<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the quarterly period ended September 24, 1994
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OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-11618
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HPSC, INC.
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(Exact name of registrant as specified in its charter)
Delaware 04-2560004
- --------------------------------------- ---------------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
60 STATE STREET, BOSTON, MASSACHUSETTS 02109
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 720-3600
----------------------------
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(Former name, former address, and former fiscal year
if changed since last report)
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 and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date COMMON STOCK, PAR VALUE $.01 PER
SHARE. SHARES OUTSTANDING AT NOVEMBER 1, 1994, 5,574,395.
<PAGE>
HPSC, INC.
INDEX
PART I - FINANCIAL INFORMATION PAGE
----
Consolidated Balance Sheets as of September 24, 1994
and December 25, 1993........................................... 3
Consolidated Statements of Income for each of the three and nine
months ended September 24, 1994 and September 25, 1993 ......... 4
Consolidated Statements of Cash Flows for each of the nine
months ended September 24, 1994 and September 25, 1993 ......... 5
Notes to Consolidated Financial Statements...................... 6-7
Management's Discussion and Analysis of Financial
Condition and Results of Operations............................. 8-9
PART II - OTHER INFORMATION
Signatures...................................................... 10
Exhibit Index................................................... 11
2
<PAGE>
HPSC, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
(unaudited)
ASSETS
<TABLE>
<CAPTION>
Sept. 24, December 25,
1994 1993
------------ ------------
<S> <C> <C>
CASH AND CASH EQUIVALENTS $ 626 $ 16,600
RESTRICTED CASH 9,215 --
INVESTMENT IN LEASES AND NOTES:
Lease contracts receivable and notes
receivable due in installments 102,469 126,369
Estimated residual value of equipment
at end of lease term 9,553 12,325
Less unearned income (15,558) (21,803)
Less allowance for losses (6,008) (6,897)
Less security deposits (2,615) (2,860)
Deferred origination costs 2,042 2,618
-------- --------
Net investment in leases and notes 89,883 109,752
-------- --------
OTHER ASSETS:
Deferred expense and other assets 2,046 1,812
Refundable income taxes 792 2,273
-------- --------
TOTAL ASSETS $102,562 $130,437
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
NOTES PAYABLE TO BANKS $ 6,000 7,130
ACCOUNTS PAYABLE 5,274 5.348
ACCRUED INTEREST 305 3,434
INCOME TAXES:
Currently payable 521 310
Deferred 4,943 6,632
SENIOR NOTES 47,752 50,000
SUBORDINATED DEBT (net of unamortized
discount of $38) -- 19,962
-------- --------
Total Liabilities 64,795 92,816
-------- --------
STOCKHOLDERS' EQUITY:
Preferred Stock, $1.00 par value;
authorized 5,000,000 shares;
Issued -- NONE -- --
Common Stock, $.01 par value;
15,000,000 shares authorized; issued
and outstanding 5,574,395 shares in
1994 and 4,923,571 in 1993 56 49
Additional paid-in capital 15,916 13,645
Retained earnings 24,568 24,151
Cumulative foreign currency
translation adjustments (597) (224)
-------- --------
39,943 37,621
Less Loans Receivable from Employee
Stock Ownership Plans (2,176) --
-------- --------
Total stockholders' equity 37,767 37,621
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $102,562 $130,437
-------- --------
-------- --------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
3
<PAGE>
HPSC, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR EACH OF THE THREE AND NINE MONTHS ENDED SEPTEMBER 24, 1994
AND SEPTEMBER 25, 1993
(in thousands, except per share and share amounts)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
SEPT. 24, SEPT. 25, SEPT. 24, SEPT. 25,
1994 1993 1994 1993
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
REVENUES:
Earned income on leases and notes $2,776 $ 3,836 $ 9,443 $13,482
Provision for losses (164) (1,037) (524) (3,103)
------ ------- ------- -------
Net revenues 2,612 2,799 8,919 10,379
------ ------- ------- -------
EXPENSES:
Selling, general and administrative 1,705 1,657 5,237 3,067
Interest, net 792 2,246 2,998 6,872
------ ------- ------- -------
Total expenses 2,497 3,903 8,235 9,939
------ ------- ------- -------
INCOME BEFORE INCOME TAXES 115 (1,104) 684 440
------ ------- ------- -------
PROVISION FOR INCOME TAXES:
Federal, Foreign and State:
Current 699 (311) 1,957 917
Deferred (654) (115) (1,689) (735)
------ ------- ------- -------
TOTAL INCOME TAXES 45 (426) 268 182
------ ------- ------- -------
NET INCOME $ 70 $ (678) $ 416 $ 258
------ ------- ------- -------
------ ------- ------- -------
NET INCOME PER SHARE $ .01 $ (.14) $ .08 $ .05
------ ------- ------- -------
------ ------- ------- -------
SHARES USED TO COMPUTE INCOME PER SHARE. 4,994,964 4,923,415 4,987,022 4,925,575
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS
4
<PAGE>
HPSC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR EACH OF THE NINE MONTHS ENDED SEPTEMBER 24, 1994 AND SEPTEMBER 25, 1993
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Sept. 24, Sept. 25,
1994 1993
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 416 $ 258
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 324 802
Deferred income taxes (1,689) (735)
Provision for losses on lease contracts and notes
receivable 524 3,103
(Decrease) in accrued interest (3,129) (1,760)
(Decrease) in accounts payable (74) (1,901)
Increase (Decrease) in accrued income taxes 211 (1,190)
Decrease (Increase) in refundable income taxes 1,481 (103)
Decrease in other assets 234 87
-------- --------
Cash (used in) provided by operating activities (1,702) (1,439)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (528) (118)
Lease contracts receivable and notes receivable 23,088 30,395
Estimated residual value of equipment 2,772 1,571
Unearned income (6,245) (8,197)
Security deposits (245) (376)
Deferred origination costs 576 683
-------- --------
Cash provided by investing activities 19,418 23,958
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of Senior Notes (72,248) --
Repayment of Subordinated Debt (20,000) --
Repayment of notes payable to banks (1,130) (16,188)
Proceeds from issuance of Senior Notes 70,000 --
Debt issuance costs (823) --
Increase in restricted cash (9,215) --
Proceeds from issuance of common stock -- 2
Contribution to Employee Stock Ownership Plan 99 --
Other (373) (190)
-------- --------
Cash (used in) financing activities (33,690) (16,376)
-------- --------
Net (decrease) increase in cash and cash equivalents (15,974) 6,143
Cash and cash equivalents at beginning of period 16,600 625
-------- --------
Cash and cash equivalents at end of period $ 626 $ 6,768
-------- --------
-------- --------
Supplemental disclosures of cash flow information:
Interest Paid $ 5,721 $ 7,924
Income taxes paid $ 1,618 $ 2,538
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS
5
<PAGE>
HPSC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The information presented for the interim periods is unaudited, but
includes all adjustments (consisting only of normal recurring adjustments)
which, in the opinion of the Company, are necessary for a fair presentation of
the financial position, results of operations and cash flows for the periods
presented. The results for interim periods are not necessarily indicative of
results to be expected for the full fiscal year. Certain 1993 account balances
have been reclassed to conform with 1994 presentation.
2. Interest expense is net of interest income of $98,000 and $48,000 for the
three months ended and $252,000 and $182,000 for the nine months ended September
24, 1994 and September 25, 1993, respectively. Included in interest expense is
amortization of debt discount of $38,000 and $218,000 for the three months ended
and $38,000 and $654,000 for the nine months ended September 24, 1994 and
September 25, 1993, respectively.
3. For the three and nine months ended September 25, 1994 and September 24,
1993, the earnings per share computation assumes the conversion of stock
options under the modified treasury stock method and includes only those shares
allocated to participant accounts in the Company's Employee Stock Ownership Plan
discussed in Note 6.
4. Effective January 1, 1993, the Company adopted Statement of Accounting
Standards No. 109, "Accounting for Income Taxes," which requires recognition of
deferred tax liabilities and assets for the expected future tax consequences of
events that have been included in the financial statements or tax returns.
Prior to 1993, the Company used the asset and liability method prescribed by
Statement of Financial Accounting Standards No. 96, under which deferred tax
assets and liabilities were recognized for all events that had been recognized
in the financial statements. The effect of this change in accounting for income
taxes had no impact on the financial results of the Company.
