified use without your express written permission. I
represent that I am the original owner of the property and, if I am not, that I
have provided you with a list of prior owners of the property.
I will keep the property at my address listed on page 1 of this agreement,
unless we agree I may keep it at another location. If the property is to be
used in another state, I will give you a list of those states. I will not try
to sell the property unless it is inventory or I receive your written permission
to do so. If I sell the property I will have the payment made payable to the
order of you and me.
You may demand immediate payment of the debt(s) if the debtor is not a
natural person and without your prior written consent (1) a beneficial interest
in the debtor is sold or transferred or (2) there is a change in either the
identity or number of members of a partnership or (3) there is a change in
ownership of more than 25 percent of the voting stock of a corporation.
I will pay all taxes and charges on the property as they become due. You
have the right of reasonable access in order to inspect the
<PAGE>
property. I will immediately inform you of any loss or damage to the
property.
LIMITATIONS - This agreement will not secure a debt described in the section
entitled "Secured Debts" on page 1:
1) if you fail to make any disclosure of the existence of this security
interest required by law for such other debt;
2) if this security interest is in my principal dwelling and you fail to
provide (to all persons entitled) any notice of right of rescission required
by law for such other debt;
3) to the extent that this security interest is in "household goods" and the
other debt to be secured is a "consumer" loan (as those terms are defined in
applicable federal regulations governing unfair and deceptive credit
practices);
4) if this security interest is in margin stock subject to the requirements
of 12 C.F.R. Section 207 or 221 and you do not obtain a statement of purpose
if required under these regulations with respect to that debt; or
5) if this security interest is unenforceable by law with respect to that
debt.
PURCHASE MONEY SECURITY INTEREST - For the sole purpose of determining the
extent of a purchase money security interest arising under this security
agreement: (a) payments on any non-purchase money loan also secured by this
agreement will not be deemed to apply to the purchase money loan, and (b)
payments on the purchase money loan will be deemed to apply first to the non-
purchase money portion of the loan, if any, and then to the purchase money
obligations in the order in which the items of collateral were acquired or if
acquired at the same time, in the order selected by you. No security interest
will be terminated by application of this formula. "Purchase money loan" means
any loan the proceeds of which, in whole or in part, are used to acquire any
collateral securing the loan and all extensions, renewals, consolidations and
refinancings of such loans.
AUTHORITY OF SECURED PARTY TO MAKE ADVANCES AND PERFORM FOR DEBTOR - I agree to
pay you on demand any sums you advanced on my behalf including, but not limited
to, expenses incurred in collecting, insuring, conserving, or protecting the
property or in any inventories, audits, inspections or other examinations by you
in respect to the property. If I fail to pay such sums, you may do so for me,
adding the amount paid to the other amounts secured by this agreement. All such
sums will be due on demand and will bear interest at the highest rate provided
in any agreement, note or other instrument evidencing the Secured Debt(s) and
permitted by law at the time of the advance.
If I fail to perform any of my duties under this security agreement, or any
mortgage, deed of trust, lien or other security interest, you may without
notice to me perform the duties or cause them to be performed. I understand
that this authorization includes, but is not limited to, permission to: (1)
prepare, file, and sign my name to any necessary reports or accountings; (2)
notify any account debtor of your interest in this property and tell the
account debtor to make the payments to you or someone else you name, rather
than me; (3) place on any chattel paper a note indicating your interest in
the property; (4) in my name, demand, collect, receive and give a receipt for
compromise,
<PAGE>
settle, and handle any suits or other proceedings involving the collateral;
(5) take any action you feel is necessary in order to realize on the
collateral, including performing any part of a contract or endorsing it in my
name; and (6) make an entry on my books and records showing the existence of
the security agreement. Your right to perform for me shall not create an
obligation to perform and your failure to perform will not preclude you from
exercising any of your rights under the law of this security agreement.
THESE SAME PARTIES WILL CONTROL THE INSURANCE.