The Items which comprise a significant portion of deferred tax liabilities
as of September 24, 1994 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Operating method $ 7,832,000
State income tax accrual $ 1,439,000
Alternative minimum tax credit $(2,710,000)
Other $(1,618,000)
-----------
Deferred income taxes $ 4,943,000
-----------
-----------
</TABLE>
5. On September 24, 1994, the Company had $9,215,000 in restricted cash of
which $4,397,000 was reserved for debt service and $4,818,000 was reserved for
credit enhancement pursuant to the terms of agreements entered into by the
Company on December 27, 1993 with respect to a $70,000,000 securitization
transaction.
6. In June, 1994, the Board of Directors authorized and the Company made a
contribution of $99,000 to the Employee Stock Ownership Plan (ESOP) for 1993.
This contribution had the effect of allocating 28,280 shares of common stock of
the Company to qualified participant accounts at the end of 1993 in a ratio
representing approximately 8.6% of qualified 1993 wages as defined in the
appropriate regulations. The ESOP holds 271,720 shares that have not yet been
funded or allocated to specific participant accounts. These unallocated shares
have not been included in earnings per share calculations.
6
<PAGE>
HPSC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONT'D)
On July 28, 1994, the Company adopted a supplemental Employee Stock
Ownership Plan (Supplemental ESOP) that is expected to be primarily invested in
Common Stock of the Company. The Company has issued 350,000 shares of Common
Stock to the Supplemental ESOP which will be allocated first to the accounts of
certain highly compensated employees to make up for certain limitations on
Company contributions under the ESOP required by the 1993 Tax Act and next to
all eligible employees of the Company on a non-discriminatory basis. The
Company has not yet made contributions to the Supplemental ESOP. Shares
allocated to participants' accounts in the Supplemental ESOP fully vest over
five years of service from plan adoption at 20% per year of service. At
retirement or other qualifying termination of a participant, the vested portion
of the common stock may be distributed or converted to cash.
7. On June 23, 1994 the Company executed a $20,000,000 revolving credit
agreement with the First National Bank of Boston and Continental Bank, N.A.. The
agreement is secured primarily by the customer receivables of the Company,
expires on December 31, 1995 and contains certain financial and other
restrictive covenants.
At September 24, 1994, the Company was in compliance with the covenants of
the agreement and had $6,000,000 outstanding under the agreement.
8. The Company entered into an agreement to transfer substantially all the
finance assets of Credident, Inc., its wholly-owned Canadian subsidiary,
effective June 30, 1994, to Newcourt Credit Group, Inc. (Newcourt), for
approximately $7 million (US) in cash. The Company also entered into a service
agreement whereby Newcourt will manage certain accounts over the next two years
for a fee related to collections. The sale did not have a material effect on
the Company's operations. Subsequent to the transfers, all of Credident, Inc.'s
Canadian bank debt was retired. As discussed in its annual Form 10-K for fiscal
1993, HPSC ceased to book any more business in Canada effective July, 1993. This
transfer of substantially all of Credident's finance assets is consistent with
the Company's strategic plan to focus on its business in the United States.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Quarter Ended September 24, 1994 Compared to Quarter Ended September 25, 1993.
The Company's net income for the third quarter of 1994 was $70,000, or $.01
per share, compared to a net loss of ($678,000) or ($.14) per share for the
third quarter of 1993. For the nine months ended September 24, 1994, net income
was $416,000 or $.08 per share compared to $258,000 or $.05 per share in 1993.
These increases were due principally to a decrease in provision for losses and
interest expense, offset by a decrease in earned income on leases and notes as
well as a continuing increase in selling, general administrative costs as part
of the Company's implementation of its long term strategic plan.
Earned income on leases and notes for the third quarter of 1994 was
$2,776,000 compared to $3,836,000 for the third quarter of 1993. For the nine
months ended September 24, 1994, earned income was $9,443,000 compared to
$13,482,000 in 1993. This decline is partially due to a declining portfolio
resulting from reduced bookings over the last several quarters of 1993 and to
reduced finance rates charged to the Company's customers. The reduced bookings
were due to the fact that Healthco International, Inc. (Healthco), which had
previously referred to the Company substantially all of the Company's business,
filed for bankruptcy on June 9, 1993 and subsequently began liquidation under
Chapter 7 of the US Bankruptcy Code. The Company has reduced its cost of capital
as a result of a securitization transaction described herein in the first
quarter of 1994 which allowed it to lower the rates which it charges to its
customers, while helping to maintain its target margins on financings. Although
the Company increased its 1994 bookings from 1993 levels, it expects earned
income on leases and notes to continue to decrease from comparable 1993 levels
until its volume of new business consistently exceeds portfolio runoff. The
Company's US bookings for the third quarter of 1994 were $9,185,000 compared to
$3,030,000 for the comparable period in 1993. The Company stopped booking
business in Canada in July, 1993.
The provision for losses was $164,000 in the third quarter of 1994 compared
to $1,037,000 for the comparable period in 1993. For the nine months ended
September 24, 1994, the provision for losses was $524,000 compared to $3,103,000
in 1993. This decrease is due in part to an increase in loan loss reserves for
the year ended December 25, 1993, and to a decrease in current portfolio size.
Selling general and administrative expenses for the third quarter of 1994
were $1,705,000 compared to $1,657,000 in the third quarter of 1993. For the
nine months ended September 24, 1994, these expenses were $5,237,000 compared to
$3,067,000 in 1993. The increase was due in part to the Company's need to
replace services which were formerly provided by Healthco under intercompany
agreements between the two companies. The Company continues to hire additional
sales and support personnel to assist in its transition to a diversified
financial services organization no longer affiliated with a single vendor.
Net interest expense for the third quarter of 1994 decreased to $792,000
from $2,246,000 for the same period in 1993. For the nine months ended
September 24, 1994, interest expense was $2,998,000 compared to $6,872,000 in
1993. This decrease resulted from a reduced level of borrowings as well as
reduced interest rates on outstanding debt.
The Company's income before income taxes for the third quarter of 1994 was
$115,000 compared to a loss of $1,104,000 for the third quarter of 1993. For
the nine months ended September 24, 1994, income before income taxes was
$684,000 compared to $440,000 in 1993.
Despite the adverse developments arising out of the Healthco bankruptcy,
the Company is replacing the business previously supplied by Healthco with
referrals from the Company's customers and an expanding list of vendors
representing diversified sources of new business. At quarter end, the Company
had customer inquiries with respect to possible new business exceeding
$40,000,000, compared to $20,000,000 of customer inquiries at December 25, 1993.
The volume of US bookings in the first nine months of 1994 was $20,129,000
compared to $11,530,000 in 1993.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONT'D)
LIQUIDITY AND CAPITAL RESOURCES
At September 24, 1994 the Company had $626,000 in cash and cash equivalents
compared with $16,600,000 at the end of 1993. As described in footnote 5 to the
Company's consolidated financial statements included in this report on Form
10-Q, $9,215,000 of cash was restricted as of September 24, 1994 pursuant to
the securitization agreements. Cash used for operating activities was
$1,702,000 for the nine months ended September 24, 1994, compared to $1,439,000
of cash provided by operating activities for the same period in 1993. Cash
provided by investing activities was $19,418,000 for the nine months ended
September 24, 1994 compared to $23,958,000 for the same period in 1993.
On December 27, 1993, the Company raised $70,000,000 through an asset
securitization transaction in which a wholly owned subsidiary, HPSC Funding
Corp. I (HPSC Funding) issued senior secured notes at a rate of 5.01%. The
notes were secured by a portion of the Company's portfolio which it sold in
part and contributed in part to HPSC Funding. Proceeds of this financing were
used to retire $50,000,000, 10.125% senior notes due December 28, 1993, and
$20,000,000, 10% subordinated debentures due January 15, 1994. As of
September 24, 1994, the HPSC Funding portfolio is performing according to
expectations. On June 23, 1994, the Company entered into a $20,000,000
revolving credit agreement with The First National Bank of Boston as Agent
Bank and Continental Bank, N.A. as described in Note 7 of the Financial
Statements.
The Company anticipates that it may seek to raise additional capital in
1994 to finance its activities and expects that it will be able to obtain
additional capital on competitive terms, but there can be no assurance it will
be able to do so.
9
<PAGE>
HPSC, INC.
PART II. OTHER INFORMATION
ITEMS 1 THROUGH 4 ARE OMITTED BECAUSE THEY ARE INAPPLICABLE
Item 5. Other Information.
On November 1, 1994, the Company, in conjunction with certain investors,
entered into an agreement to repurchase, 1,949,182 shares of its common stock
that were pledged to a group of banks and held by Healthco International, Inc.
(Healthco), as debtor-in-possession and later by the Chapter 7 Trustee for
Healthco, subject to the pledge, since the bankruptcy of Healthco in 1993. The
Company intends to repurchase a minimum of 1,000,000 shares and the balance will
be purchased by investors. The transaction has a purchase price of $9,000,000
and settles all claims between the Company and the bank group regarding
intercompany transactions between HPSC and Healthco.
Upon completion of the minimum share repurchase by HPSC, the Company's pro-
forma book value per share would be approximately $8.50 per share, an increase
of $.90 per share over September 24, 1994 book value.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
See the Exhibit Index on Page 11.
b) Reports on Form 8-K
There were no reports on Form 8-K filed during the three months ended
September 24, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, HPSC, Inc.
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dated: November 4, 1994 HPSC, INC.
------------------------ -----------------------------------
(Registrant)
By: John W. Everets
------------------------------------
John W. Everets
Chairman & Chief Executive Officer
By: Rene Lefebvre
------------------------------------
Rene Lefebvre
Chief Financial Officer
By: Dennis J. McMahon
------------------------------------
Dennis J. McMahon
Controller
(Principal Accounting Officer)
10
<PAGE>
HPSC, INC.
EXHIBIT INDEX
EXHIBIT
NO. TITLE PAGE
--- ----- ----
10.1 First Amendment, dated as of September 2, 1994, to Revolving
Credit Agreement, dated as of June 23, 1994, among HPSC,
Inc., The First National Bank of Boston, individually and as
Agent, and Continental Bank, N.A., individually and as Co-
Agent.
10.2 Amendment and Restatement, dated November 4, 1994, of First
Amendment, dated as of September 2, 1994, to Revolving
Credit Agreement, dated as of June 23, 1993, among HPSC,
Inc., The First National Bank of Boston, individually and as
Agent, and Bank of America, Illinois, individually and as
Co-Agent.
10.3 Stock Purchase Agreement, dated as of November 1, 1994, by
and among HPSC, Inc. and each of Chemical Bank; The CIT
Group/Business Credit, Inc.; Van Kampen Merritt Prime Rate
Income Trust; the Nippon Credit Bank, Ltd.; Union Bank of
Finland, Grand Cayman Branch; SPBC, Inc.; The Bank of Tokyo
Trust Company; and Morgens, Waterfall, Vintiadis & Co. Inc.,
and related Schedules
11
<PAGE>
FIRST AMENDMENT
TO REVOLVING CREDIT AGREEMENT
This FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT (this "First Amendment")
dated as of September 2, 1994, by and among HPSC, INC. (the "Borrower"), a
Delaware corporation, THE FIRST NATIONAL BANK OF BOSTON ("FNBB"), a national
banking association, BANK OF AMERICA ILLINOIS (formerly know as Continental Bank
N.A.) ("BoAI", and together with FNBB, the "Banks"), and THE FIRST NATIONAL BANK
OF BOSTON as Agent for the Banks and BoAI as co-agent for the Banks.
Capitalized terms used herein without definition shall have the meanings set
forth in the Credit Agreement (as defined below).
WHEREAS, the Borrower, the Agent and the Banks are parties to that certain
Revolving Credit Agreement dated as of June 23, 1994 (as amended, modified or
supplemented and in effect from time to time, the "Credit Agreement");
WHEREAS, the Borrower has requested that certain terms and provisions of
the Credit Agreement be amended to enable the Borrower to enter into a Stock
Purchase Agreement by and among the Borrower, Chemical Bank, William Brandt,
Jr., Trustee of Healthco International, Inc., Debtor in Proceedings under
Chapter 7, pending in United States Bankruptcy Court for the District of
Massachusetts, Case No. 93-416040-JFQ, substantially in the form of EXHIBIT A
attached hereto and made a part hereof; and
WHEREAS, the Agent and the Banks, subject to the terms and provisions
hereof have agreed to amend the Credit Agreement;
NOW, THEREFORE, in consideration of the premises contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
Section 1. DEFINITIONS. Section 1.1 of the Credit Agreement is hereby
amended by inserting the following new definition in the appropriate place in
the alphabetical sequence:
"STOCK PURCHASE AGREEMENT. The Stock Purchase Agreement
entered into or to be entered into among the Borrower, Chemical
Bank, William Brandt, Jr., Trustee of Healthco International,
Inc., Debtor in Proceedings under Chapter 7, pending in United
States Bankruptcy Court for the District of Massachusetts, Case
No. 93-416040-JFQ, substantially in the form of EXHIBIT I
attached hereto and made a part hereof."
<PAGE>
-2-
Section 1.2. REGULATIONS U AND X. Section 6.17 of the Credit Agreement is
hereby amended by deleting it in its entirety and substituting in lieu thereof
the following:
"6.17. REGULATIONS U AND X. The proceeds of the Loans
shall be used for working capital purposes, except to the
extent permitted by Section 7.12 of this Agreement. No
portion of any Loan which is to be used for the purpose of
purchasing or carrying any "margin security" or "margin
stock" will be secured directly or indirectly by "margin
security" or "margin stock" as such terms are used in
Regulations U and X of the Board of Governors of the Federal
Reserve System, 12 C.F.R. Parts 221 and 224."
Section 1.3. USE OF PROCEEDS. Section 7.12 of the Credit Agreement is
hereby amended by deleting it in its entirety and substituting in lieu thereof
the following:
"7.12. USE OF PROCEEDS. The Borrower will use the proceeds
of the Loans solely for working capital purposes, PROVIDED,
HOWEVER, that the Borrower may use up to a maximum aggregate
amount of $7,000,000 of proceeds of the Loans to purchase
1,949,182 shares of the Borrower's Common Stock, $0.01 par value,
pursuant to the terms of the Stock Purchase Agreement, and
PROVIDED FURTHER that the Borrower may not use more than
$1,000,000 of proceeds of the Loans for the portion of the
Purchase Price (as defined in the Stock Purchase Agreement) to be
paid by the Borrower on the Closing Date (as defined in the Stock
Purchase Agreement)."
Section 1.4. CERTAIN NEGATIVE COVENANTS OF THE BORROWER. Section 8.1 of
the Credit Agreement is hereby amended by adding to the end thereof the
following new subsection (k):
"(k) Indebtedness incurred pursuant to the Stock Purchase
Agreement, PROVIDED that the aggregate principal amount of such
Indebtedness of the Borrower and its Subsidiaries shall not
exceed the aggregate principal amount of $9,000,000 at any time."
Section 1.5. RESTRICTIONS ON LIENS. Section 8.2 of the Credit Agreement
is hereby amended by inserting the following new subsection (j):
"(j) liens on "margin security" or "margin stock" as such
terms are used in Regulations U and X of the Board of Governors
of the Federal Reserve System, 12 C.F.R. Parts 221 and 224."
<PAGE>
-3-
Section 1.6. RESTRICTIONS ON INVESTMENTS. Section 8.3 of the Credit
Agreement is hereby amended by adding to the end thereof the following new
subsection (j):
"(j) Investments made pursuant to the Stock Purchase
Agreement."
Section 1.7. DISTRIBUTIONS. Section 8.4 of the Credit Agreement is hereby
amended by deleting it in its entirety and substituting in lieu thereof the
following:
"8.4. DISTRIBUTIONS. The Borrower will not make any
Distributions, PROVIDED, HOWEVER, that the Borrower may make
payments required to be made pursuant to the provisions of the
Stock Purchase Agreement so long as no Default or Event of
Default has occurred and is continuing."
Section 1.8. CONSOLIDATED TANGIBLE NET WORTH. Section 9.2 of the Credit
Agreement is hereby amended by (a) inserting the following parenthetical phrase
in subclause (iii) thereof following the text "proceeds of any sale" and before
the text "by the Borrower or any of its Subsidiaries":
"(other than up to $4,000,000 of proceeds from the re-sale by the
Borrower of 949,182 shares of the Borrower's Common Stock, $0.01
par value, purchased pursuant to the Stock Purchase Agreement).",
and
(b) adding the following new subsection (iv) after subsection (iii)
thereof:
"(iv) MINUS up to $5,000,000 of the total Stock Purchase Price
(as defined in the Stock Purchase Agreement) used to purchase
shares of the Borrower's Common Stock, $0.01 par value, pursuant
to the Stock Purchase Agreement which shares thereafter are to be
either held by the Borrower as treasury shares or retired."
Section 2. CONDITIONS TO EFFECTIVENESS. This First Amendment shall not
become effective unless and until (a) the Bank receives counterparts of this
First Amendment executed by each of the Borrower, the Banks, the Agent and the
Guarantor and (b) all proceedings in connection with the transactions
contemplated by this Amendment and all documents incident hereto shall be
satisfactory in form and substance to the Agent, and the Agent shall have
received all information and counterpart originals or certified or other copies
of such documents as the Agent may reasonably request.