INSURANCE
WARRANTIES AND REPRESENTATIONS - If this agreement includes accounts, I will
not settle any account for less than its full value without your written
permission. I will collect all accounts until you tell me otherwise. I will
keep the proceeds from all the accounts and any goods which are returned to
me or which I take back in trust for you, I will not mix them with any other
property of mine. I will deliver them to you at your request. If you ask me
to pay you the full price on any returned items or items retaken by myself, I
will do so.
If this agreement covers inventory, I will not dispose of it except in my
ordinary course of business at the fair market value for the property, or at a
minimum price established between you and me.
If this agreement covers farm products I will provide you, at your request, a
written list of the buyers, commission merchants or selling agents to or
through whom I may sell my farm products. In addition to those parties named
on this written list, I authorize you to notify at your sole discretion any
additional parties regarding your security interest in my farm products. I
remain subject to all applicable penalties for selling my farm products in
violation of my agreement with you and the Food Security Act. In this paragraph
the terms farm products, buyers, commission merchants and selling agents have
the meanings given to them in the Federal Food Security Act of 1985.
DEFAULT - I will be in default if any one or more of the following occur: (1) I
fail to make a payment on time or in the amount due; (2) I fail to keep the
property insured, if required; (3) I fail to pay, or keep any promise, on any
debt or agreement I have with you; (4) any other creditor of mine attempts to
collect any debt I owe him through court proceedings; (5) I die, am declared
incompetent, make an assignment for the benefit of creditors, or become
insolvent (either because my liabilities exceed my assets or I am unable to pay
my debts as they become due); (6) I make any written statement or provide any
financial information that is untrue or inaccurate at the time it was provided;
(7) I do or fail to do something which causes you to believe that you will have
difficulty collecting the amount I owe you; (8) I change my name or assume an
additional name without first notifying you before making such a change; (9)
failure to plant, cultivate and harvest crops in due season; (10) if any loan
proceeds are used for a purpose that will contribute to excessive erosion of
highly erodible land or to the conversion of wetlands to produce an agricultural
commodity, as further explained in 7 C.F.R. Part 1940, Subpart G, Exhibit M.
<PAGE>
REMEDIES - If I am in default on this agreement, you have the following
remedies:
1) You may demand immediate payment of all I owe you under any obligation
secured by this agreement.
2) You may set off any obligation I have to you against any right I have to
the payment of money from you.
3) You may demand more security or new parties obligated to pay any debt I
owe you as a condition of giving up any other remedy.
4) You may make use of any remedy you have under state or federal law.
5) If I default by failing to pay taxes or other charges, you may pay them
(but you are not required to do so). If you do, I will repay to you the
amount you paid plus interest at the highest contract rate.
6) You may require me to gather the property and make it available to you in a
reasonable fashion.
7) You may repossess the property and sell it as provided by law. You may
repossess the property so long as the repossession does not involve a
breach of the peace or an illegal entry onto my property. You may sell the
property as provided by law. You may apply what you receive from the sale
of the property to: your expenses; your reasonable attorney's fees and
legal expenses (where not prohibited by law); any debt I owe you. If what
you receive from the sale of the property does not satisfy the debts, you
may take me to court to recover the difference (where permitted by law).
I agree that 10 days written notice sent to my address listed on page 1 by
first class mail will be reasonable notice to me under the Uniform
Commercial Code.
If any items not otherwise subject to this agreement are contained in the
property when you take possession, you may hold these items for me at my
risk and you will not be liable for taking possession of them.
8) In some cases, you may keep the property to satisfy the debt. You may
enter upon and take possession of all or any part of my property, so
long as you do not breach the peace or illegally enter onto the property,
including lands, plants, buildings, machinery, and equipment as may be
necessary to permit you to manufacture, produce, process, store or sell or
complete the manufacture, production, processing, storing or sale of any of
the property and to use and operate the property for the length of time you
feel is necessary to protect your interest, all without payment or
compensation to me.
By choosing any one or more of these remedies, you do not waive your right to
later use any other remedy. You do not waive a default if you choose not to
use any remedy, and, by electing not to use any remedy, you do not waive your
right to later consider the event a default and to immediately use any remedies
if it continues or occurs again.