Section 3. REPRESENTATIONS AND WARRANTIES; NO DEFAULT. The Borrower
represents and warrants to the Agent and the Banks that (a) each and every one
of the representations and warranties made by the Borrower to the Agent and the
Banks in Section 6 or elsewhere in the Credit Agreement or in the other Loan
Documents, as amended by this First Amendment are true and correct in all
material respects
<PAGE>
-4-
on and as of the date hereof except to the extent that any of such
representations and warranties relate, by the express terms thereof, solely to a
date prior hereto; (b) the Borrower has duly and properly performed, complied
with and observed each of its covenants, agreements and obligations contained in
Sections 7 and 8 or elsewhere in the Credit Agreement or the other Loan
Documents, as amended by this First Amendment; and (c) no event has occurred or
is continuing and no condition exists which constitutes a Default or Event of
Default.
Section 4. RATIFICATION, ETC. Except as expressly amended hereby, the
Credit Agreement and the Loan Documents and all documents, instruments and
agreements related thereto, including, but not limited to the Security
Documents, are hereby ratified and confirmed in all respects and shall continue
in full force and effect. The Credit Agreement and this First Amendment shall
be read and construed as a single agreement. All references in the Credit
Agreement or any related agreement or instrument to the Credit Agreement shall
hereafter refer to the Credit Agreement as amended hereby. All references in
the Credit Agreement or any related agreement or instrument to Continental Bank
N.A. shall hereafter be deemed to be references to BoAI.
Section 5. EXPENSES AND FEES. The Borrower hereby agrees to pay to the
Agent, on demand by the Agent, all reasonable out-of-pocket costs and expenses
incurred or sustained by the Agent or any of the Banks in connection with the
preparation of this First Amendment and the documents referred to herein
(including reasonable legal fees).
Section 6. NO WAIVER. Nothing contained herein shall constitute a waiver
of, impair or otherwise affect any Obligations, any other obligation of the
Borrower or any rights of the Agent or either of the Banks consequent thereon.
Section 7. COUNTERPARTS. This First Amendment may be executed in one or
more counterparts, each of which shall be deemed an original but which together
shall constitute one and the same instrument.
Section 8. HEADINGS. Section headings in this First Amendment are
included herein for convenience of reference only and shall not constitute part
of this First Amendment for any other purpose.
Section 9. GOVERNING LAW. THIS FIRST AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
(WITHOUT REFERENCE TO CONFLICT OF LAWS).
IN WITNESS WHEREOF, the undersigned have duly executed this First
Amendment as a sealed instrument as of the date first set forth above.
<PAGE>
-5-
HPSC, INC.
By: Rene Lefebure
--------------------------------
Rene Lefebure
THE FIRST NATIONAL BANK
OF BOSTON, individually and
as Agent
By: Mitchell Feldman
--------------------------------
Mitchell Feldman
BANK OF AMERICA ILLINOIS, individually
and as co-agent
By: David Noda
--------------------------------
David Noda
CONSENTED TO BY THE UNDERSIGNED GUARANTOR:
AMERICAN COMMERCIAL
FINANCE CORPORATION
By: John W. Everets
------------------------------
John W. Everets
<PAGE>
Exhibit 10.2
November 4, 1994
Mitchell B. Feldman
First National Bank of Boston
100 Federal Street
Boston, Massachusetts 02110
Mark Hurley
Bank of America, Illinois
231 South LaSalle Street
Chicago, Illinois 60697
Re: Amendment and Restatement of First Amendment
dated as of September 2, 1994 (the "Amendment") to
Revolving Credit Agreement dated as of June 23, 1994
among HPSC, Inc. ("HPSC"), The First National Bank of
Boston, individually ("FNBB") and as Agent, and Bank of
America, Illinois, individually ("BoAI", and together with
FNBB, the "Banks") and as Co-Agent (the "Agreement")
----------------------------------------------------------
Dear Sirs:
HPSC has entered into a stock purchase agreement dated as of November 1,
1994 with Chemical Bank and a number of other banks who are the pledgees of
1,949,182 shares of HPSC common stock pledged by Healthco International, Inc.,
pursuant to which HPSC and certain investors will repurchase such shares (the
"Stock Purchase Agreement").
HPSC, the Banks and the Agent entered into the Amendment to permit a
portion of the line of credit established pursuant to the Agreement to be used
for the repurchase contemplated by the Stock Purchase Agreement. At the time
that HPSC, the Banks and the Agent entered into the Amendment, the parties
attached an initial draft of the Stock Purchase Agreement to the Amendment.
Because the initial draft of the Stock Purchase Agreement attached to the
Amendment has been superseded by the final executed version, HPSC would like to
amend and restate the Amendment effective as of November 1, 1994 to approve the
stock purchase pursuant to the final form of Stock Purchase Agreement attached
hereto.
<PAGE>
Except to the extent specifically amended hereby, the Agreement shall
remain in full force and effect. Please sign below to indicate your approval.
Very truly yours,
HPSC, Inc.
By: John W. Everets
-----------------------------------------
John W. Everets, Chairman
ACCEPTED AND AGREED TO
THIS 4th DAY OF NOVEMBER, 1994
THE FIRST NATIONAL BANK OF BOSTON
By: Mitchell B. Feldman
-------------------------------------
Name: Mitchell B. Feldman
Title: Director
BANK OF AMERICA, ILLINOIS
By: Mark N. Hurley
-------------------------------------
Name: Mark N. Hurley
Title: Vice President
<PAGE>
EXHIBIT 10.3
STOCK PURCHASE AGREEMENT
As of November 1, 1994
Chemical Bank
CIT Group/Business Credit, Inc.
Van Kampen Merritt Prime Rate Income Trust
The Nippon Credit Bank, Ltd.
Union Bank of Finland, Ltd, Grand Cayman Branch
SPBC, Inc.
The Bank of Tokyo Trust Company
Morgens, Waterfall, Vintiadis & Co.
c/o Chemical Bank, as Agent
270 Park Avenue
New York, NY 10017-2070
Attn: Steven C. Pickhardt
Vice President
Dear Sirs:
1. SALE AND PURCHASE.
1.1 HPSC, Inc., a Delaware corporation, as agent for itself and others
("HPSC"), hereby agrees to purchase from Chemical Bank; The CIT Group/Business
Credit, Inc.; Van Kampen Merritt Prime Rate Income Trust; the Nippon Credit
Bank, Ltd.; Union Bank of Finland Ltd., Grand Cayman Branch; SPBC, Inc.; the
Bank of Tokyo Trust Company and Morgens, Waterfall, Vintiadis & Co. Inc. (the
"Banks"), and the Bank Group agrees to sell, subject to the terms and conditions
hereinafter set forth, 1,949,182 shares of HPSC Common Stock, $0.01 par value
(the "Shares"), free and clear of all liens and security interests, for the
Purchase Price set forth in Section 2 below.
1.2 HPSC shall designate the names of the purchasers of the Shares, the
number of Shares being purchased by each such purchaser, and the dates upon
which the purchasers shall pay their proportionate portion of the Purchase Price
(as hereinafter defined) by not later than three (3) days before the Closing (as
hereinafter defined) and by three (3) days before each payment on the Note (as
hereinafter defined). The purchasers so designated are referred to herein as a
"Purchaser" or "the Purchasers"; Purchasers other than HPSC are referred to
herein as an "Individual Purchaser" or the "Individual Purchasers". Shares
purchased by Individual Purchasers are referred to herein as "IP Shares".
Shares purchased by HPSC are referred to herein as "Remainder Shares".
<PAGE>
2. PAYMENT OF PURCHASE PRICE.
2.1 The aggregate purchase price (the "Purchase Price") for the Shares and
the Bank Releases described in Paragraph 4 shall be Nine Million Dollars
($9,000,000). The Purchase Price shall be paid as follows. On the Closing Date
(as hereinafter defined), the Purchasers shall pay at least $4,500,000 to CIT
Group/Business Credit, Inc., as Collateral Agent for the Banks. The balance of
the Purchase Price shall be evidenced by a promissory note from HPSC to the
Agent, in the form attached hereto as Schedule A (the "Note"), which shall be
delivered by HPSC to Chemical Bank, as Agent (the "Agent") for the Banks at the
Closing.
2.2 The Purchase Price shall be allocated among the Banks by the Agent as
the Agent shall determine.
3. DELIVERY OF SHARES. The Agent shall deliver a certificate or
certificates evidencing the Shares to HPSC, endorsed in blank for transfer to
the Purchasers, provided, however, that HPSC shall thereupon redeliver to the
Agent certificates (or the Agent shall be issued new certificates by HPSC)
representing all Remainder Shares which are subject to the Pledge Agreement,
described in Section 7 hereto, until payment in full of the Note.
4. RELEASES. At the Closing, the Banks shall execute and deliver in favor
of HPSC releases in the form of Schedule B-1 hereto (the "Bank Releases") and
HPSC shall execute and deliver in favor of the Banks a release in the form of
Schedule B-2 hereto (the "HPSC Release").
5. TERM. Subject to the provisions of Section 8, the term of this
Agreement shall commence upon the date hereof and continue until the Note has
been paid in full unless extended by mutual consent of the parties, provided,
however, this Agreement may be terminated at any time prior to the Closing (as
hereinafter defined) by either party if the other party fails to satisfy the
closing conditions set forth in Section 8 by the date specified for the
satisfaction of such conditions.
6. CLOSING. The closing of the sale of the Shares (the "Closing") shall
take place at the offices of Hill & Barlow, a Professional Corporation, One
International Place, Boston, Massachusetts 02110 at 10:00 a.m. on a date that is
agreeable to the Purchasers and HPSC, but in no event more than sixty (60) days
after the date hereof (the "Closing Date").
7. SECURITY INTEREST.
7.1 HPSC shall grant to the Agent a security interest in the Remainder
Shares to be purchased by HPSC to secure payment of the Note, pursuant to the
Pledge Agreement attached hereto as Schedule C (the "Pledge Agreement"). The
Banks will have no security interest in or lien on and shall release IP Shares
when the Banks have been paid $4.62 for each of such Shares, subject, however,
to the limitations contained in the Pledge Agreement with respect to IP Shares
purchased by Individual Purchasers after the Closing.
-2-
<PAGE>
7.2 As additional security for the payment of the Notes, HPSC will deliver,
at the Closing, a letter of credit (the "Letter of Credit") issued by the Bank
of Boston in favor of the Agent in an amount derived by the following formula:
1,949,182
Minus - The number of IP Shares purchased at the Closing Date
by Individual Purchasers
Minus - A number of Shares equal to fifteen percent (15%) of the issued and
outstanding common stock of HPSC on the Closing Date, after taking
into account the sale and purchase of Shares that occurs on the
Closing Date
Multiplied by - $4.62
The Letter of Credit may be drawn upon by the Banks upon an Event of Default
under the Note until such time as the Banks are holding a number of Shares
pursuant to the Pledge Agreement which is less than fifteen percent (15%) of the
issued and outstanding common stock of HPSC.
8. CLOSING CONDITIONS.
8.1 The obligations of the Banks to perform hereunder shall be subject to
the following conditions:
(i) By not later than ten (10) days after the date hereof, HPSC's
revolving credit lenders shall have approved this Agreement and the transactions
contemplated hereby and a copy of such approval shall have been supplied to the
Agent;
(ii) By not later than ten ((10) days after the date hereof, HPSC
shall have obtained a commitment from its revolving credit lenders to permit
HPSC to use up to Six Million Five Hundred Thousand Dollars ($6,500,000) of its
revolving line of credit to finance HPSC's payment of its portion of the
Purchase Price for the Shares (including the Letter of Credit) and a copy of
such commitment shall have been supplied to the Agent;
(iii) By not later than ten (10) days after the date hereof, the Board
of Directors of HPSC shall have authorized the transactions contemplated hereby
and a copy of such authorization shall have been supplied to the Agent.
(iv) the representations and warranties of HPSC contained herein shall
be true and correct as of the Closing Date and HPSC shall not be in default of
this Agreement;
-3-
<PAGE>
(v) HPSC shall have paid the Purchase Price to be paid at the Closing
and shall have executed and delivered to the Agent the Note, the Pledge
Agreement and the HPSC Release (collectively, the "Related Documents") as
provided herein; and
(vi) Individual Purchasers shall purchase IP Shares having a purchase
price of at least Two Million Five Hundred Thousand Dollars ($2,500,000) at the
Closing.
8.2 The obligations of HPSC to perform hereunder shall be subject to the
following conditions:
(a) The representations and warranties of the Banks contained herein
shall be true and correct as of the Closing Date and the Banks shall not be in
default of this Agreement; and
(b) The Agent shall have endorsed and delivered the certificates for
the Shares and the Banks shall have delivered the Bank Releases as provided
herein.
9. SPECIFIC PERFORMANCE. Each of the parties acknowledges that in the
event of any default hereunder by the other party, the non-defaulting party's
remedies at law will be inadequate and the non-defaulting party shall be
entitled, in addition to its other remedies at law or in equity, to obtain
injunctive relief ordering specific performance of those provisions from a court
of competent jurisdiction.
10. REPRESENTATIONS. Each of the Banks and HPSC represents and warrants
that it has sufficient authority, or that on or before the Closing Date it will
have sufficient authority, to enter into this Agreement and to carry out the
transactions contemplated hereby. The Agent represents and warrants that it is
the duly authorized Agent for the Banks, that it has a valid and enforceable
first lien and security interest on the Shares subject to no other lien or
security interest, and that it has full power and authority to sell the Shares
to the Purchasers, free and clear of all liens and security interests, pursuant
to Section 9-504 of the Uniform Commercial Code of New York (the "Applicable UCC
Provision"). HPSC represents and warrants that its purchase of the Remainder
Shares will be permitted under Delaware law. HPSC represents and warrants that
as of the Closing Date and during the term hereof (a) the sum of the assets of
HPSC, at fair valuations, will be greater than HPSC's probable liability on its
existing debts; (b) after taking into account the transactions contemplated
hereby, HPSC will have adequate capital to operate as an ongoing and viable
concern in its present and anticipated future ventures; and (c) HPSC will be
generally able to pay its debts (including its obligations hereunder) as they
become due and mature. Each party represents and warrants that the execution,
delivery, and performance of this Agreement will not conflict with or constitute
a default under its certificate of incorporation, bylaws, or any law or order of
court to which the party is subject or any contract or agreement by which it is
bound and that this Agreement is its legal, valid and binding obligation,
enforceable against it in accordance with its terms. The parties agree that
they will diligently pursue and use their best efforts to hold the Closing
contemplated hereby on or before the date that is 60 days from the date of this
Agreement.
-4-
<PAGE>
11. EXPENSES. Whether or not the transactions contemplated by this
Agreement are consummated, the Banks and HPSC shall pay their own expenses
(including, without limitation, attorneys' fees) incurred in connection
herewith.
12. NON-SOLICITATION. During the term of this Agreement, the Banks will
not solicit, or accept any offer for, or expression of interest in, the Shares
from any person or entity except as provided herein.
13. CONFIDENTIAL INFORMATION. The Banks shall keep confidential and not
disclose to any party any information regarding HPSC which has been made
available to the Banks by HPSC and which is not public information or any
information regarding the transactions contemplated hereby, except as may be
required by federal or state securities laws or the Applicable UCC Provision.
14. GOVERNING LAW.
14.1 This Agreement and the rights and obligations of the parties
hereunder shall be governed by, and construed and interpreted in accordance
with, the law of the State of New York.
14.2 HPSC hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the Related Agreements, or for
recognition and enforcement of any judgment in respect thereof, to the non-
exclusive general jurisdiction of the courts of the State of New York, the
courts of the United States of America for the Southern District of New York,
and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail (or
any substantially similar form of mail), postage prepaid, to HPSC at its address
set forth in Section 15 or at such other address of which the Agent shall have
been notified pursuant hereto; and
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the right
to sue in any other jurisdiction.
-5-
<PAGE>
15. MISCELLANEOUS. All covenants and agreements contained in this
Agreement shall bind and inure to the benefit of the respective successors and
assigns of the parties. This Agreement and the other documents delivered
pursuant hereto or contemplated hereby constitute the full and entire
understanding and agreement between the parties with regard to the subject
matters hereof and thereof. Neither this Agreement nor any provision hereof may
be amended, waived, discharged or terminated except by a written instrument
signed by the party against whom enforcement of any such amendment, waiver,
discharge or termination is sought. The rights and obligations of the parties
hereunder shall be subject to any order duly entered by a court of competent
jurisdiction relating to the subject matter hereof. All notices and other
communications required or permitted hereunder shall be in writing and shall be
mailed by first-class mail, postage prepaid, sent by telex, telecopier,
facsimile transmission, or similar means, or otherwise delivered by hand or by
messenger, addressed as follows: (a) if to the Banks, to the Agent at 270 Park
Avenue, New York, NY 10017, attention: Steven C. Pickhardt, Vice President,
with a copy to Andrew P. DeNatale, Esq., White & Case, 1155 Avenue of the
Americas, New York, New York 10036-2787 and (b) if to HPSC, at 60 State Street,
Boston, MA 02109, attention: John W. Everets, Chairman and Chief Executive
Officer, with a copy to Richard L. Levine, Esq., Hill & Barlow, a Professional
Corporation, One International Place, Boston, Massachusetts 02110-2607. This
Agreement may be executed in any number of counterparts each of which shall be
enforceable against the parties actually executing such counterparts and all of
which together shall constitute one instrument.