FILING - A carbon, photographic or other reproduction of this security agreement
or the financing statement covering the property described in this agreement may
be used as a financing statement where allowed by law. Where permitted by law,
you may file a financing statement which
<PAGE>
does not contain my signature, covering the property secured by this
agreement.
CO-MAKERS - If more than one of us has signed this agreement, we are all
obligated equally under the agreement. You may sue any of one of us or any of
us together if this agreement is violated. You do not have to tell me if any
term of the agreement has not been carried out. You may release any co-signer
and I will still be obligated under this agreement. You may release any of the
security and I will still be obligated under this agreement. Waiver by you of
any of your rights will not affect my duties under this agreement. Extending
this agreement or new obligations under this agreement, will not affect my duty
under the agreement.
<PAGE>
EXHIBIT 10.4
LETTER AGREEMENT AMENDING THE LOAN AGREEMENT
Overton Bank & Trust, N.A.
South Arlington Office
Curtis F. Von Der Ahe
President
December 12, 1996
Mt. Tom Hoefert, CFO
InnoServ Technologies, Inc.
4330 Beltway #300
Arlington, Texas 76018
REFERENCE: LOAN AGREEMENT DATED DECEMBER 15, 1995 COVENANT VIOLATIONS
- ---------
Dear Mr. Hoefert,
You have indicated that you are in violation of the Minimum Tangible Net Worth
covenant as outlined in the loan agreement referenced above. We hereby waive
compliance with this covenant thru October 31, 1996 and re-set this covenant
as follows:
Minimum Tangible Net Worth $4,500,000
If you require anything else, please do not hesitate to call.
Sincerely,
/s/ Curtis F. Von Der Ahe
Curtis F. Von Der Ahe
President
<PAGE>
EXHIBIT 11.1 - COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share amounts)
<TABLE>
Three Months Ended Six Months Ended
October 31, October 31,
-------------------- ------------------
1996 1995 1996 1995
------- ------- ------- ------
<S> <C> <C> <C> <C>
Primary:
Earnings:
Net income (loss) $ (456) $ 308 $(1,083) $ 71
Shares:
Weighted average shares outstanding 5,036 5,036 5,036 5,038
Per share amounts:
Net income (loss) $ (.09) $ .04 $ (.22) $ .01
------- ------- ------- ------
------- ------- ------- ------
Fully diluted (A):
Earnings:
Net income (loss) $ (456) $ 308 $(1,083) $ 71
Shares:
Weighted average shares outstanding 5,036 5,036 5,036 5,038
Net shares issuable on exercise of
certain stock options 25 -- 67 4
------- ------- ------- ------
Weighted average shares outstanding,
as adjusted 5,061 5,036 5,103 5,042
Per share amounts:
Net income (loss) $ (.09) $ .04 $ (.21) $ .01
------- ------- ------- ------
------- ------- ------- ------
</TABLE>
Note A: This calculation is submitted in accordance with Regulation S-K
item 601(b)(11) although it is contrary to paragraph 40 of APB Opinion
No. 15 because it produces an anti-dilutive result.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> AUG-01-1996
<PERIOD-END> OCT-31-1996
<CASH> 1,166
<SECURITIES> 0
<RECEIVABLES> 4,791
<ALLOWANCES> 905
<INVENTORY> 6,268
<CURRENT-ASSETS> 12,067
<PP&E> 28,251
<DEPRECIATION> 22,844
<TOTAL-ASSETS> 21,028
<CURRENT-LIABILITIES> 11,512
<BONDS> 1,185
51
0
<COMMON> 0
<OTHER-SE> 8,832
<TOTAL-LIABILITY-AND-EQUITY> 21,028
<SALES> 430
<TOTAL-REVENUES> 10,684
<CGS> 326
<TOTAL-COSTS> 9,121
<OTHER-EXPENSES> 505
<LOSS-PROVISION> (114)
<INTEREST-EXPENSE> 77
<INCOME-PRETAX> (456)
<INCOME-TAX> 0
<INCOME-CONTINUING> (456)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (456)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>