IN WITNESS WHEREOF, the undersigned has executed this Agreement under seal as of
the date first appearing above.
HPSC, INC. CHEMICAL BANK, AS AGENT
By: John W. Everets By: Steven C. Pickhardt
------------------------------- ------------------------------------
John W. Everets, Chairman and Steven C. Pickhardt, Vice President
Chief Executive Officer
-6-
<PAGE>
ACKNOWLEDGED AND CONSENTED TO:
Chemical Bank Union Bank of Finland, Ltd.
Grand Cayman Branch
By: By: James Kyprios
------------------------------- ------------------------------------
Name: Name: James Kyprios
Title: Title: Senior Vice President
By: Durval Araujo
------------------------------------
Name: Durval Araujo
Title: Vice President
SPBC, Inc. CIT Group/Business Credit, Inc.
By: Daniel J. Ujfalusy By: John Conheeney
------------------------------- ------------------------------------
Name: Daniel J. Ujfalusy Name: John Conheeney
Title: Senior Vice President Title: Vice President
By: Surendra Malhotra
------------------------------------
Name: Surendra Malhotra
Title: Senior Vice President
Van Kampen Merritt Prime The Nippon Credit Bank, Ltd.
Rate Income Trust
By: Jeffrey Miallet By: Yoshiki Ishizuka
------------------------------- ------------------------------------
Name: Jeffrey Mialett Name: Yoshiki Ishizuka
Title: Vice President and Title: Assistant Vice President
Portfolio Manager
The Bank of Tokyo Trust Co. Morgens Waterfall, Vintiadis & Co.
By: John Blasi By: David Erioson
------------------------------ ------------------------------------
Name: John Blasi Name: David Erioson
Title: Vice President Title: Authorized Agent
-7-
<PAGE>
Schedule A
PROMISSORY NOTE
DUE , 1995
------------------
$ , 1994
------------- ------------- --
FOR VALUE RECEIVED, the undersigned, HPSC, Inc., a Delaware corporation
having its principal place of business at 60 State Street, Boston, Massachusetts
02109 (the Maker), hereby promises to pay to Chemical Bank, as Agent for itself
and the other Banks listed on Schedule 1 hereto (the "Payee") the principal
amount of _____________________ Dollars ($___________), in lawful money of the
United States of America, on or before July 1, 1995. All amounts due hereunder
shall be paid to the Payee at 270 Park Avenue, New York, New York 10057,
Attention: Steven C. Pickhardt, Vice President. This Note shall not bear
interest, provided, however, if the Maker shall default in the payment of the
principal amount of this Note, the amount of this Note which is due but unpaid
shall bear interest from the date of default until paid at the Prime Rate of
Payee plus four (4) percent.
The Note shall be payable in six (6) equal monthly installments of
_________________ Dollars ($_________) payable on the first day of the month
beginning on February 1, 1995, with the final installment due on July 1, 1995.
The principal of this Note may be prepaid in whole or in part at any time or
from time to time at the option of the Maker, without premium or penalty.
This Note is the Note referred to in a Stock Purchase Agreement, dated of as
of November 1, 1994 between the Maker, Payee and the Banks listed on Schedule 1
hereto (the Stock Purchase Agreement). This Note is secured by a Pledge
Agreement, dated _______ (the "Pledge Agreement") referred to in the Stock
Purchase Agreement. The
<PAGE>
principal amount of the Note shall be reduced by any amounts paid by Individual
Purchasers after the Closing Date pursuant to Section 1.2 of the Pledge
Agreement.
If Maker shall fail to make any payment on this Note when due and payable
and such amount shall remain unpaid for three (3) business days after the due
date thereof; (or if Maker shall become insolvent or unable to meet its
obligations as they become due, or shall begin or be the subject of any
bankruptcy or other proceedings for the relief of debtors; or any substantial
part of its property shall be taken on attachment or by foreclosure (and not
released or redeemed within thirty (30) days after such attachment or
foreclosure); or if the Maker should sell, assign or transfer all or a
substantial portion of its assets (except pursuant to an asset securitization
transaction in the ordinary course of business) or if the Maker shall fail to
comply with or perform any other of the terms of this Note or the Pledge
Agreement within ten (10) days after the due date thereof, then, in any such
case, the Note, including the entire unpaid principal amount then outstanding,
shall become due and payable immediately.
The parties hereto, including the Maker and any endorsers and guarantors of
this Note, hereby waive presentment, demand, notice, protest and all other
demands and notices in connection with the delivery, acceptance, performance or
enforcement of this Note.
The failure of any party to insist, on any one or more occasions, upon
performance of any of the terms or conditions of this Note, shall not be
construed as a waiver or relinquishment of any rights granted hereunder or the
future performance of any such term, covenant or condition.
The Maker shall pay to the Payee upon demand all legal and other costs and
expenses of every kind, including reasonable attorneys' fees and disbursements,
relating to the collection and/or enforcement of this Note or of any rights
hereunder or under the Stock Purchase Agreement or Pledge Agreement.
-2-
<PAGE>
Any notice given hereunder shall be given as provided in the Stock Purchase
Agreement.
This Note may not be amended except in writing signed by the party against
which such amendment is sought to be enforced.
This Note and the rights and obligations of the parties hereunder shall be
governed by, and construed and interpreted in accordance with, the law of the
State of New York.
Maker hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Note, or for recognition and enforcement of any
judgment in respect thereof, to the non-exclusive general jurisdiction of the
Courts of the State of New York, the courts of the United States of America for
the Southern District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail (or
any substantially similar form of mail), postage prepaid, to Maker at its
address set forth in the Stock Purchase Agreement or at such other address of
which the Payee shall have been notified pursuant thereto; and
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the right
to sue in any other jurisdiction.
This Note has been duly executed and delivered by a duly authorized officer
of Maker.
-3-
<PAGE>
IN WITNESS WHEREOF, the undersigned has duly executed this Note as an
instrument under seal as of the day and year first above written.
HPSC, INC.
By:
-------------------------------
Name:
Title:
Witnessed by:
- -----------------------------
-4-
<PAGE>
B-1
SCHEDULE B
FORM OF RELEASE
For good and valuable consideration, receipt of which is hereby
acknowledged, each of the entities listed on Attachment 1 hereto (the "Banks")
hereby releases and discharges HPSC, Inc. , and its respective subsidiaries and
affiliates, present and former officers, directors, shareholders, employees,
agents, representatives, and successors and assigns (collectively, the
"Releasees") from all manner of claims, demands, liabilities, obligations,
actions, proceedings, causes of action or suits whatsoever, in law or equity,
whether known or unknown, which the Banks, or any of their respective
subsidiaries, affiliates, heirs, executors, administrators or successors or
assigns (collectively, "Releasors") ever had, now have or hereafter can, shall
or may have against Releasees, for, upon or by reason of any matter, cause or
thing whatsoever from the beginning of the world to the date of this Release
relating to Healthco International, Inc. and/or the estate of Healthco
International, Inc. in proceedings for liquidation under Chapter 7 of the
Bankruptcy Code in the District of Massachusetts (collectively "Healthco")
(collectively, the "Claims"), and, without limitation, all Claims arising out
of, as a result of, or in connection with the Merger Credit Agreement, by and
among HMD Acquisition Corporation, Healthco Holding Corporation, Healthco
International Inc. and the Banks, dated April 30, 1993 and the loans and
advances made pursuant thereto, the Banks' status as creditors of Healthco
and/or any debts or other liabilities owed by Releasees to Healthco; provided
that the Claims released hereby shall not include any claims arising out of any
breach of a Releasee's obligations under the Stock Purchase Agreement entered
into by HPSC, Inc. and the Banks dated as of November 1, 1994 (the "Stock
Purchase Agreement") or under the Pledge Agreement or the Promissory Note
entered into in connection with the Stock Purchase Agreement.
Each Releasor hereby assigns to the Releasees the Releasor's entire right,
title and interest in and to any amounts recovered, received or obtained by or
awarded to the Releasor or any person acting on behalf of, or in a
representative or fiduciary capacity for, the Releasor, in respect of any Claim
released hereby (and claims to any of the foregoing) except that the Releasors
retain and do not assign any direct claims which they may have against Healthco
not arising out of any claims which Healthco may have against Releasees. If a
Releasor or any person acting on behalf of, or in a representative or fiduciary
capacity of, a Releasor (except for the Trustee of Healthco in proceedings for
liquidation under Chapter 7
<PAGE>
of the Bankruptcy Code) initiates any action, proceeding or suit which
challenges the legality, validity or enforceability of this Release, the
Releasor shall reimburse the Releasees for all costs and expenses (including,
without limitation, attorneys' fees) reasonably incurred by any of the Releasees
in connection with any such action, proceeding or suit.
This Release is intended to be a general release and to discharge and
release any and all Claims (subject to the exceptions stated herein) and is not
to be construed as an admission of liability on the part of any of the
Releasees. The provisions of this Release shall be severable in the event that
any of the provisions hereof (including any provision within a single paragraph
or sentence) are held by a court of competent jurisdiction to be invalid, void
or otherwise unenforceable, and the remaining provisions shall remain
enforceable to the fullest extent permitted by law.
This Agreement and the rights and obligations of the parties hereunder shall
be governed by, and construed and interpreted in accordance with, the law of the
State of New York.
Releasors and Releasees hereby irrevocably and unconditionally:
(a) submit for themselves and their property in any legal action or
proceeding relating to this Release, or for recognition and enforcement of any
judgment in respect thereof, to the non-exclusive general jurisdiction of the
courts of the State of New York, the courts of the United States of America for
the Southern District of New York, and appellate courts from any thereof;
(b) consent that any such action or proceeding may be brought in such
courts and waive any objection that they may now or hereafter have to the venue
of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agree not to plead or claim
the same;
(c) agree that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail (or
any substantially similar form of mail), postage prepaid, to HPSC, Inc. at its
address set forth in the Stock Purchase Agreement or at such other address of
which the Releasors shall have been notified pursuant thereto; and
(d) agree that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the right
to sue in any other jurisdiction.
2
<PAGE>
THIS RELEASE SHALL BECOME EFFECTIVE ONLY UPON THE PAYMENT IN FULL OF ALL
AMOUNTS OWED TO BANKS UNDER THE STOCK PURCHASE AGREEMENT. IF SUCH AMOUNTS ARE
NOT PAID IN FULL, THIS RELEASE SHALL HAVE NO FORCE AND EFFECT.
IN WITNESS WHEREOF, the Releasors have caused this Release to be executed
under seal on this ___ day of ____, 1994.
[ ] [ ]
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By: By:
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3
<PAGE>
B-2
SCHEDULE B
FORM OF RELEASE
For good and valuable consideration, receipt of which is hereby
acknowledged, HPSC, Inc. hereby releases and discharges each of the entities
listed on Attachment 1 hereto (the "Banks"), and their respective subsidiaries
and affiliates, present and former officers, directors, shareholders, employees,
agents, representatives, and successors and assigns (collectively, the
"Releasees") from all manner of claims, demands, liabilities, obligations,
actions, proceedings, causes of action or suits whatsoever, in law or equity,
whether known or unknown, which HPSC, Inc., or any of its respective
subsidiaries, affiliates, heirs, executors, administrators or successors or
assigns (collectively, "Releasors") ever had, now have or hereafter can, shall
or may have against Releasees, for, upon or by reason of any matter, cause or
thing whatsoever from the beginning of the world to the date of this Release
relating to Healthco International, Inc. and/or the estate of Healthco
International, Inc. in proceedings for liquidation under Chapter 7 of the
Bankruptcy Code in the District of Massachusetts (collectively "Healthco")
(collectively, the "Claims"), and, without limitation, all Claims arising out
of, as a result of, or in connection with the Merger Credit Agreement, by and
among HMD Acquisition Corporation, Healthco Holding Corporation, Healthco
International Inc. and the Banks, dated April 30, 1993 and the loans and
advances made pursuant thereto, the Banks' status as a creditor of Healthco
and/or any debts or other liabilities owed by Healthco to Releasors; provided
that the Claims released hereby shall not include any claims arising out of any
breach of a Releasee's obligations under the Stock Purchase Agreement entered
into by HPSC, Inc. and the Banks dated as of November 1, 1994 (the "Stock
Purchase Agreement") or under the Pledge Agreement or the Promissory Note
entered into in connection with the Stock Purchase Agreement.
Each Releasor hereby assigns to the Releasees the Releasor's entire right,
title and interest in and to any amounts recovered, received or obtained by or
awarded to the Releasor or any person acting on behalf of, or in a
representative or fiduciary capacity for, the Releasor, in respect of any Claim
released hereby (and claims to any of the foregoing). If a Releasor or any
person acting on behalf of, or in a representative or fiduciary capacity of, a
Releasor (except for the Trustee of Healthco in proceedings for liquidation
under Chapter 7 of the Bankruptcy Code) initiates any action, proceeding or suit
which challenges the legality, validity or enforceability of this Release, the
Releasor shall reimburse the Releasees for all costs and expenses (including,
without limitation, attorneys' fees) reasonably incurred by any of the Releasees
in connection with any such action, proceeding or suit.
<PAGE>
This Release is intended to be a general release and to discharge and
release any and all Claims (subject to the exceptions stated herein) and is not
to be construed as an admission of liability on the part of any of the
Releasees. The provisions of this Release shall be severable in the event that
any of the provisions hereof (including any provision within a single paragraph
or sentence) are held by a court of competent jurisdiction to be invalid, void
or otherwise unenforceable, and the remaining provisions shall remain
enforceable to the fullest extent permitted by law.
This Agreement and the rights and obligations of the parties hereunder shall
be governed by, and construed and interpreted in accordance with, the law of the
State of New York.
Releasors and Releasees hereby irrevocably and unconditionally:
(a) submit for themselves and their property in any legal action or
proceeding relating to this Release, or for recognition and enforcement of any
judgment in respect thereof, to the non-exclusive general jurisdiction of the
courts of the State of New York, the courts of the United States of America for
the Southern District of New York, and appellate courts from any thereof;
(b) consent that any such action or proceeding may be brought in such
courts and waive any objection that they may now or hereafter have to the venue
of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agree not to plead or claims
the same;
(c) agree that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail (or
any substantially similar form of mail), postage prepaid, to HPSC, Inc. at its
address set forth in the Stock Purchase Agreement or at such other address of
which the Releasors shall have been notified pursuant thereto; and
(d) agree that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the right
to sue in any other jurisdiction.
IN WITNESS WHEREOF, the Releasors have caused this Release to be executed
under seal on this ___ day of ____, 1994.
[ ] [ ]
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By: By:
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2
<PAGE>
Schedule C
PLEDGE AGREEMENT
AGREEMENT made as of __________, 1994, between HPSC, Inc., a Delaware
corporation, having an address of 60 State Street, Boston, Massachusetts 02109
(the "Pledgor") and Chemical Bank, a New York banking corporation, having an
address of 270 Park Avenue, New York, New York 10117-2070 (the "Pledgee"), as
Agent for itself and the other entities listed on Schedule 1 hereto.
W I T N E S S E T H:
WHEREAS, the Pledgor and the Pledgee are parties to a certain Stock
Purchase Agreement (the "Stock Purchase Agreement"), dated as of November 1,
1994, pursuant to which the Pledgor and others are purchasing 1,949,182 Shares
of Pledgor's stock (the "Stock"); and
WHEREAS, as a condition to the Pledgee's obligations under the Stock
Purchase Agreement, the Pledgee requires that the Pledgor pledge all shares of
the Stock which are to be purchased by Pledgor pursuant to the terms of the
Stock Purchase Agreement in order to secure the Pledgor's performance in full of
all its obligations to the Pledgee under a promissory note of the Pledgor to the
Pledgee in the amount of $_________, dated of even date herewith (the "Note");
NOW, THEREFORE, in consideration of the foregoing and for $1.00 and other
good and valuable consideration, the receipt of which the Pledgor hereby
acknowledges, the Pledgor hereby agrees as follows:
1. PLEDGE.
1.1 The Pledgor hereby assigns, transfers, sets over and pledges to the
Pledgee as collateral to secure the payment and performance of all of the
Pledgor's obligations to the Pledgee under the Note _______ shares of the Stock
of HPSC, Inc. (herein collectively called the "Pledged Shares"), and herewith
delivers to the Pledgee the certificates evidencing the same, endorsed in blank
or with duly executed stock powers attached.
1.2 The Pledgee agrees that it shall release Pledged Shares which are
purchased by Individual Purchasers (as defined in the Stock Purchase Agreement)
after the Closing Date (as defined in the Stock Purchase Agreement) upon receipt
of a purchase price of $4.62 for each of such Pledged Shares, provided, however,
that the Pledgee shall not be required to accept the purchase price for, or to
release, more than One Hundred Thousand (100,000) Pledged Shares pursuant to
this Section 1.2 unless and until the Note is paid in full.
<PAGE>
2. REPRESENTATIONS AND WARRANTY.
The Pledgor represents and warrants that the Pledged Shares are duly and
validly pledged to the Pledgee in accordance with applicable law.
3. RIGHTS PRIOR TO DECLARATION OF DEFAULT.
3.1 Until an Event of Default (as hereafter defined) shall have occurred
and be continuing, the Pledged Shares shall be registered in the name of the
Pledgor and the Pledgor shall have the right to vote the Pledged Shares in all
stockholders meetings and to receive any cash dividends (other than liquidating
or similar dividends) with respect thereto. Stock dividends and any other
distributions with respect to the Pledged Shares shall be pledged as additional
collateral and held by the Pledgee subject to the terms and conditions hereof.
3.2 If the capital stock of Pledgor shall be changed into or exchanged for
a different number or kind of shares of stock or other securities of Pledgor or
of another corporation, whether through merger, consolidation, reorganization,
recapitalization, stock split, or combination of shares, there shall be
substituted for each of the Pledged Shares held by the Pledgee under this
Agreement the number of shares of stock or other securities into which each
outstanding share of such capital stock shall be so changed or for which each
share shall be exchanged. The Pledgor hereby agrees that any securities so
substituted for the Pledged Shares pursuant to the terms of such change or
exchange shall be delivered directly to the Pledgee, to be held and disposed of
by the Pledgee in accordance with the terms and provisions of this Agreement.
The Pledgor authorizes the Pledgee to surrender the Pledged Shares or take
whatever other action is required to be taken with respect to the Pledged Shares
under the terms of such change or exchange and further agrees to execute and
deliver to the Pledgee such stock powers as may be necessary to carry out the
purposes of this Agreement in view of such substitution.
4. DEFAULT.
If either of the following events ("Events of Default") shall occur:
(a) The Pledgor shall be in default under the Note; or
(b) The Pledgor shall be in default in any material respect
hereunder or under the Stock Purchase Agreement;
then, and in every such event, the Pledgee may declare the Pledgor in default as
of the date of occurrence of the Event of Default and exercise the rights and
remedies of a
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<PAGE>
secured party under the Uniform Commercial Code and any other rights and
remedies set forth in this Agreement.
5. RIGHTS ON DEFAULT.
5.1 If an Event of Default shall have occurred and be continuing, the
Pledgee is hereby irrevocably authorized to cause the Pledged Shares to be
transferred into its name or the name of its nominee on the books of the Pledgor
and to vote the Pledged Shares and otherwise exercise the rights of the owner
thereof; provided, however, that all such Pledged Shares so transferred shall
continue to be held and disposed of by the Pledgee in accordance with this
Agreement. The Pledgor agrees that any transfer of the Pledged Shares pursuant
to this Section 5.1 shall not violate the provisions of the Rights Agreement of
the Pledgor, dated August 3, 1993 (the Rights Agreement) to the extent that the
transfer is to the Pledgee itself or the entities listed in Schedule 1 as
described in the definition of "Grandfathered Stockholder" in the Rights
Agreement or (b) be deemed a sale or disposition under the provisions of Article
9 of the Uniform Commercial Code nor an acceptance of such stock in satisfaction
of the obligations of the Pledgor to the Pledgee or any portion thereof.
5.2 The Pledgee, upon compliance with any mandatory requirements of law,
but without further demand, attachment or notice of any kind, all of which are
hereby expressly waived by the Pledgor, may sell the Pledged Shares, in whole at
any time or in part from time to time, for cash, upon credit or for future
delivery, at public sale or at any brokers' board or exchange or at private
sale, all at the option and in the complete discretion of the Pledgee.
5.3 In case of any sale by the Pledgee of any of the Pledged Shares on
credit or for future delivery, the Pledged Shares sold may be retained by the
Pledgee until the sales price is paid by the purchaser, but the Pledgee shall
incur no liability in case of failure of the purchaser to take up and pay for
the Pledged Shares so sold. In case of any such failure, such Pledged Shares so
sold may be again similarly sold.
5.4 After deducting all costs or expenses of every kind, including
reasonable attorneys' fees, the Pledgee shall apply the proceeds from the sale
of the Pledged Shares and any other collateral towards payment of all
outstanding obligations of the Pledgor to the Pledgee. Any proceeds remaining
after the payment in full of all obligations of the Pledgor to the Pledgee shall
be paid by the Pledgee to the Pledgor or to whomsoever may be lawfully entitled
to receive the same or as a court of competent jurisdiction may direct.
5.5 No course of dealing or delay in taking or failing to take any action
with respect to any Event of Default shall affect the Pledgee's right to take
such action at a later time. No waiver as to any one Event of Default shall
affect the Pledgee's rights upon any other Event of Default.
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<PAGE>
5.6 The Pledgee may exercise any or all of its rights or remedies after an
Event of Default concurrently with, or independent of, and without regard to,
the provisions of any other security agreement or other instrument which secures
any obligation of the Pledgor to the Pledgee.
5.7 The requirement of the Uniform Commercial Code that the Pledgee give
the Pledgor reasonable notice of any proposed sale or disposition of the
Collateral shall be met if such notice is given at least seven (7) days before
the time of such sale or disposition.
6. NOTICES.
Any notice under this Agreement shall be given in accordance with the
notice provisions of the Stock Purchase Agreement.
7. SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon, and inure to the benefit of, the
parties and their successors and assigns.
8. TERM.
The term of this Agreement shall continue until all obligations of the
Pledgor to the Pledgee under the Note and the Stock Purchase Agreement have been
paid and performed in full. Upon payment in full of all obligations of the
Pledgor to the Pledgee under the Note, this Agreement shall terminate and the
Pledgee shall surrender to the Pledgor the Pledged Shares which have not
theretofore been sold or otherwise disposed of pursuant to this Agreement,
together with any excess proceeds from any sale of the Pledged Shares and any
other collateral which at the time may be held by the Pledgee hereunder.
9. WAIVERS.
With respect both to obligations of the Pledgor to the Pledgee and the
Pledged Shares, the Pledgor assents to any extension or postponement of the time
of payment or any other indulgence, to any substitution, exchange or release of
collateral, to the addition or release of any party or person primarily or
secondarily liable, to the acceptance of partial payment thereof and the
settlement, compromise or adjustment of any thereof, all in such manner and at
such time or times as the Pledgee may deem advisable. The Pledgee may exercise
its rights with respect to the Pledged Shares without resorting to and without
regard to other collateral or sources for reimbursement for liability. The
Pledgee shall not be deemed to have waived any of its rights upon or under any
obligation of the Pledgor to the Pledgee or with respect to the Pledged Shares
unless such waiver is in
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<PAGE>
writing and signed by the Pledgee. No delay or omission on the part of the
Pledgee in exercising any right shall operate as a waiver of such right or any
other right. A waiver on any one occasion shall not be construed as a bar to or
waiver of any right on any future occasion. All rights and remedies of the
Pledgee with respect to obligations of the Pledgor to the Pledgee or the Pledged
Shares, whether evidenced hereby or by any other instrument or document, shall
be cumulative and may be exercised separately or concurrently.
10. GOVERNING LAW.
10.1 This Agreement and the rights and obligations of the parties hereunder
shall be governed by, and construed and interpreted in accordance with, the law
of the State of New York.
10.2 Pledgor hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement, or for recognition and enforcement of any
judgment in respect thereof, to the non-exclusive general jurisdiction of the
courts of the State of New York, the courts of the United States of America for
the Southern District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail (or
any substantially similar form of mail), postage prepaid, to Pledgor at its
address set forth in the Stock Purchase Agreement or at such other address of
which the Pledgee shall have been notified pursuant thereto; and
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the right
to sue in any other jurisdiction.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, under
seal, as of the day, month and year first written above.
HPSC, Inc.
----------------------------------
By: Chairman and Chief
Executive Officer
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<PAGE>
SCHEDULE 1
Chemical Bank
CIT Group/Business Credit, Inc.
Van Kampen Merritt Prime Rate Income Trust
The Nippon Credit Bank, Ltd.
Union Bank of Finland, Ltd. Grand Cayman Branch
SPBC, Inc.
The Bank of Tokyo Trust Company
Morgens, Waterfall, Vintiadis & Co.
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